Osborne v Kelly

OSBORNE v KELLY & KLIMENCO
[1999] SASC 486

Full Court: Doyle CJ, Mullighan and Wicks JJ

DOYLE CJ. The appellant (I will refer to him as the plaintiff) obtained a judgment in this Court against the defendant (the respondent before us) for damages for personal injury and for costs as between solicitor and client.
The costs were finally taxed at about $361,000. The plaintiff claimed interest on the costs from the date of the judgment of the trial Judge. The Master who taxed the bill of costs rejected the claim. However, he allowed a lump sum of $18,530.09 for interest, on the basis that the defendant should have acknowledged its liability and paid an amount of $250,000, the subject of an interim allocatur, about ten months sooner than the defendant did pay that sum.
The plaintiff applied to a Judge for a review of the decision on interest. The Judge declined to interfere.
The plaintiff has appealed by leave to the Full Court. He now claims interest from a date preceding the date of the trial judgment, or at least from the date of that judgment. The submissions for the plaintiff raised some issues about the principles by reference to which a claim for interest on costs is to be decided.

The power to award interest on costs

In South Australia the award of interest on money payable under a judgment, including costs, is regulated by s 114 of the Supreme Court Act 1935. That section provides as follows:
“(1) All money, including costs, payable under any judgment or order shall bear interest at the rate from time to time prescribed by the rules of court.
(2) The interest shall be computed from the following times:-
(a).... in the case of money other than taxed costs, from the time specified in the judgment or order, and if no time is so specified from the date of the judgment or order:
(b)in the case of taxed costs, from the date of the certificate of the taxing officer by whom the costs were taxed or an earlier date specified by the taxing officer in the certificate.”
The section was amended in 1991 by adding to s 114(2)(b) the power to award interest from a date earlier than the date of the certificate of the taxing officer. Prior to 1969 the section had always provided that interest on taxed costs was to be computed from the date of the certificate of the taxing officer.
Plainly enough, the provision as it now stands confers a broad discretion on the Master or Judge concerned. The discretion is to be exercised having regard to the facts of the case and to the interests of justice. In Burford v Allan (unreported, 26 May 1998, Judgment No S6693), I considered the application of s 114(2). I said:
“The starting point is not an award of interest from the date of the judgment by virtue of which the party is entitled to costs. There must be some basis for the exercise of the discretion to order that interest be computed from a time earlier than the date of the certificate, and in particular to order that interest be computed from the date of the relevant judgment. All sorts of matters could be relevant to this question, including delay by the party ordered to pay costs or an unreasonable approach to the taxation of costs which causes delay. Some of the brief remarks made by the master and by the judge are capable of suggesting that the plaintiff had a right to have interest computed from the date of the judgment in her favour, subject only to the defendant establishing some reason to deprive the plaintiff of interest from that earlier date. It may be that that was not what was intended. Reference is made by the master, in particular, to other matters that would support the computation of interest from an earlier date. I merely make the point that, in my opinion, there is no such presumption about the time from which interest is to be computed, and it is a matter of the court being satisfied that there are proper grounds upon which interest should be computed from a date earlier than the date of the certificate, and in particular from the date of the judgment that confers the entitlement to costs.”
The other two members of the Court agreed with my reasons. In Chakravarti v Advertiser Newspapers Ltd (1998) 201 LSJS 44 the Full Court, in ex tempore reasons which I gave on its behalf, referred again to the proper application of s 114(2). It was not necessary for the Full Court to decide the matter, and so the remarks made in that case are not binding. However, the Full Court said with reference to s 114(2)(b) (at 46-47):
“We add, for what it is worth, that in our opinion it would not be appropriate for a taxing officer to proceed on the basis that interest will be payable from the date of the judgment, unless the taxing officer is persuaded otherwise.
We say that because in our opinion, to approach the matter on that premise would be to ignore the words of the statutory provision. The statutory provision gives to the taxing officer a wide discretion, and that discretion is not to be exercised on the basis of any prima facie starting point which has to be displaced. If we are wrong in that and there is a starting point, then the starting point appears to be the date of the certificate of the taxing officer: cf Burford v Allen (1996) 189 LSJS 497 at 507 Matheson J.”
The issue raised in the present case is whether a proper exercise of the discretion required, in the circumstances of the case, that interest be awarded from a date prior to judgment, or at least from the date of judgment.

The law in other jurisdictions

In England, the issue of the date from which interest on costs runs has gone all the way to the House of Lords. In Hunt v R M Douglas (Roofing) Ltd [1990] 1 AC 398 the House of Lords held that, properly understood, s 17 of the Judgments Act 1838 meant that interest on taxed costs ran from the date of the judgment, and not from the date of the taxing master’s certificate that quantified the amount of costs to be paid. The decision set to rest a fairly long standing controversy in England as to the correct position. The English approach does not involve the exercise of a discretion, and so at first it might seem that the position in England is of little relevance to the correct application of the discretion conferred by s 114. However, counsel for the plaintiff relied heavily upon reasons given by Lord Ackner for concluding that the result arrived at by him was, in principle, the more satisfactory result. Counsel for the plaintiff submitted that the same considerations led to the conclusion for which he contended in the present case. This is what Lord Ackner said in support of his conclusion as to the meaning of the relevant legislation (at 415-416):
“1. It is the unsuccessful party to the litigation who, ex hypothesi, has caused the costs unnecessarily to be incurred. Hence the order made against him. Since interest is not awarded on costs incurred and paid by the successful party before judgment, why should he suffer the added loss of interest on costs incurred and paid after judgment but before the taxing master gives his certificate? 2. Since, as the Court of Appeal rightly said in the Erven Warnink case [1982] 3 All E.R. 312 payments of costs are likely nowadays to be made to lawyers prior to taxation, then the application of the allocatur rule would generally speaking do greater injustice than the operation of the incipitur rule. Moreover, the incipitur rule provides a further necessary stimulus for payments to be made on account of costs and disbursements prior to taxation, for costs to be more readily agreed, and for taxation, when necessary, to be expedited, all of which are desirable developments. Barristers, solicitors and expert witnesses should not be expected to finance their clients’ litigation until it is completed and the taxing master’s certificate obtained. If interest is not payable on costs between judgment and the completion of taxation, then there is an incentive to delay payment, delay disbursements and taxation. 3. It is common ground between the parties that the unsatisfactory situation illustrated in K. v K. can be simply dealt with by an express agreement between the solicitor and his client that any interest recovered on costs and disbursements after judgment is pronounced but before the taxing master’s certificate is obtained, which costs and disbursements have not in fact been paid prior to taxation shall as to the interest on the costs belong to the solicitor, and as to the interest on disbursements be held by him for and on behalf of the person or persons to whom the disbursements are ultimately paid.”

The reference to the incipitur and allocatur rules is a reference to the different rules contended for, namely, that interest should run from the judgment (incipitur) or from the taxing officer’s certificate (allocatur).

As it happens, when interpreting the legislation Lord Ackner relied to some extent on the reasoning that a judgment for costs to be taxed was to be treated in the same way as a judgment for damages to be assessed, and that interest on a judgment for damages to be assessed also ran from the date of the judgment, even though the damages were not assessed until a later date. In Thomas v Bunn [1991] 1 AC 362 the House of Lords concluded that interest on a judgment for damages to be assessed should run from the date of the judgment assessing the damages, and not from the date of the judgment awarding damages to be assessed. Nevertheless, their Lordships adhered to the rule they had laid down in relation to costs. They did so although Lord Ackner recognised (at 380) that:
“[I]t is an anomaly that an order for payment of costs to be taxed is construed for the purpose of section 17 as a judgment debt, even though, before taxation has been completed, there is no sum for which execution can be levied.”
A similar question was considered by the Court of Appeal of New South Wales in Minister Administering the Environmental Planning and Assessment Act 1979 v Carson (1994) 35 NSWLR 342. The Court there considered a section in the Land and Environment Court Act 1979 relating to interest on orders for the payment of money, and concluded that that section applied to an order for the payment of costs, even though the amount to be paid was not ascertained until a later date. The question before the Court was a pure question of statutory interpretation. However, in reaching his conclusion, Kirby P approved of the reasons Lord Ackner gave in Hunt for favouring the rule that interest ran from the date of the award of costs, and not from the date of their quantification. Kirby P said that this principle reflected broad considerations of justice. He also said (at 353):
“Adopting this approach has the further merit of bringing this area of the law into line with that relating to interest on damages. There, in the absence of specific statutory modification, the fundamental principle is that interest is awarded against the party who has kept the successful litigant ‘out of his money’.”
Priestley JA concurred in the result, but did so simply on the interpretation of the relevant statutory provision. Young A-JA undertook an extensive review of the case law on the matter. He concluded that although the English approach was based on the proper construction of the 1838 legislation, it rested also on considerations of fairness and justice (at 361). Interest was ordered to be paid, not by way of penalty, but to do the plaintiff full justice. Interest was a compensation for delay.
Before us, counsel for the plaintiff relied upon these judgments as supporting the award of interest on costs from at least the date of the judgment awarding costs.
In the Supreme Court of the Australian Capital Territory the relevant provision is in a quite different form. In Tarlinton v Hall (1981) 38 ACTR 1 Kelly J, after carefully considering the history of the approach to interest on costs, concluded that the proper meaning of the relevant rule was that interest on costs should run from the date of the judgment awarding costs, and not from the date of the certificate of the taxing officer. He recognised that whether the general rule was that interest ran from the date of the judgment, or from the date of the certificate, there was a risk of injustice being done in a particular case. He took the view that the greater injustice would be worked if the rule were interpreted as providing for the payment of interest only between the date of the certificate and payment: at 8. However, I note that he envisaged that an order for interest might be moulded by the attachment of a proviso that interest was not to be payable on any costs not actually incurred or disbursements not actually made until such time as they were respectively incurred or made: at 8.
In Thompson v Australian Capital Television Pty Limited (1998) 133 ACTR 1 at 6 Miles CJ of the Supreme Court of the Australian Capital Territory, when considering a claim for interest on costs from the date of judgment, rather than the date of the order quantifying the costs, said this:
“Costs are awarded by way of indemnity. That is not to say that an order for costs will not be made until the successful party has actually paid costs. Even if the plaintiff has not paid his solicitors to date, he is entitled to be indemnified by the defendant in respect of his liability to the solicitors. However, if he is awarded interest on costs which he has not paid, then he will receive a windfall. If by reason of the agreement between himself and his solicitors, he has incurred liability for interest on the costs which he has not paid, then he will not receive a windfall and it is fair to award interest. But there must be evidence of such an agreement, otherwise the award of interest is penal in nature against the defendant and not compensatory in favour of the plaintiff.”

On that basis, he ordered that interest should run from 21 days after costs were agreed or taxed.

Counsel for the plaintiff criticised these remarks as erroneous in principle, and as being in conflict with an earlier unreported decision by Higgins J in the Supreme Court of the Australian Capital Territory.
The approach taken to the question of interest on costs varies from jurisdiction to jurisdiction in Australia: see Halsbury’s Laws of Australia Vol 20 Costs par [325-9555]. I have considered a number of reported decisions, but have found no real guidance in relation to the exercise of the discretion conferred by the South Australian provision. I accept that in a number of jurisdictions the incipitur rule is applied, but where that is so it appears to be the result of the construction of the relevant rule rather than the exercise of a general discretion: see, for example, Shaw v Commonwealth (1995) 124 FLR 190 at 205.
In the Supreme Court of New South Wales the matter is regulated by s 95 of the Supreme Court Act. The position there is somewhat complicated by the impact of rules which distinguish between actions commenced before 1 January 1984, and actions commenced thereafter. In Fischer v David Syme & Co Ltd (1989) 18 NSWLR 606 Smart J considered the position in that State. He noted that in respect of actions commenced before 1 January 1984, the usual position was that no interest was payable on costs if they were paid within 21 days after the ascertainment of the amount of the costs by taxation or otherwise (at 617). With reference to the power of the Court to otherwise order, he said (at 617):
“The usual position would be appropriate where the plaintiff has not paid many of the disbursements or costs until shortly prior to taxation. This applies to much personal injury litigation. In a case where the unsuccessful party is a natural person, it may, depending on the circumstances, not be appropriate to otherwise order. However, where the successful party has paid the costs or disbursements (or substantially paid them) and the unsuccessful party engages in commercial enterprises and can reasonably be assumed to be able to put the monies representing the costs to good use, there is probably no good reason why it should not pay interest on the costs from the date of the judgment.”
In relation to cases commenced after 1 January 1984, his view appears to have been much the same: see at 618.
In Western Australia, it appears that interest on taxed costs runs from the date of the judgment by which the costs are awarded: State Planning Commission v Della Vedova (1992) 7 WAR 81.

The discretion as to the time from which interest is to run

I adhere to the view that I expressed in Burford, and the view which I joined in expressing in Chakravarti. I did not intend in Chakravarti to depart from what I said in Burford. Parliament has conferred on the taxing officer a broad discretion. That discretion is to be exercised by reference to the relevant circumstances of the case. It is a question of whether there are proper grounds to compute interest from a date earlier than the date of the certificate.
Consistency of approach in the exercise of the discretion is desirable. If the exercise of the discretion depends upon the relevant circumstances of the case, the pursuit of consistency of outcome becomes elusive. In truth, it is consistency in the principles by reference to which the discretion is exercised that is important. More than that cannot be achieved.
The fact that the taxing officer exercises a broad discretion does not mean that there are no available principles or guidelines to assist a court in exercising the discretion. As Mason CJ said in Latoudis v Casey (1990) 170 CLR 534 at 541, dealing with the power of a court of summary jurisdiction to award costs in exercise of a statutory discretion:
“But it does not follow that any attempt to formulate a principle or a guideline according to which the discretion should be exercised would constitute a fetter upon the discretion not intended by the legislature. Indeed, a refusal to formulate a principle or guideline can only lead to exercises of the discretion which are seen to be inconsistent, a result which would not have been contemplated by the legislature with any degree of equanimity.”
His Honour went on to repeat remarks to the same effect made by him and Deane J in Norbis v Norbis (1986) 161 CLR 513 at 519. Dawson J was in dissent in the result, but he referred to those same remarks with approval (at 558). He said it was desirable for the High Court to identify the considerations that should be borne in mind in the exercise of the judicial discretion. He went on to say (at 558-559):
“As I have said, this is appropriately an appellate function, but the provision of guidance does not result in a rule of law from which courts of first instance cannot depart where the circumstances warrant departure. An exercise of the discretion which appears to disregard a guideline may miscarry, but by no means does that necessarily follow.”
Toohey J, who was one of the majority, expressed a view similar to that of Mason CJ and Dawson J at 562. In the context of a discretionary power to award costs, similar views were again expressed by the High Court in Oshlack v Richmond River Council (1998) 72 ALJR 578 at 585 Gaudron and Gummow JJ; at 591 McHugh J, and at 605 Kirby J.
In the present case the question is whether there is any relevant principle or guideline that, when applied to the facts of the present case, required the taxing officer, in the proper exercise of the discretion conferred by s 114, to make the order that the plaintiff seeks. Alternatively, it may be that some error is found in the approach taken, in which event the exercise of the discretion must be reconsidered.

Some relevant facts

Judgment was entered for the plaintiff by the trial Judge in the sum of $761,022 on 7 August 1992. On 15 March 1993 the plaintiff’s solicitors lodged a bill of costs for taxation as between party and party. By judgment dated (May 1993) the Full Court on appeal increased the award of damages and interest to the sum of $856,922. In May 1993 the plaintiff withdrew the bill of costs that had been lodged. The plaintiff then sought an order for costs as between solicitor and client. In August and November 1993, approximately $180,000 of the judgment money was paid into the trust account of the solicitors for the plaintiff. Nearly all of this money was used to meet legal costs and disbursements. By order dated 31 March 1994, after a further appeal to the Full Court, the trial Judge ordered that the plaintiff recover costs against the defendant as between solicitor and client. On 24 May 1994 the plaintiff lodged a bill of costs for taxation as between solicitor and client. There was then a protracted taxation of costs. Interim allocaturs were issued in the amount of $100,000 in October 1994 and $250,000 in August 1995. The defendant paid $100,000 on account of costs in October 1994 and a further $280,000 in August 1995. The final allocatur appears to have been signed in December 1997, the question of interest being decided after that date. The order for interest was made on 4 September 1998.

There is no suggestion that the plaintiff made a payment to his solicitors on account of the substantial costs and disbursements, until the payment was made to the solicitors in August and November 1993 from the judgment monies. It follows that the plaintiff’s solicitors were carrying unpaid substantial costs and disbursements for a considerable period of time. The money paid into the solicitor’s trust account in August 1993 was paid out, or applied to costs, in November 1993. As the above summary indicates, the plaintiff’s solicitors also received funds on account of costs from the defendant in October 1994 and August 1995.
In the end, the taxing officer awarded interest in the sum of $18,530.09. Broadly, his approach was that by October 1994 the defendant should have paid to the plaintiff’s solicitors $250,000 on account of costs. Although the computation of interest was not quite as simple as that, the taxing officer’s approach was broadly that the plaintiff had been kept out of that amount of money, subject to the payments made on account by the defendant, from October 1994 to August 1995. The figure actually awarded by the taxing officer also included some interest as a result of delays in payment of the amounts payable under the interim allocaturs. Broadly, the award of interest was made on the basis of an unjustifiable delay in making payments to the plaintiff on account of costs, once the defendant was in possession of a bill of costs in taxable form.

The purpose of an award of costs and an award of interest

The purpose of an award of costs under a provision such as s 114(2) is essentially compensatory. As Mason CJ said in Latoudis at 543:
“If one thing is clear in the realm of costs, it is that, in criminal as well as civil proceedings, costs are not awarded by way of punishment of the unsuccessful party. They are compensatory in the sense that they are awarded to indemnify the successful party against the expense to which he or she has been put by reason of the legal proceedings: Cilli v Abbott (1981) 53 FLR at p.111.”

See also Toohey J at 563 and McHugh at 567. However, as Gaudron and Gummow JJ pointed out in Oshlack at 587, there is not

“any absolute proposition that the sole purpose of a costs order is to compensate one party at the expense of another.”

They went on to explain that in certain circumstances orders for costs are made which reflect other purposes. For example, orders may be made for costs on a solicitor and client basis because of what they called “relevant delinquency” on the part of another party. As McHugh J put it in Oshlack at 591, the “primary purpose of an award of costs is to indemnify the successful party.” I add that in the same case Kirby J said (at 603) that Latoudis:

“does not, and could not, lay down a general rule that the only consideration to be taken into account in the exercise of a statutory costs discretion is the compensation of the successful party for the recoverable expense to which it has been put by the litigation.”

It is also pertinent to bear in mind that the function of an award of interest on damages prior to judgment has been said to be “to compensate a plaintiff for the loss or detriment which he or she has suffered by being kept out of his or her money during the relevant period.”: MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657 at 663. I proceed on the basis that the purpose of an award of interest on costs is the same. That is, that interest is awarded to compensate the plaintiff for the fact that the plaintiff has been without the use of the plaintiff’s money.
Once the amount of costs payable by the defendant to the plaintiff (in these reasons, I refer only to costs being payable to a plaintiff simply as a matter of convenience) has been fixed by the certificate of the taxing officer, interest will be payable on that amount at the prescribed rate: s 114(2)(b). The obligation to pay interest thereafter does not depend upon the plaintiff having already paid to his legal advisers the costs ordered to be paid, nor does it depend upon the plaintiff having agreed to pay interest on unpaid costs. The rationale underlying this provision is, presumably, that once the certificate of the taxing officer is signed, the plaintiff is entitled to payment of the specified amount, and is entitled to interest by way of compensation for any delay in the making of that payment. No doubt Parliament assumed that interest received by the plaintiff would be passed on if the plaintiff had not yet paid the costs, but the entitlement of the plaintiff to interest does not depend upon that happening.

The exercise of the discretion in the present case

Bearing in mind the purpose of an award of costs, the purpose of an award of interest, and the way in which the section operates, did a proper exercise of the discretion in this case require that the defendant be ordered to pay interest from a date preceding the date of the certificate of the taxing officer?
If the plaintiff had already paid legal costs or disbursements, there may be a sound basis for the exercise of the discretion to fix an earlier date from which interest is to run. In that event the plaintiff will have met a cost for which the defendant is liable, and will have been out of pocket from the time of the payment until the costs are paid. Compensation to the plaintiff, and the giving of a partial indemnity, would require that an earlier date be fixed than the date of the taxing officer’s certificate. In saying this I am putting to one side the possibility of the existence of other relevant factors that might support a contrary decision. The same reasoning might apply if the plaintiff has not paid costs or disbursements, but had agreed to pay interest on them if recovered from the defendant. An agreement to pay interest on unpaid costs raises issues that do not have to be considered in this case. I am not to be taken as deciding that such an agreement would be a reason for fixing an earlier date.
It is not necessary to deal here with the question of whether the taxing officer can fix a number of different dates, and the question of whether that can be done in relation to different amounts. I suspect that the only sensible way in which to exercise the discretion would be to take a broad axe approach in the fixing of a date. The fixing of a date from which interest is to run should not become, of itself, a substantial and complex issue.
In the present case there appears to me to be a strong case for an award of interest on the $180,000 paid to the plaintiff’s solicitors from the judgment monies in November 1993. In effect the plaintiff was out of pocket to that extent from that date. The subsequent payments by the defendant in response to the interim allocaturs did not reduce the amount by which the plaintiff was out of pocket, because that amount was appropriately applied by the solicitors towards costs. It is not clear to me whether this point was ever brought clearly to the attention of the taxing officer, but the material on which it is based was before the Judge who heard the review of the taxing officer’s decision pursuant to r 101.21. It appears to me that, in this respect, the exercise of the discretion has miscarried.
But the plaintiff seeks more than this. As I said earlier, the plaintiff seeks an order that interest run at least from the date of the judgment giving the plaintiff his entitlement to costs, and preferably from some date earlier than that fixed by reference to when the costs were incurred by the plaintiff. Is there a relevant principle that required the taxing officer to take this approach?
The plaintiff submits that the defendant has been able to earn substantial interest on the unpaid costs. The plaintiff made a calculation of the interest payable on the taxed costs using the rate of interest on a judgment, and calculating interest from August 1992 (the date of the judgment) to the final payment on account of costs in January 1998. At that rate of interest, which the plaintiff asserts is very conservative, the amount of interest was about $86,000.
In my opinion it would not be proper to exercise the discretion by reference to the fact that the defendant has had the use of the money until it was paid over to the plaintiff. As I have emphasised, the purpose of an award of costs is to compensate a plaintiff, and not to make the defendant account for a gain made. The same applies to the award of interest. If proper compensation for the plaintiff does not require the payment of interest, the fact that the defendant has been able to earn interest on the money meantime does not justify the making of the order that the plaintiff seeks.
The plaintiff further submits that he has been kept out of his money until it was paid to him by the defendant, and that during that time it was available to the defendant, and that the plaintiff is entitled to interest to compensate him for being kept out of his money. He calls in aid remarks found in some of the earlier cases, justifying the incipitur rule in preference to the allocatur rule, the remarks being to the effect that the plaintiff should have his debt with all its advantages, and that if a loss flows from that it should fall on the defendant rather than on the plaintiff: see, for example, Newton v Grand Junction Railway Co (1846) 16 M&W 139 at 143-144; 153 ER 1133 at 1134-1135, and in particular the remark of Alderson B (at 141; 1134) that:
“There is an uncertain amount, which is in the wrong pocket, and is there bearing interest; I see no injustice in saying, that as soon as it is reduced to certainty, that interest should be paid. Whatever be the sum, it is fructifying in the wrong pocket.”

A number of these cases are canvassed by Young AJA in Minister Administering the Environmental Planning and Assessment Act 1979 v Carson (1994) 35 NSWLR 342 and by Kelly J in Tarlinton v Hall (1981) 38 ACTR 1.

I acknowledge the force of this consideration. In a general sense it can be said to be fair that the plaintiff rather than the defendant should have the benefit of interest earned on the amount of costs ultimately held to be payable. But it seems to me that this argument of fairness is an argument for a general rule that the South Australian Parliament has chosen not to adopt. If this argument of the plaintiff were to be accepted, it would follow that in every case the defendant should be ordered to pay interest at least from the date of judgment, regardless of whether the plaintiff had paid costs or had agreed to pay interest. This would follow because the plaintiff’s proposition is simply that as the plaintiff is entitled to costs, and the defendant has had the use of the money after the entitlement arose, the defendant should as a matter of fairness pay interest if not reflecting the gain the defendant made, then at least reflecting the value to the plaintiff of having that money. But that is the very rule that the Parliament has not established, preferring to leave the matter to the discretion of the taxing officer. To adopt such a rule to guide the exercise of the discretion would mean that absent some disentitling conduct by the plaintiff, the defendant would always pay interest at least from the date of the judgment. Such a rule also appears to me to depart from the principle that the award of costs, and the award of interest, is intended to compensate the plaintiff for costs or expenses incurred by him. If the plaintiff has not paid the costs, or agreed to pay interest, an award of interest does more than compensate the plaintiff for a cost incurred. It provides the plaintiff with a potential windfall. That argument appealed to Miles CJ in Thompson v Australian Capital Television Pty Limited (1998) 133 ACTR 1, and appears also to have been accepted by Smart J in Fischer v David Syme & Co Ltd (1989) 18 NSWLR 606.
For those reasons, while I acknowledge the fairness of a rule requiring a defendant to pay interest at least from the date of the judgment entitling the plaintiff to costs, my view is that to adopt such a rule to guide the exercise of the statutory discretion would be to subvert the statutory discretion. Such a rule would also tend to detract from the need to consider other matters, such as delay by the plaintiff in taxing costs.
The plaintiff then submits that just as interest is ordered to be paid on damages from the date when the losses were incurred for which damages are paid, a sound exercise of the discretion requires that interest be paid on costs from when the plaintiff became liable to pay costs, or at least from the date of the judgment entitling the plaintiff to claim costs. The plaintiff calls in aid the remarks of Kirby P, set out earlier, to the effect that to so decide has the merit of making this area of the law accord with the law relating to interest on damages. The plaintiff further emphasises the fact that interest is awarded on damages awarded to a plaintiff who, as a result of personal injury negligently inflicted, needs services or assistance that are provided voluntarily. In such a case, the plaintiff submits, the plaintiff who recovers damages is not out of pocket, and is not legally liable to pay anything to the person who provided the services voluntarily, let alone interest, but nevertheless that plaintiff is entitled to an award of interest on the damages awarded for the provision of services voluntarily. For present purposes I will simply assume that this submission is correct: see Grincelis v House (1998) 156 ALR 443.
With respect to Kirby P, I am not persuaded that there is any particular merit in aligning this area of the law with the law relating to interest on damages. Each body of law serves its own ends. But the question remains whether the principle that supports the award of interest on damages likewise supports an award of interest on costs from the date of the judgment or some earlier date, even though the plaintiff has not paid the costs or agreed to pay interest on the costs.
Damages in tort are paid as compensation for a wrong done and for loss caused. It is just that interest be paid in respect of the period from when the loss is suffered until judgment, on the damages awarded, because the damages are compensation for a loss suffered or expense incurred at the earlier time, and are notionally payable when the loss is suffered or the expense is incurred. The important point to bear in mind is that in such a case the plaintiff has suffered a loss or incurred an expense, is entitled to damages in respect of that, but does not receive the damages until the Court has determined the amount payable.
While costs are paid by a losing party, they are not compensation for a wrong done. They are paid simply to compensate the plaintiff for costs incurred in making a successful claim. If the plaintiff does not pay costs until after the defendant has paid those costs to the plaintiff, a failure to award interest for the period prior to the taxing officer’s certificate does not leave the plaintiff out of pocket, or having suffered a loss giving rise to an entitlement for compensation which has not yet been received. Granted, once the defendant is ordered to pay costs, the plaintiff has an entitlement to costs, yet to be quantified, but it is only if the plaintiff has already paid the costs or agreed to pay interest that the plaintiff can be said to have suffered a loss in the same sense as a tortiously injured plaintiff. A tortiously injured plaintiff can be said to be out of pocket from the time when the loss is suffered until damages are paid. A successful plaintiff who has not paid costs is not, in any sense, out of pocket while awaiting the receipt from the defendant of those costs. Even in the case of a tortiously injured plaintiff who suffers a need for services that are rendered voluntarily, the position is that such a plaintiff was, in the eye of the law, entitled to compensation for the need for those services once the need arose.
My view is that there is not an analogy between the payment of interest on costs and interest on damages that supports the application of a general principle such as that for which the plaintiff contends.
I add, for what it is worth, that in my experience interest is not awarded on unpaid special damages in respect of the period prior to judgment, although I acknowledge that a judgment that includes amounts for unpaid special damages would carry interest as from the date of the judgment.
Next the plaintiff called in aid the observations made by Lord Ackner that I have set out above.
There are three strands in those observations. The first is found in Point 1. It is that as a plaintiff cannot get interest on costs actually paid before judgment (I think that Lord Ackner must be referring to costs actually paid, because he refers to costs “incurred and paid”), why should the plaintiff not at least get interest on such costs after the date of judgment and before the signing of the taxing officer’s certificate? The first strand is not relevant under s 114. If the plaintiff has actually paid costs, the taxing officer has power to direct that interest run from a date prior to judgment, from judgment, or from a later date. The discretion given to the taxing officer is capable of dealing with this factor advanced by Lord Ackner.
The other strands are found in point 2. The second strand is that it is not fair that solicitors and barristers who finance their client’s litigation should receive no interest to compensate them for doing so, if the plaintiff is successful in obtaining an order for costs. The third strand is that requiring interest to be paid from the date of judgment will encourage early payment by defendants, and encourage defendants to agree costs. Conversely, if interest is not paid, there is an incentive on the part of the defendant to delay the taxation process. I have already referred to the fact that the plaintiff put some emphasis on this point in the present case.
The second and third strands of Lord Ackner’s reasoning do raise valid policy considerations. But, as Lord Ackner said, they are reasons for adopting the rule that the United Kingdom Parliament has adopted. The South Australian Parliament has not established any such rule. My view is that to adopt a rule that interest should run at least from judgment on costs ordered to be paid, when a plaintiff has not paid them, would once again be to establish not a guideline or principle but a rule that would apply in every case, absent some disentitling conduct on the part of the plaintiff. Moreover, such a rule is not tied in any sense to the facts of a particular case. Lord Ackner’s reasoning reflects a point of view with which I have considerable sympathy, indeed I agree with it. But, as it seems to me, that sort of reasoning is a reason for adopting a general rule, not a reason for the exercise of the discretion in a particular case. I do not overlook the fact, as has been pointed out by several members of the High Court, that the exercise of the discretion in relation to costs is not controlled exclusively by considerations relevant to the compensation of the successful party. At times other factors come into play. But it seems to me that to establish the general rule sought by the plaintiff, on the basis of the considerations advanced by Lord Ackner, would be to substitute a general rule for the statutory discretion, and to do so by reference to considerations of general policy rather than by reference to the circumstances of the particular case. Those considerations of general policy could be broadly described as reflecting objectives of fairness and efficiency, and as having nothing to do with compensation to the plaintiff in the particular case.
For those reasons, although I agree with Lord Ackner’s views, and consider that there is much to be said in support of a general rule that interest should run on taxed costs from the date of the judgment, I do not consider that such a general rule for the exercise of the statutory discretion can be established on this basis.

The legal profession provides very substantial assistance to litigants who cannot afford to pay legal costs. It does so by often conducting litigation without requiring any or any significant payment on account of costs and disbursements. This constitutes a substantial subsidy towards the cost of litigation, and in some cases exposes the practitioners concerned to a real risk of being unable to recoup payment. But I do not consider that these practical problems are a basis for the Court adopting a general rule of the type contended for by the plaintiff.
There were some other matters pointed to by the plaintiff but they were, I consider, only variations on the above themes.
My conclusion is that none of the matters relied upon by the plaintiff establish a principle or rule that, in the present case, required an order that interest run from the date of the judgment, or from an earlier date.
In particular, I do not agree that ordinarily interest should run on costs ordered to be paid from the time when the work was done, or from the time when the plaintiff was charged for the work, or from the date of the judgment ordering that costs be paid, when the plaintiff has not paid the costs or agreed to pay interest on outstanding costs.
That leaves the question of whether, in the particular circumstances, the taxing officer erred in any other respect. Mr Gray QC for the plaintiff submitted that the taxing officer erred in holding that the plaintiff could and should have moved more quickly than he did to tax his costs. In fact, the plaintiff lodged a bill of costs as between party and party in March 1993. When the plaintiff succeeded, on appeal in obtaining an order for costs as between solicitor and client, that bill was withdrawn and a bill as between solicitor and client was lodged for taxation. Bearing in mind the complexity of the bill, no criticism can be made of the plaintiff on the basis of delay. The taxing officer’s award of interest was made on the basis that the bill of costs was filed after March 1994. In fact, the defendant had had in its possession a bill of costs, as between party and party, since March 1993. I consider that if the taxing officer had realised that, he would have ordered that interest run, on the amount that he considered should have been paid earlier than it was, from an earlier date than the date that he chose. In that respect an error has occurred.
Mr Gray made a similar criticism of the reasoning of the Judge who heard the review of the taxation of costs. I am not satisfied that the criticism is sound, because the Judge made a somewhat different point, which was that overall the proceedings had taken longer than they should have taken. But this does not matter, because I am satisfied that in the respect identified the taxing officer proceeded on an incorrect basis.
While the taxing officer erred in this respect, and failed to take account of the fact that the plaintiff had paid some of the costs from the judgment money, I find no error in his general approach to the question of interest. Other than in the respect indicated, he did not consider that the defendant had been guilty of delay or obstruction warranting the order that the plaintiff sought. I consider that that conclusion was open to him. The question of costs had been hard fought, but that is all.
Accordingly, while I find no fault in the taxing officer’s general approach to the question of interest, the exercise of the taxing officer’s discretion requires reconsideration having regard to the fact that the plaintiff had paid some of the costs, from his judgment monies, and on the basis that the defendant had fair notice of the costs claimed by the plaintiff about a year earlier than the taxing officer realised. The appeal should be allowed to enable the taxing officer to reconsider the question of interest in the light of those two matters.

Conclusions

In a case in which the plaintiff has not paid costs, and has not agreed to pay interest on costs, the discretion under s 114(2)(b) in relation to the date from which interest runs is not to be exercised on the basis of a general principle that interest on costs and disbursements should run from the date of the judgment awarding costs or from some earlier date at which the costs were earned. To so decide would not be a proper exercise of the discretion. My main reason for so concluding is that the award of costs is intended as a partial indemnity against expense incurred. As the plaintiff’s argument was mainly based upon a contention that such a principle was applicable, that suffices to dispose of the main argument advanced by the plaintiff.
The taxing officer’s approach was correct in principle. Nevertheless, the appeal should be allowed to enable the taxing officer to reconsider the question of interest in the light of the two matters identified by me. There is no reason for any broader reconsideration of the question of interest.
If a plaintiff has paid the costs, wholly or in part, the subject of a taxation, or has agreed to pay interest on them, that will be a circumstance which might justify an award of interest from judgment, or even from an earlier date. I mention again the reservation that I expressed earlier relating to an agreement to pay interest on unpaid costs.
If the defendant has been guilty of delay, or of an unreasonable approach to the taxation of costs, the taxing officer might well fix a date earlier than the date of the certificate from which interest is to run. In such a case it is not easy to see how the date could be a date earlier than the judgment.
I emphasise that it remains necessary to consider all relevant factors.
In the light of the matters that have arisen for consideration in the course of the appeal, my view is that s 114(2)(b) should confer a power on a taxing officer to award a lump sum by way of interest, in addition to the power to fix a date from which interest is to run. Adjusting the date from which interest is to run will, in many circumstances, be a rather crude device. It is undesirable that the question of interest should give rise to lengthy argument about the selection of a date which will fairly compensate a plaintiff. The power to award a lump sum would inject some flexibility into the process which would avoid artificial arguments over the choice of a date.
I would order that the appeal be allowed, that the decision of the Judge dismissing the application for a review be set aside, that for that decision there be substituted an order allowing the review, setting aside the decision of the taxing officer in relation to interest, and remitting the matter to the taxing officer for further consideration in the light of these reasons.
MULLIGHAN J.I agree that the appeal be allowed for the reasons given by the Chief Justice and I agree with the orders he proposes.
WICKS J. I agree with the order proposed by the Chief Justice. I also agree with his reasons for such order. I have nothing to add.

[1999] SASC 486

12 November 1999