Pact Property Pty Ltd v APF Commercial Pty Ltd (No2)

[2009] NSWCA 293

New South Wales

Court of Appeal

CITATION:

PACT PROPERTY PTY LTD v APF COMMERCIAL PTY LTD (NO 2) [2009] NSWCA 293
This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S):

On the papers

 
JUDGMENT DATE: 

18 September 2009

JUDGMENT OF:

Beazley JA at 1; Basten JA at 1; Young JA at 1

DECISION:

(1) Appeal allowed in part.

(2) Set aside order 1 made in the Equity Division on 23 July 2008.

(3) In lieu thereof, give judgment for the appellant in the amount of $254,368, such judgment to take effect today.

(4) Each party is to bear its own costs of the appeal.

(5) Set aside orders 3 and 4 made on 23 July 2008 and in lieu thereof order that the defendants pay the plaintiff’s costs in the Court below, as agreed or assessed.

CATCHWORDS:	COSTS – conduct of parties – orders made on appeal which neither party sought – whether factors present justifying award of costs - JUDGMENT – payment as condition of stay pending appeal – capital and interest payable increased on appeal – apportionment of payment between interest and capital
LEGISLATION CITED:	Civil Procedure Act 2005 (NSW), s 101
CATEGORY:	Consequential orders
CASES CITED:	Najdovski v Crnojlovic (No 2) [2008] NSWCA 281; 51 MVR 334 Nicol v Allyacht Spars Pty Ltd [No 2] [1988] HCA 48; 165 CLR 306 Pact Property Pty Ltd v APF Commercial Pty Ltd [2009] NSWCA 218
PARTIES:	Pact Property Pty Ltd - Appellant APF Commercial Pty Ltd - Respondent
FILE NUMBER(S):	CA 40309/08
COUNSEL:	B A Coles QC/A F Fernon - Appellant S Donaldson SC/J L Chambers - Respondent
SOLICITORS:	O'Neill Marengo - Appellant Ian Abelitis Solicitors - Respondent

LOWER COURT JURISDICTION:	Supreme Court
LOWER COURT FILE NUMBER(S):	SC 50036/07
LOWER COURT JUDICIAL OFFICER:	McDougall J
LOWER COURT DATE OF DECISION:	22 July 2008; 23 July 2008 (unrep)
LOWER COURT MEDIUM NEUTRAL CITATION:	Pact Property Pty Ltd v APF Commercial Pty Ltd [2008] NSWSC 889

CA 40309/08
SC 50036/07

BEAZLEY JA
BASTEN JA
YOUNG JA

18 September 2009

PACT PROPERTY PTY LTD v APF COMMERCIAL PTY LTD (NO 2)

Judgment

1 JUDGMENT of THE COURT delivered by BASTEN JA: On 27 July 2009 the Court delivered judgment on the appeal in this matter answering questions which had been identified by the trial judge (McDougall J) as a result of which different calculations were required in respect of the amount payable by the respondent to the appellant: Pact Property Pty Ltd v APF Commercial Pty Ltd [2009] NSWCA 218. To enable it to make orders disposing of the proceedings, the Court directed the parties to confer as to the orders required and, if a common position could not be reached, each was to provide the Court with its proposed orders and submissions in support thereof: at [4]. Each was also given an opportunity to put submissions in reply.

Capitalisation of first year’s interest

2 This case involved a dispute as to the payments due under a contract for sale of a business. Payment was to be made in two tranches, the first of which ($700,000) was paid on 2 December 2005. The dispute centred on the calculation of the second payment, known in the contract as the “retention amount”. The primary judge identified certain questions, which he answered, which allowed the parties to make calculations as to the amount of the judgment. His Honour held that interest ran on the retention amount from 3 December 2005 until 2 December 2006 at a rate of 6%, simple interest. Thereafter, interest was to be calculated at a rate identified as the Westpac Indicator Lending Rate plus 2%. During the period from 3 December 2006 until payment of the judgment debt as quantified below, on 4 September 2008, that rate rose in stages from 12% to 14%.

3 On 4 September 2008 the respondent paid an amount of $73,227.12 of which $57,815.86 was a payment of principal and $15,411.26 was a payment of interest. This payment did not involve capitalisation of interest after the first year.

4 The appellant now seeks to have the interest payable in the first year during which the amount was outstanding capitalised at the end of that period. That approach was arguably inconsistent with an answer given by McDougall J as to the basis of calculation of interest, which answer was not challenged on appeal. Further, the parties made their calculations in respect of his Honour’s judgment on a basis which involved no capitalisation of that period of interest, being a basis from which the appellant now seeks to depart. On either view, the appellant’s position should be rejected and there should be no capitalisation of the interest payable during the first 12 months.

Allocation of payment made after trial

5 As already noted, the respondent made a payment following the judgment below, which involved a calculation of interest to that date. Because the capital sum which should have been awarded, according to the judgment of this Court, is greater than that which was awarded at trial, the interest up to the date of the judgment below is significantly higher than the amount understood to be payable for interest when the initial payment was made. As now appears, the total interest payable to the date of judgment (23 July 2008) was $62,237 (to the nearest dollar), not $15,411. There was, in addition a further amount of interest attributable to the period between the date of judgment below and the date of the payment.

6 The appellant contends that the payment in fact made on 4 September 2008 should be apportioned, first as to the interest now known to have been payable to that time and as to the balance, to capital. The respondent submits that there is no room for any such presumed allocation in circumstances where there was an actual agreement as to the amount payable by way of principal and interest, as at the date of payment. (Clearly it is in the interest of the respondent to reduce the capital at an early stage, so as to reduce the interest accruing on outstanding amounts, in circumstances where interest is not compounded; the appellant’s interest works the other way.)

7 The respondent’s submission should not be accepted. There was no agreement between the parties as to the allocation of the payment as between capital and interest: the agreement was that, on the basis of the judgment, a particular amount was owed by way of principal and a further amount by way of interest, all of which was paid. The premise having been rendered false, so that the payment was not a payment of the whole of the outstanding debt, but only part thereof, the general assumption should be applied that the payment was to be apportioned first to interest and then to capital.

Calculation of interest post-judgment

8 The third issue concerns the rate at which interest was to be calculated from the date of judgment in the Court below, namely 23 July 2008. That question required consideration of two periods. First, there was the period of 43 days from the date of judgment until the date of payment. The second period, which arises because the first payment was found by this Court not to be the full amount owing, runs from the date of payment of the earlier judgment until the amount of the judgment identified by this Court is paid.

9 In its initial submissions, the appellant annexed a calculation with respect to interest payable from 5 September 2008 (the second period), based on the contract rate. The respondent did not dispute the application of the contract rate as applicable to the balance outstanding as at 23 July 2008, except that, in relation to the period during which the initial judgment had been outstanding, it asserted that the proper rate, on the judgment amount, was that prescribed under s 101 of the Civil Procedure Act 2005 (NSW), which at the relevant time was 10%.

10 In making calculations on the additional amount payable under this Court’s judgment, both parties appeared to assume that the judgment would take effect from the date on which it was delivered, and not from the date of the judgment below. On that basis, the parties assumed, appropriately, that the judgment of this Court would include an amount by way of pre-judgment interest: see Nicol v Allyacht Spars Pty Ltd [No 2] [1988] HCA 48; 165 CLR 306 and Najdovski v Crnojlovic (No 2) [2008] NSWCA 281; 51 MVR 334 at [5].

11 It is appropriate to work on the assumptions made by the parties. The only significant difference between their positions for present purposes, is the rate of calculation for the period of 43 days on the amount payable under the judgment at first instance. It is arguable that the respondent had an expectation that, in the absence of any order to the contrary, the prescribed rate (rather than the contract rate) would apply post-judgment. In one sense, that judgment having been set aside, the expectation no longer operates, so that the calculation must be undertaken afresh. Another way of reaching the same conclusion is for this Court to exercise a power conferred by s 101(2) of the Civil Procedure Act to order that payment on the amount outstanding be at the contract rate for that period. On either approach, the contract rate should be applied. (The difference is of the order of $1,000.)

Consequences for judgment

12 In its submissions in reply, the respondent accepted, on the principles set out above, that the interest payable until 23 July 2008 was $14,000 (at the 6% rate for the first year) and $48,237 thereafter. The total amount of interest was thus $62,237. To that should be added the amount of interest which accrued until the date of the first payment, namely 4 September 2008. That amount, calculated at the contract rate, was $4,082, giving a total of interest as at the date of the first payment, of $66,319. The balance, to be assigned in reduction of capital, was thus $6,908. Interest payments from 4 September 2008 were therefore to be calculated by reference to a principal amount of $226,425. Interest, at the rates identified by the parties, until 14 August 2009 amounted to $25,797.

13 The parties appear to have accepted that the contract rate continues to apply at 11.16%. Therefore from the period from 14 August until the date of this judgment (14 September 2009) a further amount of $2,146 will have accrued. The total amount of the judgment payable is therefore $254,368.

Costs

14 The remaining matters outstanding are the proper orders as to the costs of the appeal and of the trial.

15 The appellant was successful on the appeal in the sense that it obtained judgment in an amount approximately $175,000 above that which it obtained at trial. However, its claim was for $2 million, on a basis upon which it failed. As noted in the principal judgment in this Court at [45], the approach accepted by this Court was that adopted (in the alternative) by the respondent below, but not actively pursued by it in this Court.

16 Each party sought its costs of the appeal. The submissions were tendentious, each identifying the factors which favoured its position, without acknowledging or addressing the weight to be given to those factors pulling in the other direction. There should be no award as to the costs of the appeal.

17 The Court invited submissions in relation to the costs of the trial. Neither party addressed that question. The primary judge made orders which implied that an offer of compromise was made by the defendants (including the respondent to the appeal) on or about 18 July 2008, that is four days before the hearing of the matter. That resulted in the plaintiff obtaining its costs up until that date but the plaintiff paying the defendant’s costs on an indemnity basis thereafter.

18 The parties have had an opportunity to address the question: see principal judgment at [46]. Neither has taken that opportunity. The orders made by the primary judge in respect of costs should therefore stand.

19 There remains a question (not addressed by the parties separately) as to the costs of the submissions in respect of these orders. In its principal judgment, the Court directed the parties to confer as to appropriate orders to dispose of the appeal: at [47]. Before submissions were filed, it is apparent that some level of agreement was reached. Nevertheless, apart from the question of capitalisation of the first year’s interest, the amount in dispute, as identified by the appellant’s submissions in reply was less than $5,000, in an amount of $250,000. (The amount would have been $5,000 higher again, if the capitalisation of interest had been accepted.) In fact the figure accepted by this Court was not proposed by either party. Why that is so is no longer of interest. The costs incurred by both parties must have exceeded the amount ultimately in dispute. No doubt the relevant positions were taken on instructions, although one might speculate as to what advice was given to the parties as to the desirability of seeking to have this Court resolve amounts which, in the end, were less than 10% of the statutory floor below which leave is required. Again each party was partly successful in its argument; again it is inappropriate to make any order as to the costs of the proceedings following delivery of the principal judgment.

20 The court makes the following orders:

(1) Appeal allowed in part.

(2) Set aside order 1 made in the Equity Division on 23 July 2008.

(3) In lieu thereof, give judgment for the appellant in the amount of $254,368, such judgment to take effect today.

(4) Each party is to bear its own costs of the appeal.

21 In addition the parties have agreed that the costs orders made below should be varied. The following further order is made by consent with effect from the date of the judgment, namely 18 September 2009:

(5) Set aside orders 3 and 4 made on 23 July 2008 and in lieu thereof order that the defendants pay the plaintiff’s costs in the Court below, as agreed or assessed.

**********

29/09/2009	-	Addition of new paragraph and order - Paragraph(s) 21
13/10/2009	-	Typographical error - Paragraph(s) Coversheet