Pozzan v Gibbons (No 2) - [2006] SASC 182

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
POZZAN v GIBBONS (No 2)
[2006] SASC 182
Reasons for Supplementary Decisions of The Honourable Justice Perry
22 June 2006
PROCEDURE - JUDGMENTS AND ORDERS - INTEREST ON JUDGMENTS - RATE
Interest on judgment – the plaintiff, having recovered a substantial money judgment, sought an award of interest on the judgment at the default rate of 20 per cent set out in the contract entered into between the parties – held that there is no discretion to award costs on a judgment other than at the rate set out in the third schedule to the rules of court – insofar as SCR r 84.19 purported to confer a discretion on the court to award interest at another rate, it is inconsistent with s 114 of the Supreme Court Act 1935 and is pro tanto invalid.
Supreme Court Act 1935 s 114; Supreme Court Rules r 84.19, referred to.
Commonwealth Bank of Australia v Heinrich [2000] SASC 20, BC200000531, considered.

PROCEDURE - COSTS - DEPARTING FROM THE GENERAL RULE - ORDER FOR COSTS ON INDEMNITY BASIS
In an action in which the plaintiff recovered a substantial money judgment against the defendant, the plaintiff sought an award of costs on a solicitor and client basis from the date of expiration of an offer communicated by letter between the solicitors for the parties, written about two months before trial, the offer being expressed to expire about five weeks before the commencement of the hearing – held that the offer fell within the category of a Calderbank offer, and given the terms of the offer, it was proper in all the circumstances to award solicitor and client costs from the date of expiration of the offer – order accordingly.

POZZAN v GIBBONS (No 2)
[2006] SASC 182
Civil

PERRY J. In this matter, following a trial, I announced the terms of the judgment to be entered, and published reasons in support of the judgment, on 5 June 2006. I then indicated that, subject to any correction of the calculation of the interest component, there would be judgment for the plaintiff against the defendant in the sum of $391,161.60 inclusive of interest to the date of judgment.
I expressly intimated that entry of judgment for that amount was subject to any correction of the calculation of interest which the parties might suggest should be made, after they had had an opportunity of considering the reasons and performing the necessary calculations.
I then stood the matter over to 8 June 2006 when I received further submissions on that aspect of the matter.
So far as the money judgment is concerned, at the hearing on that date the parties agreed that it should be in the sum of $390,837.61, a figure which resulted from a correction on the calculation of interest which I had made.
On the same occasion, that is, on 8 June 2006, I received submissions from counsel on two consequential questions.
They were the question whether interest…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2006] SASC 182
Decision Date: 22 June 2006

CaseChat Overview and Summary

In the matter of Pozzan v Gibbons (No 2), the plaintiff, having been awarded a substantial money judgment, sought an award of interest on the judgment at the default rate of 20% as per the loan agreement between the parties. The defendant, Gibbons, argued against the application of this rate post-judgment, and the case reached the court for determination of the applicable interest rate on the judgment.

The legal issues central to this case were whether the Supreme Court Rules could confer a discretion on the court to award interest at a rate other than the statutory rate and whether such a rule, if it existed, was consistent with the Supreme Court Act 1935. Specifically, the court had to determine the applicability of the loan agreement's interest rate provisions to the post-judgment interest, given that the borrower had defaulted and the lender sought interest at the default rate stipulated in the agreement.

The court held that there is no discretion to award interest on a judgment other than at the statutory rate outlined in the rules of court. The court found that Supreme Court Rules r 84.19, which purported to confer a discretion on the court to award interest at a rate other than the statutory rate, was inconsistent with s 114 of the Supreme Court Act 1935 and was therefore pro tanto invalid. The court reasoned that the statutory scheme established by the Supreme Court Act 1935 did not allow for any variation from the prescribed rate of interest on judgments, and any rule that suggested otherwise was void to the extent of its inconsistency with the Act.

As a result, the court determined that the interest on the judgment must be calculated at the statutory rate prescribed by the rules of court, rather than at the default rate specified in the loan agreement. This decision ensures that the statutory interest rate remains the standard for all judgments, barring any explicit legislative change to the interest rate provisions.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

PERRY J

These reasons are to be read in conjunction with the reasons delivered on 5 June 2006. Abbreviations used in those reasons have been carried into these reasons.Rate of interest on the judgment Pursuant to the loan agreement, the borrower, KIF agreed to pay interest on the principal sum at the rate of 20 per cent per annum, provided that if there was no default by KIF, and if quarterly interest payments as provided in the agreement were paid on time, this would reduce to 13 per cent per annum. KIF being in default of repayment of the principal sum and payment of certain interest payments, in calculating the amount of interest included in the judgment, I adopted what I described as the default rate of 20 per cent per annum. Mr Keith of counsel for the plaintiff now contends that the 20 per cent rate should also apply until payment of the judgment. He does not suggest that it should be calculated on the amount for which judgment was entered, which includes accumulated interest until then. He suggested rather that it apply to the principal sum of $300,000. Clause 5 of the loan agreement provides:5.JUDGMENT/ORDER (IF ANY)In the event of the liability of the Borrower under this agreement becoming merged in any judgment or order the Borrower shall pay interest on the amount owing for the time being under such judgment or order at the rate as at Item 2 [effectively the default rate] or at the rate fixed by or payable under such judgment or order whichever is the greater. Pursuant to the loan agreement, the defendant guaranteed the performance by the borrower of the borrower’s obligations under the loan agreement. As will have been seen from the reasons for judgment, if the loan agreement had stood alone, the obligations of the defendant would have been satisfied by providing the mortgage security only. However, the defendant executed the mortgage in terms which made him liable as a principal debtor, that is, as on an indemnity basis. There is, however, no provision in the mortgage which is the equivalent of clause 5 of the loan agreement. Within the meaning of clause5, the liability of the borrower has not become merged in any judgment or order, as KIF was not sued in the proceedings and no judgment has been entered against KIF. Were it not for an issue as to the validity of the relevant Supreme Court rule, the question would arise as to what effect those circumstances might have on the argument advanced by the plaintiff that post-judgment interest should be at the default rate of 20 per cent. Section 114 of the Supreme Court Act 1935 provides:114(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.

Ratio Decidendi

Legal Principle Established

Established by: PERRY J

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