Public Trustee v CBA (No 2) - [2018] SASC 55

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
PUBLIC TRUSTEE v CBA & ORS (No 2)
[2018] SASC 55
Judgment of The Honourable Justice Bampton
13 April 2018
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - OFFERS OF COMPROMISE, PAYMENTS INTO COURT AND SETTLEMENTS - OFFER OF COMPROMISE OR OFFER TO SETTLE OR CONSENT TO JUDGMENT PURSUANT TO RULES
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - INTEREST ON COSTS
The plaintiff, as executor of a deceased estate, was found to have claims in debt against each of the defendant banks pursuant to contracts between customer and banker. Both defendants were found to be entitled to set off their claims in equity pursuant to indemnities given against the plaintiff's claims. Both defendants filed formal offers of settlement.
Application for pre-judgment interest pursuant to s 30C of the Supreme Court Act 1935 (SA) and costs by plaintiff – whether s 30C applies – whether the amount awarded against each defendant did not exceed the amount prescribed in r 263(2)(g) of the Supreme Court Civil Rules 2006 (SA) – the effect of complying and non-complying formal offers.
HELD:
1. Plaintiff entitled to pre-judgment interest pursuant to s 30C of the Supreme Court Act 1935 (SA).
2. The prohibition in r 263(2)(g) preventing general costs of action being awarded does not apply as the amount (the sum of the debts plus pre-judgment interest) awarded to the plaintiff in this single action brought against the two defendants is in excess of $120,000.
3. The plaintiff is entitled to 80 per cent of its costs of the action against the first defendant on a party/party basis.
4. The plaintiff is entitled to 80 per cent of its costs of the action against the second defendant on party/party basis until 17 November 2016 and that there be no order as to costs of the action as between the parties after 17 November 2016.
Supreme Court Act 1935 (SA) s 30C; Supreme Court Civil Supplementary Rules 2014 (SA) r 208; Supreme Court Civil Rules 2006 (SA) r 30, r 73, r 187, r 188F, r 188G, r 263, referred to.
Duke Group Ltd (In Liq) v Pilmer & Ors (1998) 144 FLR 1; Public Trustee v CBA & Ors [2018] SASC 25, considered.

PUBLIC TRUSTEE v CBA & ORS (No 2)
[2018] SASC 55
Civil: Application for costs
BAMPTON J.

Mary Martin was a customer of the Commonwealth Bank of Australia (“CBA”) and Westpac Banking Corporation trading as Bank SA (“Bank SA”). At the date of her death, she had monies on deposit with each bank. In my judgment delivered on 9 March 2018,[1] I found that the Public Trustee’s, as executor of Mary Martin’s estate, claims in debt against the CBA and Bank SA arise pursuant to contracts between customer and banker. Following Mary Martin’s death on 3 October 2008, the CBA and Bank SA held the monies on deposit to be paid to the person legally entitled to administer her estate. Upon wrongly paying those monies to Michael Martin, the CBA and Bank SA treated their previous contracts as having been discharged. The wrong giving rise to liability was done as at the dates the accounts were closed when the CBA and Bank SA repudiated their contracts and paid the proceeds of the accounts to Michael Martin.
[1] Public Trustee v CBA & Ors [2018] SASC 25.
Accordingly, the Public Trustee is entitled to a debt from:
1.The CBA of $55,432.26. That is the sum of $69,290.33 less the set-off of 20 per cent being the balance of the CBA account closed on 19 August 2009.
2.Bank SA of $43,384.67. That is the sum of $108,461.67 less the set‑off of 60 per cent being the balance of the two Bank SA accounts closed on 23 July 2009.
Pre-judgment interest
I accept the Public Trustee’s submission that it did not affirm the contractual relationship that had existed between the CBA and Bank SA and Mary Martin. What it did do, after obtaining the grant of probate, was to make demands for payment of the monies that had been wrongfully paid to Michael Martin. As submitted by the Public Trustee, this is not a situation where a continuing right to interest after the dates of closure of the accounts “is recoverable as of right by virtue of an agreement” pursuant to s 30C(4)(b) of the Supreme Court Act 1935 (SA) which remained on foot between the banks and the Public Trustee after the account closures.
As such, s 30C of the Supreme Court Act permits me to award simple interest from the date the liability of the banks to pay the amount of the debt fell due, that is when the payments were made to Michael Martin, to the date judgment is entered at the rate of five per cent.
There can be only one rate of interest and one period in respect of which that rate is applied pursuant to s 30C.[2]
[2] Duke Group Ltd (In Liq) v Pilmer & Ors (1998) 144 FLR 1.
The appropriate rate for the calculating of interest on pre-judgment economic losses is a matter for determination by the Court. Rule 208 of the Supreme Court Civil Supplementary Rules 2014 (SA) provides that, as a guide only, the Court may calculate interest as follows:
(a)in respect of the period from 1 January to 30 June or part of that period in a year, the cash rate of interest last set by the Reserve Bank of Australia before that 1 January, plus 4%.
The published rate as at 1 January 2018 was 1.5 per cent. Adding four per cent to this rate results in a pre-judgment interest rate of 5.5 per cent. The Public Trustee seeks only five per cent.
Accordingly, in the case of the CBA, I order that interest is payable on the sum of $55,432.26 at the rate of five per cent per annum from 19 August 2009 to the date judgment is entered. In the case of Bank SA, I order interest is payable on the sum of $43,384.67 at the rate of five per cent per annum from 23 July 2009 to the date of judgment.
I enter judgment for the Public Trustee against the CBA in the sum of $79,416.66.
I enter judgment for the Public Trustee against Bank SA in the sum of $62,325.35
Costs of the action
The Public Trustee in its pleadings sought its costs of the action on an indemnity basis or alternatively on a solicitor/client basis.
During the costs argument the Public Trustee submitted that the starting point is that costs follow the event and prepared draft minutes seeking its costs on a party/party basis.
The CBA and Bank SA submitted that the starting point is that general costs are not to be awarded in accordance with r 263(2)(g) of the Supreme Court Civil Rules 2006 (SA) (“the Rules”) which provides that in an action founded on a claim for damages or any other monetary sum, general costs of action are not to be awarded in favour of the successful plaintiff unless the amount awarded exceeds $120,000.
The CBA and Bank SA argued that the amount awarded against each defendant does not exceed $120,000 and, accordingly, the Public Trustee is not entitled to costs of the action against each defendant unless it is just in the circumstances of the case that the plaintiff should recover the whole or part of the costs of the action.
I have had regard to the submissions made by the parties regarding the application of r 263(2)(g).
Pursuant to r 30(7) and r 73, the Public Trustee brought this single action based on the claims it had against the CBA and Bank SA. It was appropriate to litigate the two claims in this single action.
Accordingly, the prohibition in r 263(2)(g) preventing general costs of action being awarded does not apply as the amount (the sum of the debts plus pre-judgment interest) awarded to the Public Trustee in this action is in excess of $120,000. If I am wrong, I am satisfied that it is just, in the circumstances of this case, that the Public Trustee recover at least part of the costs of the action.
The costs recoverable against CBA
The CBA made a formal offer. The offer has no formal effect as the Public Trustee upon judgment being entered has bettered the formal offer. However, the CBA argued that the terms and facts of the offer may be taken into account. It was submitted that the Public Trustee failed to respond to that offer within the time required by the Rules. Its response, when it came, failed to give any reason as to why the offer was rejected or not accepted. In the circumstances, the Public Trustee has undertaken a five day trial, it was submitted, against it with Senior Counsel for the sake of approximately $27,000.
The Public Trustee is also criticised for having engaged in wilful blindness as to the extent of Philomena Martin’s and Francis Martin’s involvement in the payment out of the bank accounts.
The Bank SA offers
On 19 July 2016, Bank SA made an offer of $51,020.37.[3] It is evident from its terms that it is a judgment offer within r 187(2) and, therefore, a complying offer pursuant to r 188F(1).
[3] Email from defendants’ counsel dated 3 April 2018.
In assessing this offer, I take into account pre-judgment interest on the debt owed by Bank SA as calculated at the date of the offer.
Interest on the debt owed of $43,384.67 calculated at the pre-judgment rate of five per cent over a seven year period from 23 July 2019 to 19 July 2016 is approximately $58,569.30.
The Public Trustee has, upon the entering of judgment, bettered the filed offer or, in the language of r 188F, has obtained a judgment on the claim to which the offer relates no less favourable to it than the terms of the 19 July 2016 offer.
On 3 November 2016, a second formal offer was made of a lump sum of $120,000 inclusive of interest and costs. This is a non-complying offer for the purposes of r 188F. As a non-complying offer, r 188G applies. It was submitted that despite this offer being non-complying it was unreasonable for the Public Trustee not to accept the offer. I agree that this is a matter to take into account in determining what order for costs to make pursuant to r 188G.
In determining the order for costs I have taken into account the non‑acceptance of the 3 November 2016 offer together with all of the circumstances of this matter and all that has been submitted by the parties. In my view the Public Trustee is entitled to 80 per cent of its costs of the action against the CBA and 80 per cent of its costs against Bank SA until 14 days after the 3 November 2016 offer. The orders for costs are:
1.The Public Trustee is entitled to 80 per cent of its costs of the action against the CBA on a party/party basis.
2.The Public Trustee is entitled to 80 per cent of its costs of the action against Bank SA on a party/party basis until 17 November 2016 and there be no order as to costs of the action as between the Public Trustee and Bank SA after 17 November 2016.