Screenco Pty Ltd v R L Dew Pty Ltd

[2002] NSWSC 1050

CITATION:	Screenco Pty Ltd v R L Dew Pty Ltd & Ors [2002] NSWSC 1050
CURRENT JURISDICTION:	Equity Division Commercial List
FILE NUMBER(S):	SC 50067/99
HEARING DATE(S):	3 October 2002
JUDGMENT DATE:	11 November 2002
PARTIES :	Screenco Pty Ltd (Pltf) R L Dew Pty Ltd (1D) Ronald Steele t/as Dragon Scaffolding (2D) Highrise Group Pty Ltd (XD)
JUDGMENT OF:	McClellan J

COUNSEL :	C R C Newlinds (Pltf) J B Turnbull (1D) G J McVay (2D) G A Sirtes (XD)
SOLICITORS:	Michell Sillar (Pltf) McCabe Terrill Lawyers (1D) Colin Biggers Paisley (2D) Henry Davis York (XD)
CATCHWORDS:	COMMERCIAL - INTEREST - where damage has been proved but plaintiff not had to pay for a replacement item - general principles of the discretion to award interest - whether it is just to award interest in the circumstances - COSTS - offer of compromise where claim is later amended - order for costs as between 1D and 2D.
LEGISLATION CITED:	Supreme Court Act s 94 Supreme Court Rules Pt 22 r 9, r 1A(2)(b), Pt 52A r 22
CASES CITED:	Ruby v Marsh (1975) 132 CLR 643 BP Exploration Co (Libya) Ltd v Hunt (No 2) (1979) 1 WLR 783 General Tire & Rubber Co v Firestone Tyre & Rubber Co Ltd (1975) 1 WLR 819 SCI Operations Pty Ltd & ACI Operations Pty Ltd v Commonwealth of Australia (1996) 69 FCR 346 John Fairfax & Sons Ltd v Kelly (1987) 8 NSWLR 131 Batchelor v Burke (1981) 148 CLR 448 Settree v Roberts [1982] 1 NSWLR 649 Fire and All Risks Insurance Co Ltd v Callinan (1978) 140 CLR Thompson v Faraonio (1979) 54 ALJR 231 Pheeney v Doolan [No 2] [1977] NSWLR 601 Grincelis v House (2000) 201 CLR 321 Johnson v Perez (1988) 166 CLR 351 Calderbank v Calderbank (1975) 3 All ER 333
DECISION:	Para 33

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

McCLELLAN J

MONDAY, 11 NOVEMBER 2002

50067/99 SCREENCO PTY LIMITED v R L DEW PTY LIMITED & ANOR

JUDGMENT: (interest and costs)

1 HIS HONOUR: I have published my reasons in relation to this matter. It is now necessary to determine matters of interest and costs.

Interest

2 The parties agreed the appropriate money sum for all items of damage except for the Jumbotron screen. The parties, for reasons recorded in the main reasons for judgment, agreed that the loss should initially be determined in pounds sterling at the date of the accident in March 1998. I determined that item in the sum of £477,984. The parties have further agreed that the appropriate rate at which to convert that sum to Australian dollars is the exchange rate at 3 March 1998 with the consequence that the appropriate sum for the screen is $1,152,897.40.

3 The plaintiff claims interest on the various items of damage from the date upon which either the damage occurred or the costs reflected in that item were incurred. Interest is claimed on the following basis:

1. items 1-8 inclusive, from 3 March 1998 until date of judgment;

2. item 9 from 7 April 1998, being the date of the latest relevant invoice for truck hire;

3. item 10 from 9 March 1998, being the date of the latest relevant invoice for crane hire;

4. item 11 from 17 March 1998, being the date of the latest relevant invoice for airfares;

5. item 12 – there are two components to this aspect of the claim, the first being $26,015.19 in relation to which interest has been claimed from 7 April 1998, being the date of the latest relevant invoice for freight and the second being $65,000 in relation to which interest has been claimed from 29 November 1998, being the approximate date of the relevant set off referred to by Clive Potter during the course of his evidence.

6. item 13 from 18 March 1998, being the date of the relevant invoice;

7. item 16 from 22 June 1998, being the date of the latest relevant invoice; and

8. item 18 from 1 July 1998, which is beyond the midpoint of the relevant period for which lost revenue was claimed.

4 The carriage of the argument in relation to the interest on behalf of the defendants was undertaken by Steele, who made the following submissions in writing:

1. The plaintiff claims interest from 3 March 1998 to the date of judgment on this item (item 1). It does so pursuant to s 94 of the Supreme Court Act.
2. The award of interest is not designed to compensate a plaintiff for loss arising out of the cause of action, but to provide compensation when a sum of money has been outstanding for a period of time. There is no entitlement to interest as of course. The court must be persuaded that it is just, between the plaintiff and the defendant, to make an award of interest in relation to each of the elements referred to in the section, namely the rate, the sum to bear interest, and the period for which the interest is to accrue. Pheeney v Doolan (1977) 1 NSWLR 604.
3. There are a number of reasons why it is not just as between the plaintiff and the defendant to order any interest on this amount at all. The reasons are:
(a) the plaintiff has recovered judgment for $79,000 for lost revenue, that is item 18. It is submitted that, at least for a period of time, the plaintiff cannot have both loss of revenue and interest. The loss of revenue item compensated the plaintiff for loss of revenue from not being able to use modules. The claim for interest seeks to compensate the plaintiff for the loss of the use of monies that represent the value to the plaintiff of the modules. The plaintiff cannot be compensated for revenue lost by reason of not being able to use the modules and also interest for loss of the use of the money which represents the value to the plaintiff of the modules. The plaintiff would be doubly compensated. It follows that the interest claimed on this item must be reduced by $79,000 at least.
(b) A further reason why it would not be just to award interest is because the evidence is that the plaintiff has not paid the purchase price for the modules. The vendor of the modules to the plaintiff was, of course, a related company in the UK.
(c) On the evidence, the position is that whilst the modules have been destroyed and the plaintiff has lost the value of those modules, it still has not outlaid the purchase price for those modules. It, therefore, has had the use of the full amount of the purchase price of the modules since 3 March 1998. Because the plaintiff has not outlaid the purchase price, it cannot claim interest the purpose of which is to compensate the plaintiff for being kept out of its money. It has not been kept out of its money because it has not paid it out. True it is that the modules have been destroyed, however, the plaintiff still has the money value of the modules by reason of the non-payment of the purchase price. To award interest would be to leave the plaintiff in a position where it has had the use of the purchase price of the modules since 3 March 1998 and also interest on that money. That would be to doubly compensate the plaintiff.
4. With respect to interest on freight costs to Antwerp, this item was first claimed on 15 February 2002 in the amended summons. No evidence was given about the item until 30 August 2002 (2 working weeks before the hearing) in Exhibit A3.
5. It is submitted that in those circumstances it is not just, as between the plaintiff and the defendant, to require the defendant to pay interest on this item. Until 30 August 2002 there was no evidence at all to support the claim made on 20 February 2002. By revised short minutes of order made on 27 February 2002 the court directed the plaintiff to file and serve any further evidence by 22 March 2002. It is submitted that Steele was entitled to take the position that the plaintiff had no evidence, or was offering no evidence, to support the sum of $65,000. Steele had no opportunity to concede the item was payable.
6. The sum of $65,000 has, moreover, not been paid by the plaintiff. The charge was apparently levied as an “internal services costs”. The plaintiff led no evidence as to what that meant for the plaintiff. Because the plaintiff has not paid the money it has had the benefit of it and cannot be doubly compensated by having interest also on it.
7. With respect to interest claimed on lost revenue, this item was not claimed until the amended summons was served on or about 15 February 2002. No evidence was served to support the claim until Exhibit A3 was served on 30 August 2002. The second defendant repeats the content of the direction made by the court on 27 February 2002 as to filing of all further evidence by the plaintiff by 22 March 2002. It is submitted that Steele was entitled to take the position that the plaintiff had no evidence to support this item or was not to offer any evidence to support this item. Steele has been precluded from any opportunity of assessing the evidence before the hearing and to concede it. For this reason it would be unjust to award interest on the lost revenue item.

5 A successful plaintiff who obtains an award of damages is generally entitled to an award of interest up to the date of judgment pursuant to s 94 of the Supreme Court Act (see Ruby v Marsh (1975) 132 CLR 642 at 644).

6 The fundamental principle is that interest is ordered “simply because the plaintiff has been deprived of the use of money which was due to him.” BP Exploration Co (Libya) Ltd v Hunt (No 2) (1979) 1 WLR 783 at 845. Interest is not awarded as a punishment, but “is awarded because it is only just that the person who has been deprived of the use of the money due to him should be paid interest on that money for the period during which he was deprived of that enjoyment” (General Tire & Rubber Co v Firestone Tyre & Rubber Co Ltd (1975) 1 WLR 819 at 841; and see the comprehensive discussion by Beaumont and Einfeld JJ in SCI Operations Pty Ltd & ACI Operations Pty Ltd v Commonwealth of Australia (1996) 69 FCR 346).

7 In John Fairfax & Sons Ltd v Kelly (1987) 8 NSWLR 131 McHugh JA identified the fact that interest is “awarded to compensate the plaintiff for the loss which he suffers in being kept out of his money” (Batchelor v Burke (1981) 148 CLR 448 at 455). Ordinarily a plaintiff “is not entitled to interest on damages in respect of payments which he has not made and which in point of legal theory are payable by him to a third party:” (Settree v Roberts [1982] 1 NSWLR 649). Interest should be “awarded for real and practical, and not merely theoretical losses:” (Fire and All Risks Insurance Co Ltd v Callinan (1978) 140 CLR at 432; Thompson v Faraonio (1979) 54 ALJR 231 at 233)

8 In Pheeney v Doolan [No 2] [1977] NSWLR 601 Reynolds JA described the discretion given by s 94 as providing an ancillary power the purpose for which “is to aid the court to do more complete justice between the parties than is otherwise possible. “Its purpose is to provide compensation “where it is otherwise appropriate to do so for the circumstance that a sum of money has been outstanding to him for a period of time.” (at 613).

9 Many of the decisions in which the exercise of the discretion to award interest has been discussed involve personal injuries. The fact that interest may be awarded when no payment has actually been made has been recognised in Grincelis v House (2000) 201 CLR 321. It is important to appreciate that not only may a plaintiff have been deprived of money but the defendant may have had the use of money to which it was not entitled, since the date when the cause of action arose. However, the overriding purpose of an award of interest is to ensure that in the particular circumstances, the plaintiff is justly compensated.

Conclusion in relation to interest

10 The Jumbotron screen was lost on 3 March 1998 in the circumstances I have already identified. The quantum of damages for that loss have been assessed, by the agreement of the parties, by considering the value of the screen in pounds sterling at the date of its loss and converting that sum to Australian dollars. In these circumstances it would be usual, if Screenco is to be properly compensated, that interest should be awarded from 3 March 1998 until the date of judgment unless there are special circumstances. (Ruby v Marsh)

11 As it happens, at the date of the accident, Screenco was in the process of purchasing the screen from its English “parent” company but had not made any payment for it and has still not done so. This is apparently because of arrangements which it has been able to make with the “parent” company. However, those arrangements have not been explained by the evidence and there is nothing before me to confirm that Screenco will either have to make payment for the screen or more importantly, pay any amount of interest. If Screenco was required to carry an interest charge or, perhaps, because of currency movements it might otherwise suffer loss because of a delay in payment, it would probably be entitled to interest. However, in the present circumstances I am not satisfied that any “real” or “practical” loss has been occasioned to Screenco by the delay in the payment of damages. Accordingly, interest should not be awarded in relation to the damages attributable to the loss of the screen.

12 Screenco has recovered compensation for lost revenue in an amount agreed by the parties at $79,000. This sum reflects income which was lost before the replacement screen became available. It is money which Screenco was denied and consistent with principle, should carry an award of interest.

13 With respect to items 12 and 18, I see no reason arising from the pre-trial procedures why Screenco should be denied interest on those claims. Even if the evidence came late, the claims were properly made and have succeeded.

Costs

14 Steele resists payment of both Screenco’s costs and Dew’s costs.

15 It is submitted that because Screenco was late in providing its quantum evidence and, in any event, because most of the quantum matters were settled no order for Screenco’s costs should be made. However, in my opinion, the substantive issue at the trial was the responsibility of the defendants for the accident which caused the loss. Screenco succeeded and is entitled to an order for costs.

16 In relation to Dew’s costs, Steele makes the following submissions:

“1. Steele should not be ordered to pay the first defendant’s costs of the first defendant’s cross claim against him nor of defending the second defendant’s claim against it.
2. The first defendant’s position was that there was no contract between the first defendant and Steele. That was the only issue between the first and second defendants. The first defendant lost that issue. The first defendant only obtained a judgment against Steele because the court held, contrary to the defendant’s position, that it had a contract with Steele, which contract Steele always admitted. Although the first defendant obtained a judgment against Steele, it lost the only factual issue between the first defendant and Steele that being the existence of the contract. It should, therefore, be deprived of its costs.
3. In a proper case the party that is successful overall may be ordered to pay the costs of a discrete issue. Steele does not have to show that the first defendant acted unreasonably in taking the position that there was no contract. Rosniak v GIO (1997) 41 NSWLR 608 at 615D. Steele only had to point to the fact that the first defendant lost the only issue between it and him.
4. The second defendant should not be ordered to pay the first defendant’s costs of defending the plaintiff’s claim that there was a contract between the plaintiff and the first defendant.
5. Steele’s contract with Dew was to build a scaffold. Any costs that Dew has to pay the plaintiff for unsuccessfully defending the plaintiff’s claim that there was a contract are not recoverable as damages for Steele’s breach of contract. Dew lost because its witnesses were not accepted. Those costs, therefore, did not directly flow from Steele’s breach of contract and nor could it reasonably have been in the contemplation of Dew and Steele that if Steele breached his contract he would have to pay Dew’s costs of an argument with the plaintiff that there was no contract which was lost on the basis that Dew’s witnesses were not accepted on credit.
6. For these reasons Steele should not be required to pay Dew’s costs of defending the plaintiff’s claim against Dew.”

17 Further submissions relevant to the plaintiff’s costs against Steele and the claims for interest were made:

“1. Steele sought discovery of documents showing the written down value of the modules. Discovery was never given.
2. It seems from the content of the document which is an annexure to the affidavit of David Thomas, that the plaintiff indeed had in its possession the depreciation schedules but failed to pass them on to Steele, in breach of the order for discovery. Steele did not find out the amount of the written down value of the modules until the second day of the hearing.
3. The plaintiff, by its breach of the order for discovery, caused an issue to be litigated at the hearing which would not have been an issue had adequate discovery been given.
4. For this additional reason, the plaintiff should be deprived of its costs against Steele.

18 Dew responded to Steele’s submissions. It was submitted that Steele misstated the position. The amended first cross-claim brought by Dew against Steele denied any agreement and in addition “any duty to the cross-defendant in relation to the erection of the scaffold”. It was pleaded that as between Dew and Steele, Dew relied upon the skill and ability of Steele to erect the scaffold properly. On this issue, Dew was successful.

19 It was also submitted that the terms of the contract were in issue and on this matter, Dew was successful.

Conclusion in relation to costs

20 Although Dew failed in its assertion that it did not have a contract with either Screenco or Steele, Steele never offered to indemnify Dew in the matter. Furthermore, Steele contended throughout that the accident was not its responsibility but that of Dew. In this contention, Steele wholly failed.

21 In its cross claim, Dew sought indemnity or contribution from Steele for any verdict recovered by Screenco. Dew has been successful and has a judgment in its favour. In my opinion, costs should follow the event.

22 I am satisfied that it is appropriate for Steele to be ordered to pay Dew’s costs. The order should include the costs of Dew payable to Screenco.

23 Although documents showing the written down value of modules were apparently never discovered, the written down value of the modules was provided during the hearing. The fact that the information was provided late did not, in my opinion, cause an issue to be litigated which would not otherwise have occupied the time of the court. The parties were unable to agree on the basis which the court should adopt for assessing the loss suffered by reason of the damage to the screen. Court time was not taken with determining either the value or written down value of that item.

24 Screenco made an offer of compromise pursuant to Pt 22 of the Supreme Court rules in the sum of $1,200,000. It was made in the following terms:

“Pursuant to Pt 22 of the Supreme Court rules, the plaintiff offered to compromise all causes of action upon which it claims on the following terms:
1. Verdict and judgment for the plaintiff against first and second defendants in the sum of $1,200,000.
2. The first and second defendants to pay the plaintiff’s costs as agreed or assessed.

25 The offer of compromise was dated 28 March 2000. Screenco claims indemnity costs from that date. At the date upon which the offer of compromise was served, the claim particularised by Screenco totalled $1,400,111.80 and in addition, claimed interest and costs. Although the front page of the summons contained the figure of $1,238,027, this was an error. The error would have been apparent to anyone who considered the detail of the summons.

26 Accordingly, the offer of $1,200,000 represented a true compromise.

27 After the offer of compromise was made, some items were deleted from the claim. The deduction of these items, as I understand the position, reduced the principal sum claimed to $1,081,000. However, interest must be added to this sum with the consequence that the sum recovered in relation to the modified claim was well in excess of $1,200,000.

28 In addition, after the offer of compromise, certain items were added to the claim but these may be disregarded for present purposes.

29 In my opinion, the provisions of Pt 52A r 22 are applicable to the present circumstances. Screenco has succeeded in recovering a sum which, with interest, is considerably in excess of $1,200,000.

30 Steele submits that the terms of the offer did not strictly comply with Pt 22 r 9. It is submitted that the offer does not “bear a statement to the effect the offer was made in accordance with this Division” and further, that the offer does not make it clear that the judgment was against both defendants on a joint and several basis.

31 The offer is expressed to be “pursuant to Pt 22 of the Supreme Court Rules”. This is sufficient for compliance with Pt 22 r 1A(2)(b). In my opinion, the fact that the offer does not expressly state that the judgment is to be joint and several is not material. Such a result is clear from the pleadings. Pt 22 of the Supreme Court Rules requires the offer to be put to all defendants. In the absence of any statement that the offer was directed to one particular defendant, it should be construed so that the defendants are to be jointly and severally liable for the settlement sum.

32 In any event, if the offer should not be construed in that fashion it clearly was an offer conforming with the principles in Calderbank v Calderbank (1975) 3 All ER 333 and should be considered accordingly.

33 I direct the plaintiff to bring in short minutes of order reflecting the primary reasons and these reasons in relation to interest and costs.

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Last Modified: 11/22/2002