Singh v Lugondela (Costs)
[2020] VSC 799
•2 December 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S CI 2017 05019
| RAGHBIR SINGH | Plaintiff |
| v | |
| BORA FRANCINE KAHEBWA LUGONDELA (by litigation guardian, TIM ROBINSON) & ORS (according to the attached Schedule) | Defendants |
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JUDGE: | Derham AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
DATE OF JUDGMENT: | 2 December 2020 |
CASE MAY BE CITED AS: | Singh v Lugondela (Costs) |
MEDIUM NEUTRAL CITATION: | [2020] VSC 799 |
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PRACTICE AND PROCEDURE — Costs — Whether recovery of damages of less than $100,000 for breach of a contract of sale of land should be the subject of an ‘otherwise order’ under r 63.24 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic).
PRACTICE AND PROCEDURE – Interest on judgment sum – Whether good cause shown to the contrary for the purposes of the calculation of interest under s 60 of the Supreme Court Act 1986 (Vic).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr K E W Mihaly | Vernon Da Gama & Associates |
| For the First Defendant | Mr A Hando | Russell Kennedy |
| For the Second Defendant | No appearance | |
| For the Third Parties | Mr C Smith | BN Law Limited trading as Barry.Nilsson |
HIS HONOUR:
Introduction
I published reasons for judgment in an assessment of damages in this proceeding on 31 August 2020: Singh v Lugondela [2020] VSC 544 (‘Reasons’). By Order made on 22 September 2020, the parties were required to file and serve submissions as to calculation of interest and as to the costs of the proceeding. The parties have made submissions in writing and these reasons explain my decision on those issues.
The plaintiff is entitled to damages assessed in the sum of $31,370.88, plus interest pursuant to s 60 of the Supreme Court Act 1986 (Vic) (‘SCA’). The plaintiff claims damages in the nature of interest at the rate prescribed under s 2 of the Penalty Interest Rates Act 1983 (Vic) (‘PIRA’), being 10% for the period from the commencement of the proceeding on 11 December 2017 to the date of judgment, and his costs in the proceeding, including reserved costs, on a standard basis.
The first defendant does not challenge the plaintiff’s claim to interest, but submits that r 63.24(1) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘Rules’) applies and the costs should be assessed on the scale of costs applicable in the County Court of Victoria.
The third parties dispute both the costs and the interest rate, contending that r 63.24(1) is applicable to limit the costs and that interest should be calculated to compensate the plaintiff for being kept out of funds and not as a penalty and that this is not a case where an award of interest is required in order to provide encouragement for early settlement of proceedings. The third parties say that the appropriate interest rate is that applicable in the Commonwealth jurisdiction, 4% above the cash rate published by the Reserve Bank of Australia
Costs – principles
The principles applicable to an award of costs, so far as relevant to this case, are:
(a) unless otherwise expressly provided by any Act or by the Rules, the costs of and incidental to all matters in the Supreme Court are in the discretion of the Court, and the Court has full power to determine by whom and to what extent the costs are to be paid: Supreme Court Act 1986 (Vic) (SCA) s 24(1);
(b) the purpose of a costs order is to compensate the successful party for the costs incurred, and not to punish the unsuccessful party. That purpose is a guide to the exercise of the discretion;[1]
[1]Latoudis v Casey (1990) 170 CLR 534, 563 (Toohey J, Mason CJ agreeing); 567 (McHugh J); Ohn v Walton (1995) 36 NSWLR 77, 79.
(c) the discretion regarding costs has been described as absolute, unconfined or unfettered, although that discretion must be exercised judicially, upon facts connected with or leading up to the litigation;[2]
[2]See for example Latoudis v Casey (1990) 170 CLR 534, 537; cited with approval in Oshlack v Richmond River Council (1998) 193 CLR 72, 86 (Oshlack).
(d) in the exercise of the discretion, practices or guidelines have been developed.[3] They are not legal rules that confine the exercise of the discretion;[4] There is a settled practice or general rule that in the absence of good reason to the contrary a successful litigant should receive his or her costs.[5] It is not rule devised to control the exercise of the discretion.[6] Where the general rule applies it generally has the result that the successful party should be entitled to the whole of its costs;[7]
(e) the general rule has traditionally been described as the costs ‘following the event’, meaning that the party who wins has the costs paid by the other side. But the ‘event’ which, in accordance with the general rule, determines the disposition of costs is not limited to the ultimate fate of the litigation but may extend to the fate of each and every issue argued in the proceedings;[8] and
(f) if each party succeeds on a discrete issue it may be entitled to the costs of that issue.[9] In this regard, r 63.04 of the Rules provides specific authority by providing that the Court may make an order for costs in relation to a particular question in or a particular part of a proceeding. This power permits orders depriving an ultimately unsuccessful party of its costs, or a part of its costs, or by awarding an unsuccessful party some part of its costs.[10] For this purpose, ‘issue’ does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law.[11] Further, an overall order may be made reflecting these matters so as to obviate the need to tax two bills of costs.
[3]Oshlack (1998) 193 CLR 72, 86.
[4]Norbis v Norbis (1986) 161 CLR 513, 537; Oshlack (1998) 193 CLR 72, 86.
[5]Ritter v Godfrey [1920] 2 KB 47, 52; Donald Campbell and Co Ltd v Pollak [1927] AC 732, 809 Milne v Attorney-General for the State of Tasmania (1956) 95 CLR 460, 477.
[6]Oshlack (1998) 193 CLR 72, 86 [35].
[7]Lollis v Loulatzis (No 2) [2008] VSC 35 [26].
[8]S v Minister for Youth and Community Services (1986) 10 Fam LR 849, 856referred to in Wilson v McDougall (1987) 11 NSWLR 241, 247; LexisNexis, Civil Procedure Victoria (Service 306) [63.02.85] (Civil Procedure Victoria).
[9]APN Funds Management Ltd v Australian Property Investment Strategic Pty Ltd (Costs) [2012] VSC 365 [11].
[10]Civil Procedure Victoria [63.04.0].
[11]Hughes v Western Australian Cricket Assn (Inc) (1986) ATPR ¶40-748, 48-136 (FCA). Queensland Wire Industries Pty Ltd v BHP Co Ltd (1987) 17 FCR 211, 222; Cummings v Lewis (1993) 41 FCR 559, 603; Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 [11]; Martech International Pty Ltd v Energy World Corp Ltd (No 4) [2006] FCA 1779; Civil Procedure Victoria [63.04.0].
Pursuant to r 63.24(1) of the Rules, where in a proceeding for debt or damages the plaintiff recovers by judgment or otherwise an amount (exclusive of costs) not exceeding $100 000, the plaintiff shall, unless the Court otherwise orders, be entitled –
(a) only to the costs to which the plaintiff would have been entitled if the plaintiff had brought the proceeding in the County Court (‘first limb’); and
(b) less an amount equal to the additional costs properly incurred by the defendant by reason of the proceeding having been brought in the Supreme Court instead of the County Court (‘second limb’),
but shall not be required to pay to the defendant any amount by which the additional costs exceed the costs payable to the plaintiff.
Costs – submissions
The first defendant submits that –
(a) the plaintiff sought specific performance of the contract when he knew, or ought to have known if properly advised, that he should have proceeded for damages for breach of contract a reasonable time after 10 November 2017;
(b) as a result of the plaintiff seeking specific performance, the proceeding spanned over two and a half years from initiation to judgment. This is disproportionate and could not on any assessment be fair and just to award that amount of costs to the plaintiff;
(c) had the plaintiff sought damages from the outset, this proceeding should have, and could have, been brought in the Magistrates’ Court of Victoria where the Magistrates’ Court scale of costs applies;
(d) it would be entirely disproportionate and against the interests of justice to award the plaintiff costs on any scale other than the Magistrates’ Court scale of costs; and
(e) under the second limb of r 63.24, the first defendant is entitled to recover her own costs for the difference between the two Court scales.
The plaintiff seeks no costs against third parties and nor do the third parties seek costs against the plaintiff. Whether the third parties should be liable to compensate the defendant stands to be assessed in the remaining phase of the proceeding. The third parties submit that –
(a) no basis for ‘otherwise ordering’ under r 63.24 was raised by plaintiff in his submissions, and the third party submits that none exists;
(b) under the second limb of the r 63.24(1), the plaintiff’s costs are also to be reduced by an amount equal to any additional costs properly incurred by the first defendant; and
(c) under r 63A.24(1) of the County Court Civil Procedure Rules 2018, because the amount recovered by way of damages was less than half of the Magistrates’ Court’s jurisdictional limit, the default position under the County Court Rules is that the plaintiff is entitled only to the costs that would be recoverable under the applicable Magistrates’ Court scale, unless the Court otherwise orders.
Costs - consideration
Clearly the plaintiff achieved a judgment of less than $100,000, satisfying the pre-condition to the operation of r 63.24(1), so that unless ‘otherwise ordered’, costs are to be awarded and assessed as if the proceeding were commenced in the County Court. In my view the Court should not limit the plaintiff’s costs to either the Magistrates’ Court scale or the County Court scale. There should be an order ‘otherwise’ under r 63.24(1) so that the costs are assessed on the standard basis in accordance with the Supreme Court scale, for the following brief reasons:
(a) the claim involved at the outset a claim for specific performance of a contract for the sale of land or, in the alternative, damages for breach of that contract. Although these kinds of claim are well within the jurisdiction and, with respect, the capability of the County Court, they nevertheless are conventionally the kind of proceeding to which litigants resort to the Supreme Court and are nowadays conducted in a specialist List designed to accommodate proceedings of this kind (the Property List);
(b) as the proceeding progressed it became more complicated and beset with issues, some of considerable difficulty, as the Reasons show. These included defences based on the rule in Bain v Fothergill,[12] a difficult issue of the date of assessment of damages and complex claims for loss of bargain damages and a novel claim for loss of amenity (which ultimately did not need to be determined);
[12](1874) LR 7 HL 158.
(c) no party suggested at any stage of the proceeding that it should be transferred to the County Court, and nor did the Court of its own motion deem it appropriate to take that step;
(d) it is in my view incorrect for the first defendant to submit that it was as a result of the plaintiff seeking specific performance that the proceeding spanned over two and a half years from initiation to judgment. The delays were not a product of the claim for specific performance but other reasons, referred to next. In any event, the election to claim damages for breach of the contract were made relatively early in the proceeding;
(e) Generally speaking the delay in the progress of the proceeding, and the increased costs occasioned by that delay, is attributable to the conduct of the defendant and the defendant’s joinder of the third parties. A reasonably full account of these delays is set out in the Reasons and need not be repeated;[13] and
(f) although the first defendant was entitled to seek, and may yet be entitled to, indemnity from the third parties, those parties’ position necessarily depends on and largely mirrors that of the first defendant’s defence to the plaintiff’s claim. The plaintiff’s costs have increased by reason of the third parties’ involvement without such involvement having any actual bearing on the plaintiff’s claim.
[13]They are also summarised in the plaintiff’s submissions in reply dated 9 October 2020, [7].
No party contended that there should be a division of the costs according to the issues, and it is not sensible in the circumstances of this case, to attempt to isolate particular issues that were won or lost by the plaintiff or the first defendant, or raised and won or lost by the third parties in defending the first defendant against the claim by the plaintiff.
I agree with the final submission of the plaintiff that in attempting to limit the costs that the plaintiff will receive, the other parties are attempting to avoid the consequences of the manner in which the first defendant conducted this litigation. The first defendant’s conduct has increased the plaintiff’s costs such that the court ought ‘order otherwise’ under r 63.24(1).
Interest - principles
Section 60(1) of the SCA provides, so far as relevant:
The Court, on application in any proceeding for the recovery of debt or damages, must, unless good cause is shown to the contrary, give damages in the nature of interest at such rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 as it thinks fit from the commencement of the proceeding to the date of the judgment over and above the debt or damages awarded.
There are various qualifications to the operation of this provision, but none are presently relevant. Decisions on the construction of s 58 are often relevant to the construction of s 60, and vice versa, because of the similarity in the terminology and the interrelationship between them.[14] Neither section is given a narrow meaning and both sections are given a beneficial construction so as to achieve their purposes:
(a) to compensate parties who have been obliged to take ‘proceedings’ to recover a money sum and who in the meantime have been kept out of moneys which they could otherwise have used or upon which they could otherwise have earned interest;[15] and
(b) to encourage the early resolution of litigation.[16]
[14]Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (No.3) [2003] VSC 244 [44] (Johnson Tiles).
[15]Victorian WorkCover Authority v Esso Australia Ltd (2001) 207 CLR 520, 546 (Kirby J). Hosking v Ipex Software Service Pty Ltd (No 2) [2004] VSC 343 (Hosking); Hodgson v Amcor (No 9) [2012] VSC 205 [12]-[14] (Hodgson).
[16]Ruby v Marsh (1975) 132 CLR 642, 652-653 (Barwick CJ); Clarke v Foodland Stores Pty Ltd [1993] 2 VR 382, 396 (Clarke v Foodland Stores); MBP(SA) Pty Ltd v Gogic (1991) 171 CLR 657, 663; Grincelis v House (2000) 201 CLR 321, [16] and [29]; Victorian WorkCover Authority v Esso Australia Limited (2001) 207 CLR 520, [69], [92], [109]; GEC Marconi Systems Pty Limited v BHP Information Technology Pty Limited (2003) 201 ALR 55, 60; Johnson Tiles [2003] VSC 244 [61]; Hodgson [2012] VSC 205 [12].
Bearing in mind that the section imposes an obligation on the Court to allow interest where the circumstances make the section applicable, there are two elements involved in an interest determination made under s 60:[17]
(a) whether the obligation to allow interest in the particular case is qualified by good cause shown to the contrary; and
(b) the determination of the appropriate rate of interest. This is a question of discretion for the Court and does not depend upon establishing good cause to the contrary.
[17]Clarke v Foodland Stores Pty Ltd (1993) 2 VR 382, 389, 394 (Fullagar, Marks and J.D. Phillips JJ); Johnson Tiles [2003] VSC 244, [45]; Hodgson [2012] VSC 205 [10].
The onus is on the defendant to show good cause against an allowance of interest.[18] The good cause must be measured against the purposes of the statutory power to award interest and thus is referrable to the statutory power and is not a discretion ‘at large’.[19] Delays in the litigation by the defendant do not generally constitute good cause.[20] Where the defendant has had use of the money in question, delay by the plaintiff is rarely a justifiable basis for refusing interest for any period,[21] but the plaintiff’s delay after demand may be relevant to the determination of ‘good cause to the contrary’ and may, depending on the facts of the case, justify the exercise of the discretion ‘to relieve against injustice to the defendant’.[22]
[18]Brew v Whitlock (No. 3) [1968] VR 504; Williams v Volta [1982] VR 739, 742; Hodgson [2012] VSC 205 [15].
[19]Johnson Tiles [2003] VSC 244 [61].
[20] Marsh v Ruby [1975] VR 191, 193; Johnson Tiles [2003] VSC 244 [50]-[53], [62]; Hodgson [2012] VSC 205 [16].
[21]Johnson Tiles [2003] VSC 244 [51].
[22]Clarke v Foodland Stores [1993] 2 VR 382, 398-400.
Once good cause has been shown to the contrary, the Court:[23]
(a) is free of the injunction to allow interest according to the terms of s 60(1) (so that in a proper case interest may be refused altogether); and
(b) is authorised, by implication, to allow interest otherwise than in accordance with those terms.
[23]Clarke v Foodland Stores [1993] 2 VR 382, 393; Hardie v The Herald and Weekly Times Pty Ltd (No 2) [2016] VSCA 130 [12].
The Appeal Division of this Court made clear in Clarke v Foodland Stores[24] that this does not mean that the Court is then wholly at large; for the Court cannot by virtue only of s 58, which was the section under consideration in that case, allow interest on terms more onerous to the defendant than those spelled out in the section. The same applies to s 60. The discretion that is conferred upon the Court once good cause has been shown empowers the Court to relieve against injustice to the defendant, so that the Court may refuse to award interest at all or may award interest on terms which are less, but not more, onerous than those laid down by the section. The Court always has a discretion as to the rate of interest (subject only to the maximum imposed by ss 58 and 60). This means, in effect, that once good cause is shown, the Court may allow interest to the plaintiff for a lesser period than that marked out by the section.[25]
[24]Clarke v Foodland Stores Pty Ltd [1993] 2 VR 382, 396.
[25]Ibid 393–394.
It is clear that ‘good cause to the contrary’ means no more and no less than good reason, according to the justice of the case, for not allowing interest at all or, if interest is to be allowed, then for not allowing interest for the whole of the period marked out by the section.[26]
[26]Ibid 394.
Interest – submissions
As I have said, the first defendant did not challenge the plaintiff’s claim for interest at the rate prescribed by s 2 of the PIRA for the whole period from the commencement of the proceeding to the date of Judgment. However, the third parties did, and submitted that-
(a) interest is awarded in order to compensate a plaintiff for being kept out of funds, as well as to encourage early settlement of a proceeding;
(b) the facts of this proceeding do not support the imposition of a penalty, and do not involve a case where an award of interest is required in order to provide encouragement for early settlement of proceedings. That is because the first defendant was not in a position to readily assess what amount might be owed to the plaintiff, as that depended upon whether to depart from the ordinary rule that damages for breach of contract are assessed as at the date of the breach and, if so, by what amount of time and valuation evidence, and how the valuation of the property varied over time; and
(c) in the Commonwealth jurisdiction, the ordinary award of pre-judgment interest is at the rate that is 4% above the cash rate published by the Reserve Bank of Australia. That involves a more modest level of penalty. Interest calculated over the same period as is used by the plaintiff (at a rate of between 5.5% and 4.25%) is nearly half the amount calculated by the plaintiff. The third parties submit that no higher amount of interest should be awarded, including because the plaintiff also caused some of the delay in this proceeding.
The plaintiff submitted that –
(a) in seeking to limit the interest awarded, the third parties overstate the court’s discretion in s 60 of the SCA. Under that section the Court ‘must, unless good cause is shown to the contrary’ order interest at the rate set from time to time under s 2 of the Penalty Interest Rates Act 1983. I hasten to interpolate here that this is a misstatement of the terms of the section, as it provides that the Court ‘must, unless good cause is shown to the contrary, give damages in the nature of interest at such rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 as it thinks fit….’ This means that the Court has a discretion as to the rate of interest up to the rate fixed under the PIRA. As I have said, this is a question of discretion for the Court and does not depend upon establishing good cause to the contrary;
(b) the third parties have cited no authority as to circumstances where ‘good cause’ has been shown. In Clarke v Foodland Stores Pty Ltd[27] the Full Court held that good cause means ‘no more and no less than good reason, according to the justice of the case’.[28] By way of example, in Johnson Tiles Pty Ltd & Ors v EssoAustralia Pty Ltd & Ors (No 3),[29] to which the third parties refer, good cause was shown because, unusually, the parties claiming interest were not joined to the proceeding until 2003,[30] but were entitled to interest from 1998 because s 60 of the SCA applied to interest from commencement of the proceeding as a whole, including prior to joinder;
(c) no good cause exists to limit interest in this case because the plaintiff’s recovery of damages has been delayed by the first defendant’s conduct of the litigation and the factors relied upon by the third parties (lack of certainty as to the quantum of the plaintiff’s claim) exist to some degree or another in almost all cases for damages, such that the third parties’ submission would have the effect of denying penalty interest to all plaintiffs; and
(d) the plaintiff has been deprived of funds to which he is entitled by the other parties’ contest of this proceeding and is in the same situation as almost all plaintiffs. No good cause exists to limit the interest payable.
[27][1993] 2 VR 382.
[28]Ibid, 394.
[29][2003] VSC 244.
[30]Ibid, [74].
Interest - consideration
In my view, the interest should be awarded at the rate fixed under the PIRA, 10% per annum, from the date of commencement of the proceeding on 11 December 2017 to the date of judgment. I have formed that view for the following reasons:
(a) the purposes of the provisions for the award of interest apply as much to this case as to any other claim for damages for breach of contract. The purposes of the provision are good reason to allow interest at the full rate of 10%. Those purposes are –
(i) to compensate the plaintiff, who has been obliged to bring this proceeding to recover damages, which were always a part of the claim, and who in the meantime has been kept out of moneys which he could otherwise have used or upon which he could otherwise have earned interest; and
(ii) to encourage the early resolution of litigation. It is no answer to this proposition that the plaintiff initially pressed for specific performance because that was effectively given up on 10 August 2018. It was always within the power of the first defendant to seek to compromise the proceeding, and it is not an answer to this that she was not a native English speaker and was unfamiliar with Australian law.
(b) in the unusual circumstances of the assessment of damages in this case, interest at the rate fixed under the PIRA is also justified. One of the reasons for selecting a particular time for the assessment of damages ‘along a continuum of loss and damage’ is to determine the point at which the plaintiff is able to mitigate his losses.[31] This is particularly so where the delay between the cause of action arising, or the commencement of the proceeding in this case, and judgment can be met by an award of interest.[32]
(c) the delays in the proceeding were almost entirely because of the difficulties faced by the first defendant, or by the first defendant’s desire, indeed one might say need, to join the third parties, as the Reasons make clear;[33] and
(d) I agree with the submission of the plaintiff that the third parties have not shown good cause to the contrary so as to limit the period over which the interest is to be calculated.
[31]North East Solution Pty Ltd v Masters Home Improvement Australia Pty Ltd [2016] VSC 1, [374].
[32]Johnson v Perez (1988) 166 CLR 351, 388 (Dawson J) and see the Reasons at [83].
[33]The Reasons have been revised to correct typographical errors, including in some critical dates: Singh v Lugondela [2020] VSC 544 (first revision 1 December 2020).
Conclusions
For these brief reasons, I will allow costs on the Supreme Court scale on the standard basis and interest at the rate fixed under the PIRA for the period from the commencement of the proceeding on 11 December 2017 to the date of judgment. Orders will be made accordingly.
SCHEDULE OF PARTIES
| S CI 2017 05019 | |
| BETWEEN: | |
| RAGHBIR SINGH | Plaintiff |
| - v - | |
| BORA FRANCINE KAHEBWA LUGONDELA (by Litigation Guardian, TIM ROBINSON) | First Defendant |
| REGISTRAR OF TITLES | Second Defendant |
| - and - | |
| HILLSIDE PROPERTY CONVEYANCING PTY LTD (ACN 129 781 504) | First Third Party – 1st Claim |
| ZLATA DIZDAREVIC | Second Third Party – 1st Claim |
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