Sino Synergy Investment Company Limited v Maygood Australia Pty Limited; Limei Wang Lee v Yehan Koo; Yi-Fawn Lee v Yehan Koo (No. 2)
[2012] NSWSC 784
•29 June 2012
Supreme Court
New South Wales
Medium Neutral Citation: Sino Synergy Investment Company Limited v Maygood Australia Pty Limited; Limei Wang Lee v Yehan Koo; Yi-Fawn Lee v Yehan Koo (No. 2) [2012] NSWSC 784 Hearing dates: 31 May 2012 Decision date: 29 June 2012 Jurisdiction: Equity Division Before: Slattery J Decision: Interest should be calculated at the rate of 10 per cent from the date of Sino's advances up to the date of judgment on a non-compounding basis. Sino is not entitled to an order for indemnity costs against Maygood but to an order for 40 per cent of its costs of all the proceedings.
Catchwords: INTEREST - issues of calculation of interest after the principal judgment (Sino Synergy Investment Co Ltd v Maygood Australia Pty Ltd; Lee v Koo [2012] NSSWSC 92) - from what date should interest be calculated - whether or not interest should be calculated on a compounding basis - COSTS - issues of costs after the principal judgment - whether Sino is entitled to indemnity costs - what apportionment of costs is appropriate given Sino was unsuccessful in some of the proceedings. Cases Cited: Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322
James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296
Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 2) [2011] NSWCA 171
Rae v Beddison Corporation Pty Ltd (No 2) [2009] NSWSC 178
Roads and Traffic Authority v McGregor (No 2) [2005] NSWCA 453
Sino Synergy Investment Company Limited v Maygood Australia Pty Limited; Limei Wang Lee v Yehan Koo; Yi-Fawn Lee v Yehan Koo [2012] NSWSC 92
Seven Sydney Pty Ltd v Fuji Xerox Australia Pty Ltd [2004] NSWSC 1081Category: Separate question Parties: Plaintiffs- Sino Synergy Investment Company Limited, Limei Wang Lee, Yi-Fawn Lee
Defendants- Maygood Australia Pty Limited, Yehan KooRepresentation: Plaintiffs-A. Spencer
Defendants-M.Aldridge SC, F.Sinclair
Plaintiffs-H.McNair, Holding Redich
Defendants-K.Steele, DC Balog & Associates
File Number(s): (2009/287922); (2010/64562); (2010/64176) Publication restriction: No
EX TEMPORE Judgment
In this matter I gave my principal judgment on 20 February 2012: Sino Synergy Investment Company Limited v Maygood Australia Pty Limited; Limei Wang Lee v Yehan Koo; Yi-Fawn Lee v Yehan Koo [2012] NSWSC 92. This second judgment concerns issues of costs and the calculation of interest, arising out of the findings in my principal judgment. Persons, matters and things referred to in this judgment are described in the same way as they are in my principal judgment. This judgment should be read together with my principal judgment.
The issues of interest and costs left unresolved by the primary judgment were argued as five questions by the parties. I will state my reasons and my conclusions under those five questions.
The first three questions relate to the calculation of interest. The first question is: from what date does interest on the moneys advanced run? The second question is: to what end date is interest to be calculated? The third question is: whether interest should be awarded on a compound or non-compound basis.
The two remaining questions, the fourth and fifth questions overall, relate to costs. The fourth question is: whether there should be a special order for costs by way of indemnity costs. The fifth question is: what should be the overall costs apportionment in the proceedings.
A short preliminary note is required about the making of the costs orders. The parties agreed, very sensibly if I may say so, that the two groups of parties in the proceedings should constitute groupings against which costs orders would be made, without making separate costs orders of a different kind in each of the proceedings. And the costs orders will be made between Sino and Maygood. The parties were of one mind that it would only add to the complexity of taxation if separate costs orders were made in the Limei and Yi-Fawn proceedings as well as in the Sino proceedings. So the course I have taken is to apportion costs in a way that will allow common orders to be made in all proceedings. The parties should prepare short minutes of order to give effect to this apportionment.
Summary of Conclusions
It is convenient to give a summary of the Court's reasons and conclusions on each of these five questions.
First, the date on which interest on the moneys advanced runs should, in my view, be the earlier date contended for by Sino: the date of the actual advances, 13 December 2006 and 18 December 2006, not the later date for which Maygood contended, 20 December, 2006.
Secondly, to what date is interest calculated? In my view Sino is correct on this argument. The law is clear that contractual interest is recoverable, notwithstanding there has been an accepted repudiation of the contract somewhere in the second half of 2008 on one of several suggested occasions. Maygood's contentions fail on this point. However, the practical impact of that argument depends on question three, the issue of compound interest.
On the third issue of compound interest, I favour Maygood's submissions, not Sino's. Construing the oral contract found between the parties, it was not a contract for the payment of compound interest. It was only a contract for the payment of simple interest at ten percent per annum.
On the question of costs, it is convenient to deal with the question of indemnity costs first. The parties agree that if I were to make an indemnity costs order the best way of implementing such an order is to include it as a further adjustment in the apportionment process that was to take place in the wider proceedings. That was the practical approach that both parties took. But this is not a case where an order for indemnity costs is warranted, neither from the way the proceedings were conducted, nor because of any Calderbank letter.
The last costs question is what should be the appropriate apportionment of costs, allowing for the issues and proceedings on which Sino was unsuccessful. The positions taken by the parties on what was the correct apportionment were a long way apart. Maygood contended each party should bear their or its own costs, assessing the proceedings on a group basis. Sino contended that 75 percent of its costs should be paid on a group basis. Sino acknowledged that because it substantially lost the Limei and Yi-Fawn proceedings, although it won the Sino proceedings, that some discount was appropriate. That was obviously correct. But the remaining question was what would be the appropriate discount. I am of the view that neither side's contentions should be accepted. There should be an apportionment in which Maygood pays Sino's costs. But Sino will only have 40 per cent of its costs of the whole proceedings.
Finally, so far as the costs of this argument are concerned, there has been a mixed result. No special order for costs needs to be made in respect of this costs argument. The costs of this part of the proceedings will also be governed by the same order: Maygood will pay 40 percent of Sino's costs of the costs argument.
I will now go through the reasoning and conclusion for each question.
Question One - The Date from which Interest Runs
The first question is the date from which interest runs on the Sino loan to Maygood. Sino contends that interest should run from the date of the two advances, 13 and 18 December 2006. Maygood contends interest should run from 20 December 2006, as the purpose of the advance was to fund the Chatswood development and contracts were only exchanged for that development on 20 December 2006. Maygood contends that if the contracts had not been exchanged, then the funds should have been returned to Sino.
The parties have agreed that this is a matter of the construction of the oral agreement that the court has found in the principal judgment: Sino Synergy Investment Company Limited v Maygood Australia Pty Limited; Limei Wang Lee v Yehan Koo; Yi-Fawn Lee v Yehan Koo [2012] NSWSC 92 at [63].
The oral agreement itself does not identify any starting date for the accrual of interest. Unsurprisingly, the parties did not engage at that level of detail in their conversation. That generates the present argument. I prefer Sino's submissions on this subject.
There is no evidentiary support for the contention that the accrual of interest should be based on anything other than the time of each advance. In the conversation at [63] of the principal judgment, Mr Lee says "I will lend to you through Sino Synergy. You don't need to pay any monthly interest. You can pay me all of the interest together with the $1 million but you will need to provide the company quarterly instalments of the outstanding balance". There is no qualification here that interest would not be payable if construction did not commence. This was the conversation capsule in which Mr Lee was explaining the interest obligation. The obligation is more obviously linked to the simple fact of the making of the advance rather than anything else.
In my view, therefore, interest will be payable from the time of the two advances, on 13 and 18 December 2006.
Question Two - the Date to which Interest is Calculated
The second issue is the date to which interest should be calculated. The plaintiff, Sino, claims contractual interest right up to the date of judgment and not just up to the date of any earlier accepted repudiation. Maygood says: the contract terminated at one of several possible dates, 21 November 2008 or 20 December 2008; that contractual interest was only payable up to one of these dates; and that from then Court rates of interest apply.
This argument would perhaps be more commercially significant were compound interest payable under the contract. Then compound interest would cease to be paid on the date of accepted repudiation and simple interest at Court rates only after that date. But the Court's conclusion on the next question is that compound interest is not payable under this contract. In any event, Sino is correct on this argument. Even if there was an accepted repudiation on one of the dates Maygood suggests, contractual interest is recoverable after that date as damages: Seven Sydney Pty Ltd v Fuji Xerox Australia Pty Ltd [2004] NSWSC 1081. The quantum of the interest recoverable right up to the date of judgment is contractual interest, as Maygood contends.
Question Three - Compound Interest or Not
Question three is whether or not compound interest is payable. The parties agree that 10 per cent interest per annum is payable under the agreement. But they disagree whether interest should be compounded. Both parties agree that this is a contest about the proper construction of the parties' oral agreement, set out in the principal judgment, at [63]. There is an issue of substance between the parties as to what, properly construed, that oral agreement was about the issue of compounding. But there is also a procedural issue as to whether I have already decided the substantive question in Sino's favour, as it contends. I will deal with the procedural issue first.
Sino says the issue of compound interest or not has been decided. Sino contends the compound interest claim was pleaded, denied and decided. I do not agree that this matter has already been decided. This issue of compounding interest, or simple interest, was not presented for clear argument and was not expressly decided. Looking at the principal judgment itself, (at [8], [63], [111], and [176]) the issue has either been left open or has been dealt with by way of recording (as in [8]) the allegations on both sides.
On the question of substance Maygood's submissions are the more persuasive. The written agreement does not make express provision for compound interest. The oral agreement do not support the conclusion that the parties agreed to compound interest.
In context, this was a family dealing between in-laws. If compounding was being stipulated for, one would expect it to be stated clearly. But here any requirement for compound interest is not stated clearly in the oral exchanges.
The real issue being discussed between Mr Lee and Mr Koo at the time was not compounding interest but whether or not that interest would be paid on a monthly basis as time passed, or whether it would be capitalised. There are several statements in the oral agreement found at [63] that the parties have agreed upon annual interest at 10 per cent. But what was not well covered between them was whether interest would be capitalised at the end of the loan or whether it would be capitalised annually and that interest would then be earned upon capital annually augmented with interest.
Sino relies upon Mr Koo's reference in the conversation to the "Loans we have had in the past have had interest capitalised by the banks". In my view, such a statement does not incorporate the banks' practices as to charging compound interest into the parties' dealings. Indeed, no-one contends in this case that many aspects of banking practice were incorporated in this family dealing. There was no lending on the general terms of a bank. There was no stipulation for default interest. There was no security taken. The core part of the conversation dealing with interest, is Mr Lee's final statement, "You can pay me all of the interest together with the $1 million but you will need to provide the company quarterly statements of the outstanding balance".
Here was the moment to mention simple interest or the annual capitalisation of interest to augment the capital sum outstanding. Mr Koo refers in conversation to "The loans we have had here in the past have had interest capitalised by banks". But Mr Lee does not capture that statement and require interest to be capitalised on an annual basis. In the absence of him doing so, such a term is not to be taken as part of the agreement.
Another objective matter known to both parties supports that conclusion. The evidence supports the view that 10 per cent interest per annum represented a substantial premium on Taiwanese bank interest rates. Mrs Limei Wang Lee's Australian dollar clearing account with Mega International Commercial Bank, Hong Kong had interest rates in 2006 on interest bearing rollovers for Australian currency between 4.7 and 5.2 per cent. Mr Lee in cross-examination said that the interest rate for Taiwanese RMB and Hong Kong dollars for the period 2005 to 2008 was about 2.53 per cent.
Nor do I regard my findings about Maygood's account keeping as inconsistent with this conclusion. Sino has pointed out that the accrued interest figure of $158,164, in the accounts for the Koo Family Trust No 2 for the year ending 30 June 2008, is a figure which, the principal judgment explains (at [156]), "accurately represents the interest that would have been due on $1 million from 20 December 2006 to 30 June 2008 if it had been accrued in accordance with the written loan agreement at 10 per cent per annum compounded annually". That part of the judgment should be taken merely as a record of information provided to the court as to calculations by the parties. It is not a formal admission against interest on the part of Maygood.
Therefore I conclude that the interest in this case which is payable should be payable on a simple not a compounded basis.
The remaining two questions relate to costs. The first question is: should there be any special orders as to costs. As to this, two arguments are put. One is based upon a Calderbank letter and the other upon findings in relation to false evidence. The final question is the question of apportionment of costs.
Question Four - Indemnity Costs
Sino first claims a special costs order, an order for indemnity costs, on the basis of a Calderbank letter dated 25 June 2010 and on offers of compromise dated 23 August 2010. Maygood, resists the making of any special order for costs based on any of these offers.
Maygood's submissions about these offers should be accepted. The Calderbank letter of 25 June 2010, offered to settle all the proceedings for $1.8 million inclusive of costs. In my view that did not represent a genuine attempt at compromise. In any event, the inclusive of costs nature of the offer makes it difficult to assess the value of such an offer and in my view it does not qualify as an effective Calderbank letter: Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 at [145] and [150] per Basten JA.
The offers of compromise were served on 23 August 2010, after the matters had been listed for hearing, commencing on 21 February 2011. Construed properly, the offers of compromise were intended to be accepted as a whole. They offered to settle all the matters for $1.485 million plus costs as agreed or assessed. This was an offer of a genuine compromise.
Sino has been successful in respect of its claim in the Sino proceedings for the advances of $1 million, plus 10 per cent interest assessed on a simple interest basis. But it has failed in the Yi-Fawn and Limei proceedings.
Under the Uniform Civil Procedure Rules r 42.16, in determining whether a judgment is no less favourable than the result, only the amount of interest or damages by way of interest relating to the period before the date of the offer of compromise, should be taken into account. I accept Maygood's argument that the Court's judgment amount, plus interest up to June 2010, did not reach the amount offered. The offers of compromise in my view taken as a whole were less favourable to the plaintiff than the final judgment amount.
It is correct, as Maygood submits, to view the offers of compromise together. But even if they are viewed separately, the offer made in respect of the Sino proceedings should not be regarded as comparably bettering Sino's success at trial. At least part of Sino's success at trial was in relation to the further pleadings in the amended statement of claim filed in February 2011, some five and a half months after the offers of compromise were made: Rae v Beddison Corporation Pty Ltd (No 2) [2009] NSWSC 178.
Question Five - Apportioning Costs
The final question is the apportionment of costs. The costs are substantial on both sides. The parties were well represented by solicitors and counsel. Both parties say that I should make a broad assessment in apportioning costs. The parties agree that the costs will be payable between Maygood and Sino. Appropriate undertakings have been given to ensure Maygood's solvency for that purpose. Maygood contends that taken on a broad basis, each party should bear its own costs. Sino contends that seventy-five per cent of its costs should be paid by Maygood, taking into account the fact that Maygood failed in the Sino proceedings but was successful in the Limei and Yi-Fawn proceedings.
The way the parties have approached the matter is desirable. An assessment of costs separately between each of these proceedings would invite a needless classification and reclassification of the work of the lawyers to ascertain whether it related to one or another proceeding. This would make for a very costly assessment process.
The law in this area is clear. The Court of Appeal has emphasised, where there is a mixed outcome in proceedings the question of apportionment of costs between issues on which the party who has overall been successful and those which the other party has failed is very much a matter of discretion and mathematical precision in the assessment is illusory: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [36]; Roads and Traffic Authority v McGregor(No 2) [2005] NSWCA 453 at [19]. Nevertheless, the court can and should have regard to the proportions of both the judgment and the evidentiary and lawyer time to which various issues are committed: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 and Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 2) [2011] NSWCA 171.
Sino contends it has been successful in relation to claims that occupied over three-quarters of the court's time and involved eighty per cent of the total value of the claims made. Sino says it and the Lee family were successful on three claims and failed on two and should receive a substantial percentage of their costs. They contend for an award of seventy-five per cent of total costs.
I do not entirely agree with the Sino and Lee family submission. My conclusion is that Sino should be awarded forty per cent of its costs. In my view, the overall assessment should take into account the various costs which have been incurred in the matter in the District Court before it was transferred to the Supreme Court and the costs that were included in the Maygood and Yi-Fawn proceedings in which Maygood was mostly successful.
It is true that substantial parts of the cross-examination in the proceedings involved cross-examination of Mr Lee who was believed and Mr Yehan Koo and other members of his family who were not believed. But I do not think that that matter, or the proportion of the judgment that was taken up by these issues, is necessarily decisive. The proportion of the judgment describing the Sino claim is to provide important structural background for other parts of the judgment, even apart from the introduction in the judgment. In my view this is not a sound basis for saying that seventy-five per cent of costs should be recovered. The parts of the claims on which Sino failed involved much detail and were labour-intensive to Maygood inside and outside Court.
I take a broad view, of the time spent by parties of what I estimate would have occurred outside court, of the nature and difficulty of the legal and evidentiary arguments put and answered by the parties on all sides. The hearing time on each issue is difficult to determine. So a broad view is necessary. I reach the view that Maygood should pay forty per cent of Sino's costs.
Conclusions and Orders
Counsel on each side submit that orders should be made as between Maygood and Sino but covering the cost of all three sets of proceedings. As a result more detailed orders for costs may need to be made in each proceeding to give full effect to these reasons. So, I will give the parties liberty to apply to bring in further orders expressing orders in each proceeding, consistent with these reasons.
Accordingly, I make the following orders and directions:-
1.Direct the parties to bring short minutes of order to give effect to the following calculation of interest.
(i)The date from which interest of Sino's advances runs should be the date of the actual advances being 13 and 18 December 2006.
(ii)Interest should be calculated up to the date of judgment, at the rate described in 3.
(iii)Interest should be paid on the basis of simple interest at a rate of 10%.
2.Maygood Australia Pty Ltd shall pay 40% of Sino Synergy Investment Company Limited's costs of all the proceedings, namely the Sino proceedings, the Limei proceedings and the Yi-Fawn proceedings, and shall do so on the ordinary basis.
3.Note that no special order as to costs should be made for the costs of this part of the proceedings, dealing with costs and interest, but Maygood Australia Pty Ltd should pay 40% of Sino Synergy Investment Company Limited's such costs.
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Decision last updated: 12 July 2012
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