South West Helicopters Pty Ltd v Stephenson (No 2)

[2018] NSWCA 99

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

South West Helicopters Pty Ltd v Stephenson (No 2) [2018] NSWCA 99

Hearing dates:

On the papers

Decision date:

11 May 2018

Before:

Basten JA; Leeming JA; Payne JA

Decision:

(A)   In matter No 2017/70847, Essential Energy’s appeal:

 

(1)   Vary order (1) made on 7 December 2017 to add par (c):

 

(c)   Judgment for the First Respondent (South West) in respect of the first cross-claim in relation to each proceeding brought by the Sixth Respondent (Parkes Shire Council).

 

(2)   Vary order (2) to add the words “and all cross-claims” after “the proceedings”.
(3)   Vary order (3) to add the words “and cross-claims” after “claims”.
(4)   Vary order (4) to delete reference to the “sixth respondent”, so that it now reads:

 

“Order that the first and second respondents’ pay the appellant’s costs in this Court.”

 

(B)   As to the motions:

 

(5)   Subject to variations at (A)(1), (2) and (3), otherwise dismiss Essential Energy’s notice of motion filed 22 December 2017.
(6)   Subject to the variations at (A)(4), otherwise dismiss Parkes Shire Council’s application dated 4 January 2018 to vary the orders of the Court.

 

(C)   Dismiss the application by South West dated 4 January 2018 to vary the orders of the Court.

 (D)   There be no order as to the costs of any motion.

Catchwords:

CIVIL PROCEDURE – variation of orders – costs – application for award of interest on costs – source of power to award interest on costs – whether interest calculation to run from date of payment of costs to own lawyers – relevant considerations – when evidence of payment relevant – whether costs disproportionate to amount in issue – interest on costs of trial first sought after judgment on appeal

 

CIVIL PROCEDURE – costs – interest on costs – importance of avoiding satellite litigation

 

CIVIL PROCEDURE – exercise of discretionary powers – reasons in one case not to be taken as statement of principle generally applicable

  STATUTORY INTERPRETATION – use of extrinsic materials to resolve uncertain operation of amendments – available construction shown to be unintended

Legislation Cited:

Civil Procedure Act 2005 (NSW), ss 56, 100, 101
Courts and Other Justice Portfolio Legislation Amendment Act 2015 (NSW), Sch 1.2 [2]
Interpretation Act 1987 (NSW), ss 34, 35
Legal Profession Uniform Law Application Act 2014 (NSW), s 70
Workers Compensation Act 1987 (NSW), s 151Z
Civil Aviation (Carriers’ Liability) Act 1959 (Cth), s 31

Uniform Civil Procedure Rules 2005 (NSW), r 36.4

Cases Cited:

Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd [2014] NSWCA 158
Drummond and Rosen Pty Ltd v Easey [No 2] [2009] NSWCA 331
Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 250 CLR 303; [2013] HCA 46
Illawarra Hotel Company Pty Ltd v Walton Construction Pty Ltd (No 2) (2013) 84 NSWLR 436; [2013] NSWCA 211
James Hardie & Coy Pty Ltd v Wyong Shire Council (2000) 48 NSWLR 679; [2000] NSWCA 107
Lahoud v Lahoud [2006] NSWSC 126
Leda Pty Ltd v Weerden (No 2) [2007] NSWCA 283
Maria Saravinovksa v Krste (Chris) Saravinovski (No 7) [2016] NSWSC 1261
Robb Evans of Robb Evans & Associates v European Bank Ltd (No 2) [2009] NSWCA 170
Secure Parking Pty Ltd v Woollahra Municipal Council (No 2) [2017] NSWCA 51
Sheppard v State of New South Wales [2018] NSWSC 62
South West Helicopters Pty Ltd v Stephenson [2017] NSWCA 312
Stephenson v Parkes Shire Council [2016] NSWSC 507
T&DC Pty Ltd v Workforce Clothing Pty Ltd (No 3) [2016] NSWSC 1892
McKeith v Royal Bank of Scotland Group PLC; Royal Bank of Scotland Group PLC v James (No 2) [2016] NSWCA 260
T&T Investments Australia Pty Limited v CGU Insurance Limited (No 2) [2016] NSWCA 372
Secure Parking Pty Ltd v Woollahra Municipal Council (No 2) [2017] NSWCA 51

Texts Cited:

Report of the Chief Justice’s Review of the Costs Assessment Scheme, 7 September 2011

Category:

Costs

Parties:

In matter 2017/70847:
Essential Energy (Appellant)
South West Helicopters Pty Ltd (First Respondent)
Country Connection Airlines Pty Ltd (Second Respondent)
Ingrid Margaret Stephenson (Third Respondent)
Natalee Joy Stephenson (Fourth Respondent)
Jay Stephenson (Fifth Respondent)
Parkes Shire Council (Sixth Respondent)

  In matter 2016/255761:
South West Helicopters Pty Ltd (First Appellant)
Country Connection Airlines Pty Ltd (Second Appellant)
Ingrid Margaret Stephenson (First Respondent)
Natalee Joy Stephenson (Second Respondent)
Jay Stephenson (Third Respondent)
Essential Energy (Fourth Respondent)
Parkes Shire Council (Fifth Respondent)

Representation:

Counsel:

 

J Morris SC/R Bianchi (Essential Energy)
P Williams (Parkes Shire Council)

 

Solicitors:

  Norton White (South West Helicopters and Country Connection Airlines)
Victoria Baker (Ingrid, Natalee and Jay Stephenson)
Norton Rose Fulbright (Essential Energy)
Moray & Agnew (Parkes Shire Council)

File Number(s):

2016/255761; 2017/70847

 Decision under appeal 

Court or tribunal:

Supreme Court

Jurisdiction:

Common Law

Citation:

[2014] NSWSC 1758;
[2015] NSWSC 719

Date of Decision:

19 December 2014; 19 June 2015

Before:

Bellew J

File Number(s):

2009/297846; 2009/339465; 2009/33471; 2009/339470; 2009/339502

Judgment

1. THE COURT: On 7 December 2017 the Court handed down judgment in three appeals arising out of a fatal helicopter crash. The appeals were brought by (a) South West Helicopters Pty Ltd and Country Connection Airlines Pty Ltd, (b) Essential Energy, and (c) Parkes Shire Council: South West Helicopters Pty Ltd v Stephenson. [1] In handing down judgment, the Court granted liberty to apply in the following terms:

“In all matters each party has liberty to apply with respect to the orders identified above, such liberty to extend for a period of 28 days from the date of delivery of this judgment. Orders are to be entered at the end of that period unless and then not to the extent that application has been made to vary the orders.”

1. [2017] NSWCA 312.

2. The Court took the step of formulating orders rather than leaving that matter to the parties, partly because the orders formulated by the parties and made by the trial judge were in some cases not properly expressed, overlapping and not readily capable of being checked. The parties had not been able to clarify the meaning of some orders, nor adequately explain why other orders had been made at all.

3. Applications to vary the Court’s orders have now been made by each of the appellants. Again, in some cases, the requests have been opaque, or proposed orders identical to those prepared by the Court or have sought orders that were not sought on the appeal. Others could readily have been disposed of by consent.

(1)   Essential Energy’s application

(a)   Issues

4. One party, Essential Energy, stated in its second submission, dated 22 February 2018, that there are “procedural complexities and a degree of asymmetry between some of the primary proceedings and the consequent cross-claims.” That was said to be a basis for a request for a further oral hearing. The basis of the request is not readily comprehensible. If an oral hearing were not to be granted, Essential Energy sought seven days to make a further written submission in reply to a submission by South West. Shortly thereafter, on 5 March 2018, it filed a further submission, which was an expansion on its December submission and not in reply.

5. In its 5 March submission Essential Energy stated:

“At the time the Appellant filed its Application for further orders in December 2017, it had been assumed there would be an oral hearing on any outstanding questions. Accordingly, brief submissions were filed. The Registrar has subsequently indicated an oral hearing may not be granted.”

6. The Registrar’s indication was correct because the Court had not then addressed the request. The Registrar had given directions, in respect of each set of written submissions, that if a further oral hearing were sought, the party contending for an oral hearing “is to address that shortly in their written submissions.” No party represented by experienced litigation solicitors and counsel should have made the assumption to which the written submissions referred. The first submissions filed for Essential Energy complied with the page limit specified in directions; the later written submissions did not. In any event, no further oral hearing has occurred; the additional expense would not have been justified.

7. The notice of motion filed by Essential Energy on 22 December 2017 sought to replace all of the orders made by the Court in its judgment. In fact, not all the orders were varied, some were varied in minor respects, some were merely renumbered, and some were entirely new. The form of the proposed “variation” had two effects; first, it required the Court (and any opposing party) to work out for themselves what was sought to be varied; secondly, it effectively prevented any orders being entered in accordance with the direction that orders were to be entered 28 days from the date of judgment except to the extent that application had been made to vary them.

8. Orders (1)(a) and (b), and order (4) were not varied in any sense, except that order (4) was renumbered (5). Order (1) was sought to be varied by the addition of par (c) in the following terms:

“(c)   Judgment for the First Respondent (South West) in respect of the first cross-claim in relation to each proceeding brought by the Sixth Respondent (Parkes Shire Council).”

This was an omission and the variation should be accepted.

9. The Court’s order (2) read “In place thereof dismiss the proceedings against the Appellant.” This was sought to be varied by addition of the words “and all cross-claims” after “the proceedings”. Although it seems unnecessary, it is no doubt appropriate, given the terms of the additional order 1(c), to add these words.

10. Original order (3) was in the following terms:

“In place of order (3) (no order as to costs) order that the first and second respondents pay the appellant’s costs of their claims against it at trial.”

11. The proposed variation deleted the opening words of the provision (thereby implicitly and inexplicably leaving the trial judge’s order on foot) and added the words “and cross-claims” after the word “claims”. The first amendment is inappropriate and the second amendment is unnecessary but may be made in the interests of certainty.

12. Orders (3) and (4) were renumbered, a course which is unnecessary and require no variation.

13. These were minor points; there were also two major changes proposed by Essential Energy. First, it sought an order that the first and second respondents (South West and Country Connection) repay Essential Energy the 10% contribution ordered by the trial judge, payments having been made on different dates between 19 September and 8 December 2016, with interest. That matter has been resolved by agreement. [2]

    2.    Essential Energy’s written submissions, 22 February 2018, par 3.

(b)   Interest on costs – the issues

14. The remaining issue is whether an order should be made for payment of interest on legal costs and disbursements incurred by the appellant from the date that it paid its own costs and disbursements, both at trial and on appeal.

15. On 7 September 2016 Essential Energy commenced proceedings in this Court by way of notice of cross-appeal challenging the judgments against it in each proceeding below, but principally that brought by South West. It sought an order for costs, but did not seek an order for interest on costs. On 7 March 2017 Essential Energy filed a notice of appeal, seeking the same orders.

16. Essential Energy supplied an affidavit stating that a sum in excess of $2.7m had been incurred on account of legal costs and disbursements (without allowance for interest), a sum approximately ten times the judgment against it at trial.

17. South West submitted that, although ultimately entirely successful, Essential Energy had raised issues both by way of a cross-appeal and at trial on which it was unsuccessful. The inference sought to be drawn was, no doubt, that had Essential Energy limited its legal costs to the issue on which it was successful, the costs incurred would have been a fraction of those now sought to be recovered, even with interest.

18. The application for interest on costs requires the Court to address the following issues, namely:

1. the scope of the court’s power to award interest on costs;

2. whether the same provision applies to the costs of the trial and of the appeal;

3. the limits on the scope of the discretion, and

4. how the discretion should be exercised in relation to (a) the trial costs and (b) the appeal costs.

(i)   Scope of power to award interest on costs

19. Provision for recovery of interest on amounts payable under court-ordered costs is found in s 101 of the Civil Procedure Act 2005 (NSW). The section deals with both interest on the amount of a judgment and, separately, on orders for costs. Nevertheless, it is convenient to set out the whole of the provision, as it currently reads, in order to appreciate the different regimes.

101   Interest after judgment

(1)   Unless the court orders otherwise, interest is payable on so much of the amount of a judgment (exclusive of any order for costs) as is from time to time unpaid.

(2)   Interest under subsection (1) is to be calculated, at the prescribed rate or at such other rate as the court may order, as from:

(a)   the date on which the judgment takes effect, or

(b)   such later date as the court may order.

(3)   Despite subsection (1), interest is not payable on the amount of a judgment if the amount is paid in full within 28 days after the date on which the judgment takes effect, unless the court orders to the contrary.

(4)   Unless the court orders otherwise, interest is payable on an amount payable under an order for the payment of costs.

(5)   Interest on an amount payable under an order for the payment of costs is to be calculated, at the prescribed rate or at any other rate that the court orders, as from the date the order was made or any other date that the court orders.

(6)   This section does not authorise the giving of interest on any interest payable under this section.

(7)   In this section, a reference to the prescribed rate of interest is a reference to the rate of interest prescribed by the uniform rules for the purposes of this section.

Note. See section 136 in relation to the order in which payments on account of a judgment debt are to be appropriated.

20. The critical provisions with respect to costs are subss 101(4) and (5). The default position is that interest is payable, but only on the amount the subject of a court order: s 101(4). According to that provision, interest does not run from any earlier date. That the default date is “the date the order was made” is confirmed by subs (5). The issue is whether the court, exercising the power to specify “any other date”, can order that the calculation run from the date on which particular costs were paid by the party to its lawyers.

21. Read in isolation, the phrase “any other date” would permit such an order, being the order sought by Essential Energy. However, there are contextual considerations which cast doubt on that conclusion.

22. First, the provisions with respect to interest on costs are to be found in the same section as the provisions with respect to interest on a judgment. Although the heading to the section is not part of the Act,[3] it can be taken into account as extrinsic material. [4] The heading to s 101 is “Interest after judgment”; this may be contrasted with s 100, which provides for “Interest up to judgment”. Section 100 makes no provision for payment of interest on costs for the period prior to a court order. This militates against a reading of s 101(5) which would permit interest to be calculated on costs from the date of payment by the party to its lawyers to the date of the court order.

    3. Interpretation Act 1987 (NSW), s 35(2).

    4. Interpretation Act, s 34(2)(a) and s 35(5).

23. With respect to a judgment, interest is to be calculated either from “the date on which the judgment takes effect” or from “such later date as the court may order.” Consistently with the operation of s 100, there is no power to backdate the calculation of interest payable on the amount of a judgment. However, so far as a judgment is concerned, it is necessary to determine when “the judgment takes effect”.

24. Further provision is made for the date of effect of judgments and costs orders in the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”), in the following terms:

36.4   Date of effect of judgments and orders (cf SCR Part 40, rule 3; DCR Part 31, rule 13A (2))

(1)   A judgment or order takes effect:

(a)   as of the date on which it is given or made, or

(b)   if the court orders that it not take effect until it is entered, as of the date on which it is entered.

(2)   Despite subrule (1), if an order of the court directs the payment of costs, and the costs are to be assessed, the order takes effect as of the date when the relevant cost assessor’s certificate is filed.

(3)   Despite subrules (1) and (2), the court may order that a judgment or order is to take effect as of a date earlier or later than the date fixed by those subrules.

25. In practice judgments are rarely backdated, except where a judgment on appeal is backdated to the date of judgment in the trial court, or a judgment is ordered to take effect from an earlier separate determination of liability, with damages to be assessed. However, it might need to be an exceptional case in which such a step could be taken; the effect of such an order would be to deprive the plaintiff of pre-judgment interest for a period for which it might otherwise be available, and deprive the defendant of the opportunity to avoid post-judgment interest by paying the judgment in full within 28 days, pursuant to s 101(3). The presumption in s 101(2)(b) is that the court may order a later date as the date from which the calculation of interest may run.

26. Contextual factors thus favour a more limited reading of the power conferred to calculate interest from “any other date that the court orders.” It is necessary then to turn to the legislative history.

27. Prior to 24 November 2015, the relevant parts of s 101 were quite differently formulated;

(4)   The court may order that interest is to be paid on any amount payable under an order for the payment of costs.

(5)   Interest under subsection (4) is to be calculated, at the prescribed rate or at such other rate as the court may order, as from:

(a)   the date or dates on which the costs concerned were paid, or

(b)   such later date as the court may order.

28. The amendment to subs (4)[5] removed the requirement for a court order for payment of interest on costs and replaced it with a default position providing for interest on costs unless the court otherwise ordered. The change to subs (5) was substantial. It removed an express power to order that interest be calculated from the date or dates on which costs were paid, or some later date, which clearly encompassed a date earlier than the court order. That history would suggest that the new provision was not intended to provide for interest to be calculated from the date when the costs were paid, although the indication is not strong.

    5. Courts and Other Justice Portfolio Legislation Amendment Act 2015 (NSW), Sch 1.2 [2].

29. Other aspects of the legislative history tell a different story. The amendments to s 101(4) and (5) were the result of a review undertaken at the behest of the Chief Justice, entitled “Review of the Costs Assessment Scheme” (“Review Report”). The review (undertaken by the Hon Paul Brereton AM RFD) made a recommendation in the following terms:

“38. CPA s 101 be amended to the effect that interest accrues in respect of party/party costs from such dates and at such rate as the court in question may order and, in the absence of any other order, from the date of the costs order at the rate applicable to a judgment debt.”

30. The basis of that recommendation was spelled out in more detail in the following paragraphs of the Review Report:

“4.2.15   A more difficult question is whether interest on party/party costs should ordinarily run from (a) the date that the receiving party pays his or her own costs or from which interest on those costs commences to accrue, or (b) the date of the costs order. The former basis reflects the true economic burden of the receiving party, which it is the function of the costs order to alleviate, but it can require complex calculations. … The latter basis has the virtue of simplicity. In the nature of things, almost all the receiving party’s own costs are incurred well before judgment, and to take the judgment date as the starting point is no injustice to the paying party. The present view of the Review is that the better default rule is (b) because of its simplicity, but that the relevant court should have an unfettered residual discretion. It is not desirable or necessary to specify a date before which interest cannot be allowed. The interests of paying parties are sufficiently protected by the judicial nature of the discretion.

4.2.16   The Review therefore considers that interest on party/party costs should accrue from such dates and on such basis as the court in question may order and that, in the absence of any other order, such interest should accrue from the date of the costs order at the rate applicable to a judgment debt.”

31. The explanatory note accompanying the bill dealt with the amendments to s 101 in the following terms:

“Schedule 1.2[2] amends the Civil Procedure Act 2005 to provide for interest to be payable on costs ordered by a court at the same rate of interest as for judgment debts and from the date of the costs order, unless the court otherwise orders. Currently, interest is at the discretion of the court and is calculated as from the date or dates on which the costs concerned were paid.”

32. Finally, the Minister’s second reading speech dealt with the amendments in the following terms:

“Schedule 1.2[2] amends section 101 of the Civil Procedure Act to provide that interest accrues on party-party ordered costs from the date when the costs are ordered rather than the date when the costs are paid by the receiving party, unless the court otherwise orders. Interest accrues at the prescribed rate applicable to a judgment debt.

Currently, section 101 of the Civil Procedure Act states that the interest accrues on party-party ordered costs from the date when the costs were paid by the party; in other words, the date when the party became out of pocket. However, a party must first apply to the court for such an order.

This amendment implements a recommendation from the Chief Justice’s review of the costs assessment regime that a default rule for interest on costs orders should be introduced. The default rule will mean that interest accrues automatically from the date on which the costs are ordered, without the need to make an application for such an order. This will simplify the issue of applying interest to costs orders.

The court will retain an unfettered residual discretion to order otherwise, if the circumstances demand it – for example when charging interest from the date the costs were paid would better reflect the economic burden to the receiving party.”

33. These various descriptive passages do not speak with one voice, except to indicate that the breadth of the discretion conferred on the court to specify any other date from which interest might be calculated (other than the date of the costs order) was intended to allow that the interest could be allowed to run from the date on which the costs were paid or, possibly, the date from which the party paying the costs incurred interest. The justification for backdating the date from which interest is to be calculated is also tolerably clear; it is to reflect the economic burden of the payment of costs by a party which later enjoys success and obtains an order for payment of its costs. That reading of s 101(5) should be accepted.

(ii)   Which form of s 101 applies?

34. There is a transitional provision with respect to the operation of the new s 101(4) and (5). It provides that the amendments “do not extend to proceedings commenced before the commencement of [Sch 1.2 of the 2015 Amending Act] and those proceedings may continue as if those amendments had not been enacted.”

35. The transitional provision requires a determination of when the relevant proceedings commenced. The appeal being by way of rehearing, is the order for costs made with respect to the trial to be treated as an order in the appeal proceedings or as an order in the trial proceedings? If the latter, the old rule will apply to it; however if the order is made in the appeal as part of the appeal proceedings, the new rule will apply with respect to the costs of the trial and the appeal.

36. There have been three cases in this Court where the transitional provision was in play, but in none did the present issue arise because in each the appeal was commenced before 24 November 2015. [6] As the purpose of the transitional provision was not to change the rule with respect to proceedings on foot in November 2015, but rather that they should “continue as if [the] amendments had not been enacted”, the old provision should apply to the costs of the trial proceedings. Although the appeal is by way of rehearing, for most purposes it is treated as a separate proceeding; accordingly the new provision should apply to the appeal.

    6. McKeith v Royal Bank of Scotland Group PLC; Royal Bank of Scotland Group PLC v James (No 2) [2016] NSWCA 260 at [60] (Tobias AJA, Macfarlan JA and Emmett AJA agreeing); T&T Investments Australia Pty Limited v CGU Insurance Limited (No 2) [2016] NSWCA 372 at [4] (McColl, Basten and Meagher JJA); Secure Parking Pty Ltd v Woollahra Municipal Council (No 2) [2017] NSWCA 51 at [19] (Beazley P, Meagher and Ward JJA).

(iii)   Constraints on discretionary power

37. When an order for interest was made under the old provision, the courts had to deal with the difficulty caused by lack of information as to the ultimate assessment. The Court adopted a formula which provided for the calculation of interest by reference to the proportion of each payment, being the part of the costs ultimately allowed on assessment as a fraction of the total amount paid. [7] However, that simple arithmetical formula may not cater for a case where an ultimately successful party incurred a large proportion of its costs at an early stage, but in relation to issues on which it failed. The approach was not to be treated as universally applicable.

    7. Lahoud v Lahoud [2006] NSWSC 126 (Campbell J); Leda Pty Ltd v Weerden (No 2) [2007] NSWCA 283 at [7]-[8] (Hodgson JA, McColl JA and Handley AJA); Robb Evans of Robb Evans & Associates v European Bank Ltd (No 2) [2009] NSWCA 170 (Basten and Campbell JJA).

38. This Court has not yet had to consider the application of the new provision. With respect to the old provision, there are suggestions that there was a conflict between authorities in this Court. [8] It has never been found necessary to resolve that conflict, which, subject to the operation of the transitional provisions, is now of limited significance.

    8. Secure Parking at [20].

39. However, as it is necessary to apply the old rule with respect to the costs of the trial, it is necessary to consider the apparent conflict. Given the overlapping constitution of the Court in various cases, it would be surprising if there were a true conflict. The better view is that a different emphasis as to the appropriate approach to the exercise of the discretionary power may be found in cases involving different circumstances. It is sufficient to refer to three judgments.

40. The first, Drummond and Rosen Pty Ltd v Easey[No 2],[9] involved a careful analysis by Handley AJA as to the historical developments with respect to the provisions relating to payment of interest on costs. As part of that review, Handley AJA noted that prior to 1995 the power to allow interest on costs had been vested in the taxing officers; thereafter, the power was conferred on the court. [10] Consistently with that construction, the Review Report noted that it became necessary to bring separate proceedings (often in the Local Court) to recover interest on costs which could not be included in the assessor’s certificate. [11] This factor explained Handley AJA’s conclusions, expressed in the following terms:

“[48]   In my judgment this is not necessary because the actual amount once calculated will be the amount ordered. There would be problems if it was necessary because the Court cannot know whether amounts paid to the successful party’s lawyers will be allowed on assessment, and to what extent.

[49] It follows therefore that the power in s 101(4) must be exercised by the Court and under UCPR Pt 36 r 16 it must be exercised in the substantive judgment, or on a motion filed within 14 days thereafter. In my opinion the power should not be exercised without evidence of the amounts paid and the dates of payment.”

9. [2009] NSWCA 331.

10.    Drummond and Rosen at [38]-[47].

11.    Review Report, par 4.2.11.

41. Without addressing that specific problem, the majority took a different view. Macfarlan JA (Tobias JA agreeing), concluding that it was “unnecessary for there to be evidence of the date or dates on which the costs concerned were paid for an order for the payment of interest to be made” and, noting that the purpose of the order was “essentially compensatory”, stated that there was no necessity “in the usual case” for the court to know when the costs were paid. [12]

    12. Drummond and Rosen at [3].

42. The issue as to evidence of the dates of payment has, subsequently, not been seen as a critical discretionary factor. Nor is it necessary to revisit the issue for present purposes: that is because from 9 June 2015 s 70 of the Legal Profession Uniform Law Application Act 2014 (NSW) confers a power on an assessor to include a calculation of interest ordered under s 101 of the Civil Procedure Act. Accordingly, the problem which vexed the Court in Drummond and Rosen has been resolved.

43. The second case is Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd,[13] in which Gleeson JA stated:

“[403]   No issue was raised on appeal as to the principles applied by the primary judge at [49] Judgment No 3. The payment of interest is intended to be compensatory, on the basis that the person entitled to costs has been wrongly required to spend money on litigation to enforce established rights: Robb Evans of Robb Evans & Associates v European Bank Ltd (No 2) [2009] NSWCA 170 at [44] per Basten JA (Campbell JA agreeing). Thus in the absence of any countervailing discretionary factor, it is appropriate that an order for interest on costs be made to compensate the party having the benefit of a costs order for being out of pocket in respect of relevant costs which it had paid. There is no requirement to establish that the circumstances of the case are out of the ordinary: Drummond and Rosen Pty Ltd v Easey & Ors (No 2) [2009] NSWCA 331 at [4] per Macfarlan JA (Tobias JA agreeing) citing Lahoud v Lahoud [2006] NSWCA 126 at [82]-[83] per Campbell J.”

13. [2014] NSWCA 158.

44. It is clear from the opening words of this passage (not always quoted in later authorities) that the paragraph was not intended to be an exhaustive statement of the relevant principles. Further, although there can be no doubt as to the correctness of the statement, what may constitute “countervailing discretionary factors” must now be viewed in light of the new rule. Importantly, the question under the new provision is whether the Court should backdate the period over which interest is calculated, a matter which was the default position where an order was made under the old rule.

45. In the third case, Illawarra Hotel Company Pty Ltd v Walton Construction Pty Ltd (No 2),[14] it was explained that where proceedings are protracted, it may be appropriate to consider why they were protracted, whether the delay was unreasonable and, if so, whether the party seeking interest on its costs was to any extent responsible for that delay.

    14. (2013) 84 NSWLR 436; [2013] NSWCA 211 at [38] (Meagher, Barrett and Ward JJA) (“Illawarra Hotel”).

46. That approach involved no departure, or qualification, or even change in emphasis, from Doppstadt. The passage frequently cited as the rationale of the judgment is as follows:

“[38] … A party who contends that there should be an order for interest on costs must do more than point to the fact that the proceedings were protracted and that it had to outlay moneys on its own costs over a long period. The reasons for the protracted nature of the proceedings are of obvious relevance. To take a hypothetical example, one can imagine a case in which one party deliberately seeks to prolong proceedings with an eye to some collateral benefit of its own for which it is quite happy to pay the price of being out of the money it progressively outlays for costs. That hypothetical case can be contrasted with another in which a party has made strenuous effort to expedite matters and to avoid all delay with a view to the earliest possible trial but has been frustrated in those efforts by actions of the other party. A middle course is where each party acts with reasonable diligence and dispatch but the nature of the proceedings and their subject matter is such as to prolong them. A court might well take different attitudes to applications for interest on costs in these hypothetical cases.”

47. But that passage cannot properly be viewed in isolation from the preceding paragraphs. There were three factors addressed by the Court. The first was that Illawarra Hotel had sought interest on costs awarded to it in the Equity Division, when it had not sought that order either in the Equity Division, or in its amended notice of appeal. Secondly, the Court accepted the statement by Campbell J in Lahoud that there was no need for the Court to be satisfied that the circumstances of the case “are out of the ordinary” before making an order for payment of interest on costs. [15] The Court then noted that “Illawarra nevertheless recognises that the power to award interest on costs is discretionary and that some positive case must be made in support of the application.”[16] Finally, the supposed statement of principle was made in response to a submission by the respondent to the appeal that “the question of interest on costs cannot be determined without an exhaustive consideration of the circumstances that caused the proceedings to be protracted by the serving of evidence on unsuccessful issues, futile amendments to pleadings, issues not pursued at trial and matters relevant to McDougall J’s observation concerning ‘the evident animosity between the parties and the lengths to which each has gone to buttress its case’.”[17]

    15. Illawarra Hotel at [35].

    16. Illawarra Hotel at [36].

    17. Illawarra Hotel at [37].

48. The tendency to extract statements which are responsive to the particular circumstances of a case and elevate them into freestanding statements of principle is wrong. Once that point is appreciated, there is no conflict in relation to the approach taken by this Court to applications for interest on costs made in widely differing circumstances.

49. A range of other considerations will arise in particular circumstances. In two cases before single judges of the Court there was discussion relating to the new provision. [18] Thus, in T&DC Pty Ltd v Workforce Clothing Pty Ltd (No 3) [19] McCallum J stated, in addressing an order for interest apparently brought under the new provisions:

“[11]   The disproportionality between costs and the interest at stake in these proceedings, and the manner in which the Local Court should properly address that perennial problem, was at the heart of the issue raised by the appeal. The defendant’s application gives me little to go on, in determining the application, beyond the assertion that the lawyers were paid as they went. In all the circumstances, I am not persuaded that interest should be paid by the plaintiff from ‘any other date’ than from the date the order was made.”

18.    Both appear to have involved proceedings commenced before November 2015, but the observations remain apposite.

19. [2016] NSWSC 1892.

50. In litigation between two family members involved in proceedings under the Property (Relationships) Act 1984 (NSW), Maria Saravinovksa v Krste (Chris) Saravinovski (No 7) [20] , Kunc J stated:

“[42]   The Court was satisfied that insofar as Maria could demonstrate that costs were paid out of the HSIL Loan, then, from the date on which those costs were paid, interest should be calculated so as to compensate Maria at the same interest rate that was being incurred under that loan. Interest is allowed on costs that have been paid to compensate a party for the loss of the benefit of the use of the funds. It is not necessary for a party to demonstrate what he or she might have done with the funds but for having to pay the costs.

…

[44]   I should make it clear that, in the discretionary circumstances of the present case, the Court’s decision is also based on its satisfaction that Maria had no alternative means of funding the litigation other than by taking out the HSIL Loan. It may be that a different exercise of discretion would be appropriate, both as to from when interest runs and at what rate, if a party has chosen to take out a loan to fund his or her litigation when in fact they could have done so out of their own funds. That is not this case.”

20. [2016] NSWSC 1261.

51. In Sheppard v State of New South Wales,[21] Lonergan J, although referring to the current version of s 101, correctly adopted the approach relevant to the old version, including the reasoning of Campbell J in Lahoud, and continued:

“[55]   The principles suggest I do not need to be satisfied before an order for payment of interest on costs is made that the circumstances of the case are out of the ordinary. I should consider the extent to which the defendants have been out of pocket as a result of having to pay their lawyers’ costs and disbursements. His Honour Justice Campbell also took into account the length of time the proceedings had been on foot, the extensive preparation and potential for the applying party to have been out of pocket.

[56]   Whilst I appreciate all those considerations are important, I am of the view that the circumstances here are different. The Plaintiffs, it seems, no longer have the benefit of any legal representation. Whilst it is entirely inappropriate to ‘run dead’ on correspondence regarding costs and service of legal process and to fail to appear at dates set down for the hearing of interlocutory process in relation to costs, there has not been, until this judgment, any formality in securing with any precision the sum the Plaintiffs are due to pay to the defendants for costs.”

(iv)   Determining appropriate order

21. [2018] NSWSC 62.

(A)   Costs of trial

52. In considering the application by Essential Energy for interest on the costs incurred in the trial, the old provision applies not permitting the recovery of interest unless the court so orders. There are two general considerations and some particular considerations which should govern the exercise of the discretion.

53. The first general consideration is that the court should be wary of adopting any approach which could lead to satellite litigation. Such a consequence would contradict the obligations under s 56 of the Civil Procedure Act to facilitate the just, quick and cheap resolution of the real issues in the proceedings and would contradict the principles articulated in the same vein by the High Court in Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd. [22]

    22. (2013) 250 CLR 303; [2013] HCA 46.

52. The second general principle is that different considerations may well apply to costs incurred in disputes between (or where the interested parties are) large commercial entities, in contrast to disputes between uninsured individuals. In disputes between uninsured individuals the court may wish to have some evidence that the proceedings have been financed through interest-bearing credit or, if not, that there is a realistic likelihood that interest has otherwise been foregone by the party seeking interest. If the proceedings have been funded under a speculative agreement, it may be relevant to know whether the solicitors have a contractual entitlement to interest on outstanding costs. By contrast, in litigation between large commercial entities or insurers, the court may be willing to assume that expenses, where significant in amount, will have been funded from debt or from commercial opportunities foregone if paid from cash-in-hand. In any case where interest is awarded, there will be a benefit in applying the court rate for pre-judgment interest to avoid potential further litigation as to the actual cost to the party.

53. In the present case, the claim by Essential Energy related to costs incurred as between it and South West and Parkes Shire Council, each of which may be treated as a large commercial entity for these purposes. (The plaintiffs did not join Essential Energy to their claims.) There was evidence from the solicitor for Essential Energy that fees were charged on a regular basis and were paid as they fell due. It should be accepted that Essential Energy incurred costs in funding the litigation. It may thus be accepted that any order for payment of interest on costs would be compensatory in effect.

54. There are particular features of the case which militate against an order for interest. First, there were three judgments delivered at trial. The first concerned liability, the second apportionment and the third costs (as well as other aspects of the form of the orders). With respect to the cross-claims brought by Essential Energy against the Council, Essential Energy sought its costs; [23] there is no suggestion that it sought interest on those costs. There was no evidence or submission on the present application suggesting that Essential Energy had sought interest on the costs of the trial. Although its entitlement to costs has increased significantly as a result of its success on the appeal, its failure to seek interest on costs of the trial at the time of the trial is a significant factor weighing against the exercise of the discretion on appeal with respect to the costs of the trial.

    23. Stephenson v Parkes Shire Council [2016] NSWSC 507 at [48].

55. Secondly, the Court is entitled to take into account the evidence that Essential Energy has expended some $2.7 million by way of costs and disbursements in relation to these proceedings. Given that the involvement of Essential Energy was entirely by way of response to cross-claims brought by South West, together with its own cross-claims against South West and the Council, it could only realistically have been liable for a proportion of the total amounts payable to the plaintiffs. Furthermore, there are realistic limits to the amounts recoverable by relatives of a deceased family member. Accordingly, even disregarding the outcome, the amount expended by Essential Energy was grossly disproportionate to any amount for which it might reasonably expect to become liable. This is a weighty factor against increasing the amount of costs recoverable by way of interest, and thus increasing the disparity between the costs incurred and the importance of the subject-matter, in disregard of s 60 of the Civil Procedure Act. Thirdly, because the Court has no information as to when amounts were paid by way of costs and disbursements, it has no way of knowing with any exactitude what amount might theoretically be claimable by way of interest. This factor must be taken into account against an award, in combination with the previous factors.

56. Taking account of the foregoing considerations, the Court should decline to order that Essential Energy receive interest on the costs ordered to be paid to it with respect to the trial.

(B)   Interest on costs of appeal

59. With respect to its costs of the appeal, Essential Energy is entitled to interest on costs from the date of the Court’s order. No party has sought to vary that consequence of the current form of s 101(4). The sole question is whether Essential Energy should have the effect of the calculation of interest backdated to the date on which it paid its lawyers for the appeal.

60. The general factors noted above should be considered, together with the specific factors relevant to this case. In addition, South West raised, as a basis for declining to award interest, a number of factors which might have formed the basis for disallowing part of the costs awarded to Essential Energy. Although no such variation was sought, those considerations would be relevant to the costs on which interest should be awarded. There is no reason to reject these considerations as irrelevant to the exercise of the residual discretion, described in the Review Report as “unfettered”. As the Court has said with respect to the earlier form of the power, where proceedings have been protracted the cause of any delay may be a highly significant consideration. [24] Such factors will still be relevant under the new power.

    24. Illawarra Hotel at [38].

61. The first specific factor is that the Court has no indication of what costs were incurred with respect to the appeal, nor when they were paid. Essential Energy did not appeal initially, but filed a notice of cross-appeal on 7 September 2016. The judgment on appeal was delivered on 7 December 2017. It did not seek interest on costs in its cross-appeal, nor when it filed a notice of appeal. Given the relatively small amount at issue for Essential Energy in this Court, it would be important for the Court to know what amount was being considered with respect to costs of the preparation for and conduct of a three day appeal. There is at least the possibility that the amount of costs incurred by Essential Energy in this Court may have been disproportionate to the amount in issue. If that were the case, it might be inappropriate to increase the disproportion by awarding a further amount by way of interest.

62. On the other hand, in circumstances where interest has not been claimed prior to judgment, it would be tantamount to inviting satellite litigation to permit claims for small additional amounts to be brought, without prior notice to the parties, after judgment is delivered. The current pre-judgment interest rate under the UCPR is, from 1 January 2017, 5.5%. If one were to assume that the outstanding amount was, on average, $100,000, for the period of one year, the amount in issue would be $5,500. (If the amount were larger, the risk of creating greater disproportion between costs and the amount in issue would be correspondingly increased.) There is no reason for the Court to entertain such an application, with no knowledge of whether interest has been incurred, or for what amount, or what period, where the request is first raised after judgment.

63. In these circumstances, the Court should allow the default position under the rules to stand. The application for a further order under s 101(5) should be refused.

(2)   Parkes Shire Council’s application

64. The Council gave notice on 4 January 2018 in the following terms:

“Pursuant to the liberty granted by the order, Parkes Shire Council hereby applies to be heard with respect to a variation of the following orders:

1.   A. Matter number 2016/255761 (South West’s appeal) – Orders (4)(c), (5)(d), (6)(c), (7)(c), and (9)

2.   B. Matter number 2017/70847 (Essential Energy’s appeal) – Order (4)

3.   C. Matter number 2016/271567 (Council’s appeal) – Order (2).”

65. No indication of the variations sought was provided. It was not possible for other parties to know whether they were required to respond. With respect to the first matter, order (4)(c) required that Parkes Shire Council pay the costs of the defendant (South West) in proceedings brought by it against South West under s 151Z(1)(d) of the Workers Compensation Act 1987 (NSW). Order (9) required that the Council pay 25% of South West’s costs of the appeal brought by South West. No reason was given to vary either of these orders. The Council’s written submissions did not address any variation to those orders.

66. Orders 5(d), (6)(c) and (7)(c) required that the Council pay the plaintiffs’ costs in each of the separate proceedings brought by members of the Stephenson family. Such claims against a joint tortfeasor, if made in a timely manner in a cross-claim and then on the appeal, would no doubt be successful; contribution may include both damages and costs. [25] However, South West was not a joint tortfeasor in the ordinary sense, as the submissions on the motion conceded; there was an issue as to whether the cap on recovery under s 31 of the Civil Aviation (Carriers’ Liability) Act 1959 (Cth), was exclusive of costs. Further, at least in this Court, the issue was not raised before judgment was delivered. This application should not be entertained post-judgment on a motion to vary the orders to accord with the Court’s determination of the appeal.

    25. James Hardie & Coy Pty Ltd v Wyong Shire Council (2000) 48 NSWLR 679; [2000] NSWCA 107 (Handley, Giles and Heydon JJA).

67. In the second matter, the Council, South West and Country Connection were, by order (4), required to pay Essential Energy’s costs of the appeal. As the principal judgment correctly stated at the outset,[26] the Council did not bring any claim or cross-claim against Essential Energy. The later statement that it did was in error; [27] rather, Essential Energy cross-claimed against the Council. [28] The order that the Council bear responsibility for Essential Energy’s costs of the appeal should not have been made and the order should be varied accordingly.

    26. Judgment at [6].

    27. Judgment at [237].

    28. Judgment at [8].

68. With respect to the third matter, order (2) required the Council to pay the Stephensons’ costs incurred with respect to the Council’s appeal and the Council’s cross-appeal in South West’s appeal. No variation was sought; it was not referred to in the written submissions on the motion.

South West’s application

69. South West made an application for a variation of the judgment in favour of the Council against South West in matter 2016/255761, being South West’s appeal. The application related to the proceedings brought by Parkes Shire Council against South West pursuant to s 151Z of the Workers Compensation Act, in which Parkes Shire Council had claimed an amount of $357,316. The judgment at trial was in an amount of $277,316 plus interest; the variation sought is a reduction to an amount of $224,000, in round terms, plus interest. The proceedings (matter 339501/2009 in the Common Law Division) were for the recovery of compensation payments to the wife of the deceased, Malcolm Buerckner. This Court did not interfere with that order.

70. Although with respect to the proceedings brought by the Council to recover compensation paid in respect of the death of Mr Stephenson, the Court concluded that the proceedings should have been dismissed, no similar order was made with respect to Mr Buerckner’s widow. The Court stated:[29]

“Although the notice of appeal sought to challenge the order made with respect to compensation paid to Mrs Buerckner, that aspect of the appeal was not pressed and the judgment in those proceedings must stand, assuming South West was otherwise liable in damages to Mrs Buerckner.”

29. South West at [185].

71. As the Court made no order with respect to those proceedings there is no order to vary. Although the Council did not respond to this application, there is no reason to entertain it.

Orders

72. (A)   In matter No 2017/70847, Essential Energy’s appeal:

1. Vary order (1) made on 7 December 2017 to add par (c):

(c)   Judgment for the First Respondent (South West) in respect of the first cross-claim in relation to each proceeding brought by the Sixth Respondent (Parkes Shire Council).

2. Vary order (2) to add the words “and all cross-claims” after “the proceedings”.

3. Vary order (3) to add the words “and cross-claims” after “claims”.

4. Vary order (4) to delete reference to the “sixth respondent”, so that it now reads:

“Order that the first and second respondents’ pay the appellant’s costs in this Court.”

(B)   As to the motions:

5. Subject to variations at (A)(1), (2) and (3), otherwise dismiss Essential Energy’s notice of motion filed 22 December 2017.

6. Subject to the variations at (A)(4), otherwise dismiss Parkes Shire Council’s application dated 4 January 2018 to vary the orders of the Court.

(C)   Dismiss the application by South West dated 4 January 2018 to vary the orders of the Court.

(D)   There be no order as to the costs of any motion.

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Endnotes

Decision last updated: 11 May 2018