Spartalis v BMD Constructions Pty Ltd (No 2) - [2015] SASCFC 28

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court: Civil)
SPARTALIS v BMD CONSTRUCTIONS PTY LTD (No 2)
[2015] SASCFC 28
Judgment of The Full Court
(The Honourable Justice Peek, The Honourable Justice Blue and The Honourable Justice Parker)
26 March 2015
INTEREST - RATE OF INTEREST AND COMPOUND INTEREST - RATE IN OTHER CASES
PROCEDURE - COSTS - DEPARTING FROM THE GENERAL RULE - CONDUCT OF PARTIES - DEMAND, OFFER AND CONSENT
PROCEDURE - COSTS - APPEALS AS TO COSTS - WRONG EXERCISE OF DISCRETION
Cross-appeal against a judgment of the District Court in relation to interest payable on the judgment sum and the award of costs. The Full Court previously dismissed an appeal and cross-appeal on the substantive matters. The District Court awarded damages to the plaintiff for wrongful summary dismissal from employment by the defendant. Interest was awarded on the judgment sum at a rate of 6% per annum. The award of damages (including interest) exceeded the filed settlement offer by the defendant by a small margin. Costs were awarded in favour of the plaintiff.
Whether the trial judge erred in determining the interest rate to be applied on the judgment sum. Whether the trial judge erred in awarding costs in favour of the plaintiff.
Held (the Court):
Cross-appeal dismissed.
1. The discretion of the trial judge did not miscarry in determining the rate of interest to be applied on the judgment sum. The judge treated the Supreme Court practice directions as merely a relevant consideration to be taken into account in the exercise of her discretion.
2. The discretion of the trial judge did not miscarry in awarding costs in favour of the plaintiff. For the purpose of comparing the filed settlement offer with the award of damages, the interest period ends on the date of the filed offer. While the award of damages exceeded the filed offer by a small margin, and the plaintiff did not succeed on all issues at trial, the plaintiff succeeded on the two crucial factual issues at trial.
District Court Act 1992 s 39; Supreme Court Practice Directions 2006 Practice Direction 13.3; Supreme Court Civil Supplementary Rules 2014 Rule 208, referred to.
Davies v Chicago Boot Co Pty Ltd (No 2) [2011] SASC 197; Kazar v Kargarian (2011) 197 FCR 113; Southern Resources Ltd v Residues Treatment and Trading Co Ltd (1990) 56 SASR 455, considered.

SPARTALIS v BMD CONSTRUCTIONS PTY LTD (No 2)
[2015] SASCFC 28
Full Court: Peek, Blue and Parker JJ

THE COURT: This Court previously dismissed an appeal and cross-appeal against a judgment of the District Court except in so far as the cross-appeal related to the interest payable on the judgment sum and the basis upon which costs were awarded. Those issues were left to be decided after hearing further from the parties. This judgment deals with those matters.
Interest
The trial judge awarded interest at 6% per annum on the judgment sum for the period commencing on 22 November 2010, when Mr Spartalis was dismissed from his employment by BMD Constructions, and ending on 27 March 2014, when her Honour delivered judgment. BMD Constructions submitted that the judge erred in fixing interest using a rate of 6% per annum.
The judge noted that section 39 of the District Court Act 1992 provides that, unless good cause is shown to the contrary, interest should be awarded on damages in favour of a plaintiff. Her Honour used what was then Supreme Court practice direction 13.3[1] as an indicator of an appropriate rate of interest. The former practice direction 13.3 provided that the Court may calculate interest thus: “in respect of the period from 1 January to 30 June in any year or any part of that period in any year, the cash rate of interest last set by the Reserve Bank of Australia prior to 1 January plus 4%” and “in respect of the period from 1 July to 31 December in any year or any part of that period in any year, the cash rate of interest last set by the Reserve Bank of Australia prior to that 1 July, plus 4%”.
[1] Now see Supplementary Rule 208.
The District Court judgment was published in March 2014. The Reserve Bank interest rate as at December 2013 was 2.5% per annum and as at December 2010 had been 4.75% per annum. While practice direction 13.3 suggested a higher rate of interest, the judge accepted Mr Spartalis’s submission that the appropriate rate was 6% per annum. That resulted in an award of interest in favour of Mr Spartalis in the sum of $5,852.77 covering the period of approximately three years and four months between the date of termination of his employment by BMD Constructions and the date of judgment.
BMD Constructions has contended that the judge made three errors in arriving at a rate of interest of 6% per annum.
The first error was said to be that the judge should have used the actual interest rates published by the Reserve Bank over the period between the date of termination of employment and the date of judgment. That rate was said to result in a figure of 3.5% per annum.
The second suggested error was that the judge should not have had regard to the Supreme Court practice direction as it was irrelevant to a matter in the District Court.
The third error was said to be that even if the Supreme Court practice direction did apply, in so far as it purported to fetter the discretion of the Court in determining an interest rate, it was unenforceable.
The words used by the judge and the fact that her Honour awarded interest at a rate less than that suggested in the Supreme Court practice direction make it abundantly clear that she did not regard the District Court as being bound by it and nor did it purport to have that effect. Her Honour clearly treated the practice direction as merely a relevant consideration that could be taken into account in the exercise of her judicial discretion.
There was no error made by the judge in determining the rate of interest to be applied and her Honour’s discretion did not miscarry. The cross-appeal should be dismissed in so far as it relates to interest payable on the judgment sum.
Costs
BMD Constructions submitted that the judge made two errors. The first error was said to be that the judge should not have made an order for payment of costs in favour of Mr Spartalis. The basis for that contention was that the award in favour of Mr Spartalis, exclusive of interest, exceeded the filed offer made by BMD Constructions by only $2,087.38.
BMD Constructions submitted that for the purpose of costs any interest on the judgment sum to be taken into account should be calculated:
1using a rate of 3.5% per annum; and
2to the date of the filed offer, being 25 January 2013.
As stated above, the judge did not err in using a rate of 6% per annum. In support of the second point, BMD Constructions relied upon Davies v Chicago Boot Co Pty Ltd (No 2)[2] where Sulan J held:
... interest would ordinarily continue to run up until the date of judgment delivery. That proposition is correct. Nevertheless, when considering the offer and its rejection, it is my view that one should consider the interest as calculated at the date of the offer and not at the date of the judgment. If calculated at the date of judgment, a defendant would be required to make an assessment about the rate of interest to be used, and the length of time that would elapse between the offer and the date of judgment. Such an assessment would be subject to great uncertainty, varying according to factors such as the ability of the Court to list a matter and the period of time before delivery of judgment.
[2] [2011] SASC 197 at [30].
We agree with this analysis. Thus, the interest period used to compare the filed offer with the award of damages should have ended on 25 January 2013.
The total damages awarded were $29,266.79. Interest for the period of approximately two years and two months from 22 November 2010 until 25 January 2013 at the rate of 6% per annum is $3,804.68. That interest must be added to the total damages of $29,266.79 for the purpose of making a comparison with the filed offer. Thus, the comparator is $33,071.47. That exceeded the filed offer of $27,179.41 by $5,892.06.
BMD Constructions further submitted that on any proper analysis of the trial, the issues litigated and the outcome, Mr Spartalis was the loser. After putting all the parties through the costs, inconvenience and court time, Mr Spartalis received a relatively minor net gain (ie a little under $6,000) compared to the filed offer.
The second error was said to be that the appellant was unsuccessful in relation to several significant issues, ie the findings that there was no issue estoppel, no new contract of employment and the notice period had been correctly computed.
While Mr Spartalis did not succeed on all arguments, the more significant issue is that the judge found that BMD Constructions was not entitled to dismiss Mr Spartalis without notice because the allegation of serious misconduct it made was not established. The judge also found, contrary to the contention by BMD Constructions, that Mr Spartalis had taken appropriate steps to mitigate his loss.
In considering an appeal against a discretionary order for the payment of costs, there is a strong presumption that the decision is correct.[3] The appellant will only succeed if it demonstrates that the judge exercised his or her discretion in a manner that was so unjust or unreasonable as to require the appeal court to set the decision aside and apply its own discretion.[4]
[3] Kazar v Kargarian [2011] FCAFC 136; (2011) 197 FCR 113.
[4] Southern Resources Ltd v Residues Treatment and Trading Co Ltd (1990) 56 SASR 455.
While the aggregate of damages and interest calculated up to the date of the filed offer only exceeded that offer by a little under $6,000, that is no reason to hold that the discretion of the judge miscarried. Mr Spartalis succeeded on the two crucial factual issues at the trial.
For these reasons the appeal against the costs order should be dismissed.
Conclusion
We dismiss the cross-appeal insofar as it has not been dealt with by our previous order.
We make no order as to the costs of the appeal and the cross-appeal.