Spedding v State of New South Wales

[2023] NSWSC 34

Supreme Court

New South Wales

Medium Neutral Citation:

Spedding v State of New South Wales [2023] NSWSC 34

Hearing dates:

12 December 2022

Date of orders:

02 February 2023

Decision date:

02 February 2023

Jurisdiction:

Common Law

Before:

Harrison J

Decision:

See [37]

Catchwords:

INTEREST – interest on damages – where damages award has past and future element

INTEREST – interest on damages – whether plaintiff bound to rate claimed in substantive hearing – no detrimental reliance by defendant – plaintiff not bound

TORTS – malicious prosecution – misfeasance in public office – collateral abuse of power – time at which actions accrue

COSTS – indemnity costs – where three offers of compromise sent by plaintiff all no less favourable – where reasonableness of first offer questioned by defendant

Legislation Cited:

Civil Procedure Act 2005 (NSW)

Costs in Criminal Cases Act 1967 (NSW)

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Baulderstone Hornibrook v HBO & DC & Ors [2001] NSWSC 821

Beckett v State of New South Wales [2015] NSWSC 1500

Bennette v Cohen (No 2) [2009] NSWCA 162

Caine v Lumley General Insurance Ltd (No 2) [2008] NSWCA 109

Calderbank v Calderbank [1975] 3 All ER 333

Kieran Leslie Walzel & Anor v Stephen Paul Francis (2010) 77 NSWLR 92; [2010] NSWSC 75

Murray v Commonwealth of Australia (1986) 5 NSWLR 83

Spedding v New South Wales [2022] NSWSC 1627

Category:

Costs

Parties:

William Harrie Spedding (Plaintiff)
State of New South Wales (Defendant)

Representation:

Counsel:
A Canceri with T O’Rourke (Plaintiff)
A Williams with B Searson (Defendant)

Solicitors:
O’Brien Criminal and Civil Solicitors (Plaintiff)
Crown Solicitor’s Office (Defendant)

File Number(s):

2019/00289937

Publication restriction:

Nil

Judgment

1. HIS HONOUR: Following the publication of my reasons in the principal proceedings (Spedding v New South Wales [2022] NSWSC 1627), I invited the parties to make submissions on the question of interest, about which they were unable to agree. Mr Spedding also indicated that he wished to make submissions in favour of a special costs order.

Interest

2. Mr Spedding’s submissions were as follows.

3. He claims interest on all heads of damage except exemplary damages. Consistently with the decision of Wood J in Murray v Commonwealth of Australia (1986) 5 NSWLR 83, he accepts that interest on exemplary damages is not available. The power of the Court to award interest up to judgment is found in s 100(1) of the Civil Procedure Act 2005.

4. The calculation of pre-judgment interest in this Court is governed by a Practice Note which governs or guides the way in which proceedings are expected to be administered: Beckett v State of New South Wales [2015] NSWSC 1500 at [7] citing Baulderstone Hornibrook v HBO & DC & Ors [2001] NSWSC 821 at [14]; Kieran Leslie Walzel & Anor v Stephen Paul Francis (2010) 77 NSWLR 92; [2010] NSWSC 75. Practitioners and litigants "should expect" interest for a pre-judgment period to be awarded in accordance with the rates set out in the Practice Note: Beckett at [7]. There must be "special circumstances" to justify a different interest rate being applied to that prescribed by the Practice Note and the special circumstances must be particular to the case: Beckett at [8] and the cases cited therein.

5. The damage to Mr Spedding’s reputation crystalised when the criminal proceedings against him were instituted. Former Inspector Jubelin accepted the fact that his reputation was comprehensively destroyed as a result of his arrest and prosecution on the historical sexual assault allegations: at [309] of the principal judgment. Mr Spedding’s aggravated damages crystalised at the same time. One consequence of that inappropriate prosecution was the opprobrium and unfair treatment directed at Mr Spedding by members of the public: at [314]. This arose immediately upon the institution of the criminal proceedings, causing him distress, embarrassment and humiliation.

6. I awarded damages for the torts of malicious prosecution, collateral abuse of process and misfeasance in public office, and found that the two latter torts operated in combination with Mr Spedding’s claim for malicious prosecution to contribute to the amount of his non-economic loss damages: at [305]. Included in the sum awarded for non-economic loss is a sum for Mr Spedding’s detention in custody, calculated at $1,300 per day.

7. In awarding damages for non-economic loss, I found that Mr Spedding remains traumatised by the whole unnecessary ordeal and that his pain continues. Consistently with his evidence and the expert evidence in the form of the joint opinion of Dr Anthony Samuels and Dr Alex Apler, I concluded that Mr Spedding finds it difficult to concentrate, that his level of social activity remains severely attenuated, that he feels isolated and socially uncomfortable and that his enjoyment of life remains diminished.

8. Part of the sum awarded for damages for non-economic loss is for Mr Spedding’s future loss of enjoyment of life. Accordingly, Mr Spedding claims interest on 85% of the sum of $550,000 awarded as damages for non-economic loss, together with interest on aggravated damages and damages for reputational loss, which altogether total $967,500, in accordance with Schedule "A".

SCHEDULE “A”

Start Date	End Date	Days	Rate	Amount Per Day	Total
21 April 2015	30 June 2015	71	6.5%	$172.2945	$12232.91
1 July 2015	31 December 2015	184	6%	$159.0411	$29263.56
1 January 2016	30 June 2016	182	6%	$158.6066	$28866.39
1 July 2016	31 December 2016	184	5.75%	$151.9980	$27967.62
1 January 2017	30 June 2017	181	5.5%	$145.7877	$26387.57
1 July 2017	31 December 2017	184	5.5%	$145.7877	$26824.93
1 January 2018	30 June 2018	181	5.5%	$145.7877	$26387.57
1 July 2018	31 December 2018	184	5.5%	$145,7877	$26824.93
1 January 2019	30 June 2019	181	5.5%	$145,7877	$26387.57
1 July 2019	31 December 2019	184	5.25%	$139.1610	$25605.62
1 January 2020	30 June 2020	182	4.75%	$125.5635	$22852.56
1 July 2020	31 December 2020	184	4.25%	$112.3463	$20671.72
1 January 2021	30 June 2021	181	4.1%	$108.6781	$19670.73
1 July 2021	31 December 2021	184	4.1%	$108.6781	$19996.77
1 January 2022	30 June 2022	181	4.1%	$108.6781	$19670.73
1 July 2022	1 December 2022	154	4.85%	$128.5582	$19797.97
TOTAL	2782	$379,409.16

9. Mr Spedding commenced incurring legal costs in the criminal proceedings upon their institution. He managed to recover a certain sum from the State pursuant to a certificate granted under the Costs in Criminal Cases Act 1967. The unrecovered amount of his costs, which I awarded, is $109,292: at [316]. Mr Spedding claims interest on this sum from a period of two years before the favourable termination of the criminal proceedings on 5 March 2016. This allows for the fact that the total legal costs were incurred over a period of time, not immediately upon the institution of the criminal proceedings.

10. Mr Spedding claims interest in respect of unreimbursed legal costs incurred in the criminal proceedings, in accordance with Schedule "B".

SCHEDULE “B”

Start Date	End Date	Days	Rate	Amount Per Day	Total
5 March 2016	30 June 2016	118	6%	$17.9167	$2114.17
1 July 2016	31 December 2016	184	5.75%	$17.1702	$3159.32
1 January 2017	30 June 2017	181	5.5%	$16.4687	$2980.83
1 July 2017	31 December 2017	184	5.5%	$16.4687	$3030.23
1 January 2018	30 June 2018	181	5.5%	$16.4687	$2980.83
1 July 2018	31 December 2018	184	5.5%	$16.4687	$3030.23
1 January 2019	30 June 2019	181	5.5%	$16.4687	$2980.83
1 July 2019	31 December 2019	184	5.25%	$15.7201	$2892.50
1 January 2020	30 June 2020	182	4.75%	$14.1841	$2581.50
1 July 2020	31 December 2020	184	4.25%	$12.6910	$2335.15
1 January 2021	30 June 2021	181	4.1%	$12.2766	$2222.07
1 July 2021	31 December 2021	184	4.1%	$12.2766	$2258.90
1 January 2022	30 June 2022	181	4.1%	$12.2766	$2222.07
1 July 2022	1 December 2022	154	4.85%	$14.5224	$2236.44
TOTAL	2463	$37,025.06

11. The total sum claimed by Mr Spedding for interest is $416,434.

12. The State conceded that Mr Spedding is entitled to an award of interest, although the amount of that claim is in dispute. Inasmuch as the award of damages includes an allowance for a shortfall in legal costs paid to Mr Spedding for the criminal proceedings, interest at the Practice Note rate should apply to that portion of the award of damages.

13. With respect to the remainder of the interest-bearing portion of the award of damages (non-economic loss, injury to reputation and aggravated damages), the State submitted that interest should be at the rate of 2%. That is because Mr Spedding only claimed that rate in his submissions: see [266] of the principal judgment.

14. While in Beckett v State of New South Wales [2015] NSWSC 1500 the plaintiff was awarded interest calculated under the practice note upon damages for similar causes of action, it was expressly found that the award of damages was entirely for the past: at [9].

15. The State also contests the date from which interest should be awarded. Mr Spedding maintains that his causes of action in misfeasance in public office and collateral abuse of process accrued at the date of his arrest on 21 April 2015. The State maintains that the cause of action for malicious prosecution only accrued at the time of his acquittal on 5 March 2018. The State submitted that the conduct amounting to the misfeasance in public office and the collateral abuse of process similarly accrued or was completed only at the time of that acquittal. The arrest and charging of Mr Spedding on 21 April 2015 represents only the beginning of the exercise of the power involved and the beginning of the invocation of the court's jurisdiction for a collateral purpose. In those circumstances, interest should only lie from the date of the acquittal.

16. The State conceded that Mr Spedding’s interest calculations are arithmetically correct. However, the State submitted that the award of interest to Mr Spedding should be limited to the sum of $134,724.48, resulting in a final judgment for him for $1,619,016.48.

Consideration

17. Section 100(1) of the Civil Procedure Act is in these terms:

100 Interest up to judgment

(1) In proceedings for the recovery of money (including any debt or damages or the value of any goods), the court may include interest in the amount for which judgment is given, the interest to be calculated at such rate as the court thinks fit--

(a) on the whole or any part of the money, and

(b) for the whole or any part of the period from the time the cause of action arose until the time the judgment takes effect.

18. Mr Spedding’s causes of action for collateral abuse of power and misfeasance in public office arose on the date of his arrest. I do not accept that these causes of action only accrued when the proceedings were terminated in his favour. Indeed, by their very nature, these torts are legally unrelated to the ultimate outcome in the criminal proceedings, even if that outcome may to some extent inform the nature of the acts complained of that constitute them. Interest on damages awarded for those causes of action should run from the date of Mr Spedding’s arrest. Mr Spedding’s cause of action for malicious prosecution, however, did not arise and was not complete until he was acquitted. Interest on damages awarded for that tort should run from that date. In each case, damages awarded should be attributed as to 85% for the past in accordance with Mr Spedding’s approach.

19. By reason of the different dates from which the causes of action accrued, and from which interest is calculable, it becomes necessary for the purposes of calculating interest to differentiate between damages awarded for these separate causes of action. For reasons that will be apparent from my principal judgment, I approached the attribution of damages for non-economic loss, aggravated damages and damages for reputational loss, as in effect jointly caused by these separate torts. For present purposes, however, it seems to me that the malicious prosecution claim was more significant and attracted the more significant attention in the course of the proceedings. It therefore ought notionally to bear a larger proportion of the interest which I propose to allocate as one half of the total of damages under those heads. Accordingly, interest on damages for malicious prosecution running from the date of the termination of the criminal proceedings should be calculated on 85% of one half of the total of those damages.

20. I am not attracted to the proposition that the rate of interest upon these heads of damage should be limited to 2% upon the basis that Mr Spedding claimed only that rate in his written submissions. The State does not suggest that it somehow altered its position to its detriment in reliance upon a representation that Mr Spedding would only claim interest at the lower rate. Indeed, the State’s conduct of the litigation, as evidenced by its attitude to the several offers of compromise referred to later in these reasons, demonstrates that it was locked into a determined approach based upon an apparent view that Mr Spedding had no reasonable, or even possible, chance of success and that the proceedings would go to trial. I can see no evidence to suggest that Mr Spedding’s submissions on interest rates had the slightest effect upon any decisions made by the State about how it responded to his claims or why the prescribed rates of interest should not apply.

21. Mr Spedding is entitled to interest on the unreimbursed portion of his legal costs at the prescribed rates.

Costs

22. Mr Spedding served three offers of compromise on the State on the following dates:

1. 15 December 2020, offering to settle the proceedings upon the basis of a judgment for him in the sum of $850,000.

2. 20 September 2021, offering to settle the proceedings upon the basis of a judgment for him in the sum of $800,000.

3. 8 April 2022, offering to settle the proceedings upon the basis of a judgment for him in the sum of $700,000.

23. Mr Spedding seeks a variation of the ordinary costs order made by me in the principal proceedings by ordering the State to pay his costs of and incidental to the proceedings up to and including 1 December 2020 on an ordinary basis and thereafter on an indemnity basis. The variation of the present costs order in this manner gives effect to UCPR 42.14(2).

24. There is a strong presumption in favour of the ordinary consequence of UCPR 42.14(2) and exceptional circumstances are generally required to justify a departure from the rule: Bennette v Cohen (No 2) [2009] NSWCA 162 at [25]; cited in Beckett at [32]. The onus is on the State to demonstrate, with evidence, why the Court should not make such an order: Caine v Lumley General Insurance Ltd (No 2) [2008] NSWCA 109 at [35].

25. Upon the basis of the affidavit of Ms Stephanie Koch affirmed 12 December 2022, Mr Spedding anticipates that the State will argue that its rejection of his offer of compromise dated 1 December 2020 was not unreasonable because the State was not in a position to assess the reasonableness of the offer due to a lack of documentary evidence in support of the claims for past and future economic loss. Mr Spedding argued as follows.

26. A statement of particulars was filed in these proceedings on 20 February 2020. It claimed $100,000 for past loss of earnings and $500,000 for damages for future impairment of earning capacity. The statement specified that the State was served with Mr Spedding's income tax returns for the financial years 2014 to 2018 inclusive and profit and loss statements for GAS Refrigeration Service for the financial years 2014 to 2019 inclusive. It also claimed amounts for general, aggravated and exemplary damages for each of the alleged torts. The statement of particulars did not specify a sum for damages for reputational loss.

27. The State's solicitors wrote to Mr Spedding's solicitors on 8 December 2020 complaining that the State was not able to evaluate the reasonableness of the offer of compromise made on 1 December 2020 because of the alleged lack of evidentiary support for the sums claimed for past and future economic loss, and also because it did not know what proportion of Mr Spedding's total legal costs in the criminal proceedings had been reimbursed by the Department of Justice pursuant to the certificate granted under the Costs in Criminal Cases Act.

28. Mr Spedding's solicitors responded to that letter on 15 December 2020, rejecting the assertion that the State was not able to assess the reasonableness of the offer for the reasons stated. In doing so, Mr Spedding referred the State's solicitors to the statement of particulars filed in the proceedings on 20 February 2020. Further, Mr Spedding informed them that the sum of $109,291.70 remained after credit was given for the sum paid by the Department of Justice for his legal costs.

29. Mr Spedding submits that the State was, as at 1 December 2020 and at all times thereafter, in a position to assess the reasonableness of his offer of $850,000. His statement of particulars pleaded a claim for $1,450,000, excluding the claims for past and future economic loss totalling $700,000. The statement did not specify the amount claimed for damages for reputational loss. Adding the sum of $300,000 for damages for reputational loss to the amounts claimed in the statement, the total amount claimed came to $2,450,000. After deducting the sum of $700,000 from this total (representing the combined sum claimed for past and future economic loss), the total damages claimed came to $1,750,000. Mr Spedding submitted that the offer of $850,000 was therefore a very significant compromise.

30. Further, the State's failure to accept the second and third offers of compromise, by which times it knew that Mr Spedding was not pursuing a claim for past or future economic loss, suggests that throughout the conduct of the litigation the State grossly undervalued the other heads of damage upon which he was ultimately successful. If the State had carried out a proper evaluation of Mr Spedding's losses, save for economic loss, it should have accepted the first offer, not to say the subsequent smaller offers.

31. The State accepted in response that Mr Spedding is entitled to a special costs order based on the offer of compromise served on 20 September 2021, but not otherwise. The State’s argument is as follows.

32. The offer of 1 December 2020 was served under cover of a letter. While that letter purports to invoke the principles of Calderbank v Calderbank, it is patently clear that there is no basis on which those principles could be properly invoked if for some reason the attached offer of compromise is not effective. No reasons why the offer is reasonable are stated. It cannot be said that a failure to accept that offer was unreasonable or improper.

33. The offer of 1 December 2020 formally complied with the rules. At the time of its service, there was substantial uncertainty about the scope of Mr Spedding’s claim. First, there was uncertainty about the quantum of the claimed shortfall of legal costs. Secondly, there was uncertainty about whether Mr Spedding was maintaining his claim for economic loss, which had been particularised. Given that uncertainty, the State put Mr Spedding on notice under UCPR 20.26(4) that it was unable at that time to assess the reasonableness of the offer. By his solicitor’s letter of 15 December 2020, Mr Spedding clarified the quantum of the legal costs claim. However, clarification of whether the economic loss claim was to be pressed or not was not provided until much later, on 2 July 2021.

23. Even though Mr Spedding seeks indemnity costs on the strength of the offer of 1 December 2020, the State maintained that the scope of the claim was substantially unclear in two specific ways that it identified at the time. While one of those matters was clarified relatively shortly after the making of the offer of compromise, the other, more substantial one, was not. Despite this, Mr Spedding seeks an order for costs on an indemnity basis from the date of the offer itself, at which time, it is clear that the State was not able to evaluate the claim so that its failure to accept the offer was at that time a reasonable course.

24. The State does not make any complaint about the offer of compromise of 20 September 2021, and accepts that an order for indemnity costs in favour of Mr Spedding should flow from that offer. The State submitted that the current order for costs should be varied so that it reads:

Vacate order 3 made on 1 December 2022 and in lieu thereof order the defendant to pay the plaintiff's costs of the proceedings up to and including 20 September 2021 on an ordinary basis and thereafter until 1 December 2022 on an indemnity basis.

Consideration

36. Although I am not overwhelmed with confidence that the State was not in a position to assess the reasonableness of Mr Spedding’s first offer of compromise, the correspondence at the time certainly demonstrates both that the State promptly sought particulars of the offer, which it maintained were necessary before it could give it a proper consideration, and that Mr Spedding appears to have accepted as much in the response that was provided by his solicitors. Moreover, as the events in due course demonstrated, Mr Spedding did not ever appear to have a significant claim for economic loss at any stage and the fact that it was made and later completely abandoned supports the proposition that his pleaded case was in a state of some uncertainty when the first offer was made. It was in the circumstances not unreasonable for the State to seek to evaluate the claim further and that its failure to accept the first offer was therefore not unreasonable. That position had changed, as the State accepts, by the time of the second offer.

Conclusion

37. It follows that Mr Spedding is entitled to interest, calculated having regard to the findings I have made, as well as indemnity costs in accordance with the second offer of compromise. I will therefore direct the parties to bring in a final minute of orders giving effect to these reasons.

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Decision last updated: 03 February 2023