St Barnabas Nominees Pty Ltd v Stallard Corp Pty Ltd [No 2]
[2011] WASC 289 (S)
•24 OCTOBER 2011
ST BARNABAS NOMINEES PTY LTD -v- STALLARD CORP PTY LTD [No 2] [2011] WASC 289 (S)
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2011] WASC 289 (S) | |
| Case No: | CIV:2399/2009 | 24 OCTOBER 2011 | |
| Coram: | EDELMAN J | 24/10/11 | |
| 25/10/11 | |||
| 9 | Judgment Part: | 1 of 1 | |
| Result: | Pre-judgment interest ordered at 6% Costs to be taxed on a party and party basis | ||
| B | |||
| PDF Version |
| Parties: | ST BARNABAS NOMINEES PTY LTD STALLARD CORP PTY LTD CORRIN LINDSAY CAINE |
Catchwords: | Interest awards Rate of pre-judgment interest Whether commercial rate of 8.25% used by related parties should be the appropriate rate Different circumstances and conditions for the use of the 8.25% rate Costs Whether costs should be taxed on an indemnity basis Whether the refusal of an O 24A offer permits costs to be taxed on an indemnity basis Order 24A offer less favourable than terms of judgment received Difficulty of assessing the reasonableness of costs offer in O 24A offer Whether refusal of the O 24A offer was unreasonable |
Legislation: | Rules of the Supreme Court 1971 (WA), O 24A Supreme Court Act 1935 (WA), s 31, 32 |
Case References: | Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115 Grincelis v House [2000] HCA 42; (2000) 201 CLR 321 Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125 Lunt v Briggs [No 2] [2009] WASC 243 MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
DECISION : 25 OCTOBER 2011 FILE NO/S : CIV 2399 of 2009 BETWEEN : ST BARNABAS NOMINEES PTY LTD
- Plaintiff
AND
STALLARD CORP PTY LTD
Defendant
(BY ORIGINAL ACTION)
STALLARD CORP PTY LTD
Plaintiff
AND
ST BARNABAS NOMINEES PTY LTD
First Defendant
CORRIN LINDSAY CAINE
Second Defendant
(BY COUNTERCLAIM)
(Page 2)
Catchwords:
Interest awards - Rate of pre-judgment interest - Whether commercial rate of 8.25% used by related parties should be the appropriate rate - Different circumstances and conditions for the use of the 8.25% rate
Costs - Whether costs should be taxed on an indemnity basis - Whether the refusal of an O 24A offer permits costs to be taxed on an indemnity basis - Order 24A offer less favourable than terms of judgment received - Difficulty of assessing the reasonableness of costs offer in O 24A offer - Whether refusal of the O 24A offer was unreasonable
Legislation:
Rules of the Supreme Court 1971 (WA), O 24A
Supreme Court Act 1935 (WA), s 31, 32
Result:
Pre-judgment interest ordered at 6%
Costs to be taxed on a party and party basis
Category: B
Representation:
Original Action
Counsel:
Plaintiff : Ms K A Vernon
Defendant : Mr I R Freeman
Solicitors:
Plaintiff : Butcher Paull & Calder
Defendant : Haynes Robinson
(Page 3)
Counterclaim
Counsel:
Plaintiff : Mr I R Freeman
First Defendant : Ms K A Vernon
Second Defendant : Ms K A Vernon
Solicitors:
Plaintiff : Haynes Robinson
First Defendant : Butcher Paull & Calder
Second Defendant : Butcher Paull & Calder
Case(s) referred to in judgment(s):
Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115
Grincelis v House [2000] HCA 42; (2000) 201 CLR 321
Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125
Lunt v Briggs [No 2] [2009] WASC 243
MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657
(Page 4)
1 EDELMAN J: After delivery of my reasons for decision in this case the parties conferred and were agreed as to the appropriate orders with two exceptions. The orders proposed by the plaintiff were as follows.
1. There be judgment for the plaintiff by original action.
2. The Disputed Amount and all interest accruing thereon currently held in an interest bearing trust account by solicitors Butcher Paull & Calder be released to St Barnabas Nominees Pty Ltd.
3. The defendant by original action pay to the plaintiff by original action interest at a rate of 8.25% per annum on the Disputed Amount from 17 December 2007 to judgment, less the amount of interest which has actually accumulated on the Disputed Amount.
4. The counterclaim be dismissed.
5. The defendant by original action pay the plaintiff's by original action costs of the action including reserved costs, and to be taxed on an indemnity basis from 15 November 2010.
2 Two issues arose. The first was whether interest in proposed order 3, should be at the rate of 8.25%. This was the rate used by related parties in the 19 July 2007 contract which was in issue at trial. Alternatively, should the rate of interest be the usual statutory rate of 6% under s 32 of the Supreme Court Act 1935 (WA)? I conclude below that the appropriate rate is 6%.
3 The second issue was whether the taxed costs in order 5 should be on an indemnity basis or taxed as party and party costs, in circumstances in which an offer of compromise was made by the plaintiff under O 24A of the Rules of the Supreme Court 1971 (WA). I conclude that the costs should be taxed on a party and party basis.
The rate of interest
4 As to the question of interest, at the commencement of the trial I gave the plaintiff leave to amend its prayer for relief to seek recovery of interest at 8.25% (ts 3). The amendment was to seek interest on the Disputed Amount from 17 December 2007 until judgment at a rate of 8.25% per annum 'pursuant to the [19 July 2007] Contract or alternatively pursuant to s 32 of the Supreme Court Act 1935 (WA)'.
5 It is not clear how the 19 July 2007 contract is said to give rise to an entitlement of the plaintiff to interest on the Disputed Amount from the
(Page 5)
- defendant at 8.25% until judgment. Certainly it does not make any express provision to this effect. Nor is the plaintiff a party to the 19 July 2007 contract.
6 Further, this was not a case where the plaintiff had pleaded and proved compensation for losses caused by an inability to use the Disputed Amount arising from a breach of contract or tort by the defendant. There is a 'critical distinction' between a statutory award of pre-judgment interest and an award of compensation for loss caused by a wrongfully caused loss of use of money: Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125, 152 (Brennan & Deane JJ); see also 147 - 148 (Mason CJ & Wilson J).
7 If interest is claimed on the latter basis, it requires that the breach of contract or tort causing loss be pleaded and proved. No evidence was led by the plaintiff concerning any losses it suffered by the failure to receive the Disputed Amount on 17 December 2007, or any tort or breach of contract by the defendant in failing to pay the Disputed Amount.
8 In any event, the plaintiff did not put its argument for interest at 8.25% on this basis. The plaintiff argued in oral submissions that the 8.25% rate should be used by the court, in its discretion, in ordering pre-judgment interest under s 32(1) of the Supreme Court Act (see ts 199).
9 Section 32(1) of the Supreme Court Act provides for recovery by a plaintiff of pre-judgment interest 'at such rate as it thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date when the judgment takes effect'.
10 The award of interest under s 32 is discretionary. It can be, 'at best only a rough guide' to the value of the use of money: MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657, 666 (the Court).
11 The statutory award of pre-judgment interest is made in favour of a party 'because he or she has been deprived of the use of his or her money, not because he or she has foregone investment opportunities': MBP (SA) Pty Ltd v Gogic (666) (the Court).
12 The statutory provision may also serve the purpose of encouraging early resolution of litigation: Grincelis v House [2000] HCA 42; (2000) 201 CLR 321, 328 - 329 [16] (the Court).
(Page 6)
13 The plaintiff's submission was that the statutory discretion should be exercised to award interest at 8.25%. The defendant (Stallard Corp) submitted that 6% was the appropriate rate for the exercise of discretion (ts 205).
14 The plaintiff relied upon the 8.25% rate which was adopted in the 19 July 2007 contract between Stallard Corp and Spinaway. In that contract Spinaway was to pay to Stallard Corp interest at 8.25% on the amounts which remained outstanding under that contract. In other words, Spinaway was to pay, and Stallard Corp was to receive, interest at 8.25% for the delayed payment by Spinaway from the time of settlement of $7 million of the purchase price for the Land. The plaintiff submitted that this demonstrated that the parties considered that the commercial value of money was 8.25%. The consequence of this was said to be that interest on the Disputed Amount should accrue at 8.25% in favour of St Barnabas.
15 I do not accept this submission. There are three reasons why the 8.25% is not an appropriate comparison rate for the award of interest payable on the Disputed Amount.
16 First, as I have explained in my reasons for decision, the 19 July 2007 contract was not between St Barnabas and Stallard Corp. It is St Barnabas who now claims pre-judgment interest for the loss of use of its money. It is not Spinaway.
17 Secondly, even if Spinaway could be equated with the plaintiff (St Barnabas) for the purpose of assessing the appropriate pre-judgment interest rate, the circumstances are very different. An interest rate of 8.25% payable by Spinaway on the balance of an unpaid purchase price is a very different scenario from an interest rate in relation to money which is held on trust by solicitors who hold the money pending the outcome of litigation. The risks involved in the latter scenario are simply not comparable to the former.
18 Thirdly, the 19 July 2007 contract was part of a larger suite of transactions (see my reasons at [51]). The 8.25% interest rate payable by Spinaway is further removed from the circumstances of interest which should be payable on the Disputed Amount because of those other related transactions which included related contracts for security entered into between Stallard Corp and St Barnabas and Mr Caine. I have discussed those contracts in my reasons for decision at [56].
19 No argument was made by Stallard Corp that an award of interest under s 32 of the Supreme Court Act in an amount above 6% was
(Page 7)
- impermissible due to s 31 of the Supreme Court Act: see Lunt v Briggs [No 2] [2009] WASC 243 [25] (EM Heenan J) and statement of claim, par 9. I do not need to consider that issue.
20 As to the exercise of my discretion as to interest, Stallard Corp accepted that 6% was an appropriate amount (ts 207). That is also the rate applied in cases of post-judgment interest since 13 September 1997: see now Civil Judgments Enforcement Regulations 2005 (WA) r 4(1). The post-judgment rate is a guide to the exercise of the court's discretion under s 32 of the Supreme Court Act: O 36 r 20 Rules of the Supreme Court.
21 Interest should be paid at 6% from the date at which the cause of action arose, following the payment of the Disputed Amount to the plaintiff's solicitors. That date was 17 December 2007.
Indemnity costs
22 The second issue which arose after handing down of my reasons was whether costs should be taxed on an indemnity basis from 15 November 2010.
23 The plaintiff submitted that the costs should be awarded on an indemnity basis from that date because on that date an offer of compromise was made under O 24A Rules of the Supreme Court.
24 The offer letter was not provided to me by counsel. However, counsel informed me that the offer was expressed as an O 24A offer of compromise (ts 209). I do not accept that indemnity costs should be awarded for four reasons.
25 First, O 24A does not contemplate the award of indemnity costs. Order 24A r 10(4) provides as follows:
Where an offer is made by a plaintiff and not accepted by the defendant, and the plaintiff obtains judgment on the claim to which the offer relates no less favourable to him than the terms of the offer, then, unless the Court otherwise orders, the plaintiff shall be entitled to an order against the defendant for his costs in respect of the claim from the date on which the offer was made, in addition to his costs incurred before that date, all such costs to be taxed on a party and party basis. (emphasis added).
26 It is true that if the offer had been informal, rather than a O 24A offer, then it is possible that there may be a power to make an award of indemnity costs if the offer was unreasonably refused: Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115 [16]
(Page 8)
- (Buss JA). However, for the reasons set out below, it was not unreasonable for Stallard Corp to refuse the offer.
27 Since Stallard Corp's refusal was not unreasonable, I do not need to decide whether there is any scope for the application of indemnity costs in relation an O 24A offer must be of the same effect as those made informally or outside the terms of O 24A.
28 The second reason why indemnity costs are not an appropriate award is because the plaintiff's offer was not more favourable than the award which I have made.
29 The plaintiff's offer (as I was informed in submissions) was to compromise the litigation if the defendant released the Disputed Amount and paid to the plaintiff interest at a rate of 8.25% on the Disputed Amount from 17 December 2007 until the date of offer of 11 November 2010.
30 In contrast, for the reasons I have set out above, the plaintiff is only entitled to interest on the Disputed Amount at 6%. The plaintiff's offer was less favourable than the judgment which it has obtained.
31 Thirdly, an award of indemnity costs is also inappropriate because one aspect of the reasonableness of the plaintiff's O 24A offer of compromise is impossible to assess. The offer contained a component for costs. The plaintiff (as I was informed in submissions) sought recovery of $44,979.70 of its legal costs in addition to the Disputed Amount and interest.
32 Counsel for the plaintiff accepted that it is impossible for me to determine whether this amount of costs claimed was reasonable, or whether it was an offer more favourable than the award which the plaintiff might obtain on a taxation. Without such a determination indemnity costs should not be awarded in this case.
33 Counsel for the plaintiff argued that O 24A r 10(2) permits the court to disregard that component of the offer in assessing whether indemnity costs should be awarded. I do not accept that this is permitted by O 24A r 10(2). That rule is clearly directed to circumstances where an offer of compromise is accepted: see O 24A r 10(1).
34 Fourthly, and finally, indemnity costs should not be awarded because the nature of the offer was such that it was not unreasonable for Stallard Corp to refuse it. The offer sought all the relief which had been pleaded,
(Page 9)
- and more. The relief pleaded at the time of the O 24A offer was payment of the Disputed Amount with interest under s 32 of the Supreme Court Act (6%). The statement of claim was not amended to seek 8.25% interest until the first day of trial. Yet, apart from the payment sought for costs, the O 24A offer sought payment of the Disputed Amount and interest at 8.25%. It was not unreasonable for the defendant to refuse this offer.
35 The costs should be taxed on a party and party basis.
Conclusion
36 For these reasons, the orders I make are as follows.
1. There be judgment for the plaintiff by original action.
2. The Disputed Amount and all interest accruing thereon currently held in an interest bearing trust account by solicitors Butcher Paull & Calder be released to St Barnabas Nominees Pty Ltd.
3. The defendant by original action pay to the plaintiff by original action interest at a rate of 6% per annum on the Disputed Amount from 17 December 2007 to judgment, less the amount of interest which has actually accumulated on the Disputed Amount.
4. The counterclaim be dismissed.
5. The defendant by original action pay the costs of the action of the plaintiff by original action including reserved costs, to be taxed.
0
6
2