State of New South Wales v Avery

Case •

[2016] NSWCA 147

•

27 June 2016

No judgment structure available for this case.

Court of Appeal


Supreme Court


New South Wales

  • Amendment notes
Medium Neutral Citation: State of New South Wales v Avery [2016] NSWCA 147
Hearing dates:3 May 2016
Decision date: 27 June 2016
Before: McColl JA at [1];
Simpson JA at [2];
Sackville AJA at [3]
Decision:

1. The summons filed on 17 November 2015 be dismissed.
2. The applicant (the State) pay the costs of the respondent (Mr Avery) of the summons.

Catchwords: COSTS – judicial review of decision of District Court judge on appeal from costs assessor – calculation of maximum costs recoverable in personal injury cases pursuant to Legal Profession Act 2004 (NSW), s 338 – whether “amount recovered on a claim” is calculated having regard to amounts attributable to pre-judgment interest pursuant to Legal Profession Act 2004 (NSW), s 343(2) – meaning of “addition of interest”
Legislation Cited:

Civil Liability Act 2002 (NSW), Pt 2, ss 3B(1)(a), 11, 18(1)
Civil Procedure Act 2005 (NSW), ss 100, 101
Legal Profession Act 1987 (NSW), Pt 11, Div 5B
Legal Profession Act 2004 (NSW), ss 4, 302(2), 302B, 337, 338, 339, 340, 341, 343, 364(1), 367A, 368, 370, 384
Legal Profession Uniform Law Application Act 2014 (NSW), s 167(a), Sch 1
Supreme Court Act 1970 (NSW), ss 69, 94

 

Legal Profession Uniform Law Application Act 2014 (Vic), Sch 1

 

County Courts Act 1867 (UK), s 5

Legal Profession Uniform Law, s 6
Uniform Civil Procedure Rules, r 6.12
Cases Cited: Avery v State of New South Wales (District Court (NSW), Delaney ADCJ, 17 August 2015, unrep)
Avery v State of New South Wales (District Court (NSW), Elkaim DCJ, 29 November 2012, unrep)
Certain Lloyd’s Underwriters v Cross [2012] HCA 56; 248 CLR 378
Commissioner for Railways (NSW) v Agalianos (1955) 92 CLR 390
Fergusson v Davison (1882) 8 QBD 470
Fire & All Risks Insurance Co Ltd v Callinan [1978] HCA 31; 140 CLR 427
Haines v Bendall [1991] HCA 15; 172 CLR 60
Hungerfords v Walker [1989] HCA 8; 171 CLR 125
MBP (SA) Pty Ltd v Gogic [1991] HCA 3; 171 CLR 657
Muldoon v Church of England Children’s Homes Burwood [2011] NSWCA 46; 80 NSWLR 282
Newcastle City Council v McShane (No 3) [2005] NSWCA 437; 65 NSWLR 155
New South Wales v Williamson [2011] NSWCA 183
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355
Reiter v Commissioner of Taxation [2008] FCA 1068; 113 FCR 492
State of New South Wales v Williamson [2012] HCA 57; 248 CLR 417
Wigens v Cook (1859) 141 ER 659
Texts Cited: New South Wales Legislative Assembly, Parliamentary Debates (Hansard), 28 May 1987
The Macquarie Dictionary (2nd ed, 1990, The Book Printer)
Shorter Oxford English Dictionary (3rd ed, 1962, Clarendon Press)
Category:Principal judgment
Parties: State of New South Wales (Appellant)
Michael Avery (First Respondent)
District Court of New South Wales (Second Respondent)
Representation:

Counsel:
Ms T McDonald SC / Mr RC Gration (Applicant)
Mr D Campbell SC / Mr AC Harding (Respondent)

  Solicitors:
Makinson d’Apice Lawyers (Applicant)
RMB Lawyers (Respondent)
File Number(s):2015/338276
 Decision under appeal 
Court or tribunal:
District Court of New South Wales
Date of Decision:
17 August 2015
Before:
Delaney ADCJ
File Number(s):
2015/106152

HEADNOTE

[This headnote is not to be read as part of the judgment]

This was an application for judicial review of a decision of the District Court.

The respondent (Mr Avery) brought proceedings in the District Court against the applicant (the State) claiming damages for assault by a police officer (Assault Proceedings). The District Court gave judgment for Mr Avery for $101,800 (including $1,800 in pre-judgment interest) and ordered the State to pay costs. Mr Avery subsequently appealed to the District Court the decision of the costs assessor, who found that Mr Avery’s costs were capped at $20,000 (plus $2,000 GST) by s 338(1) of the Legal Profession Act 2004 (NSW). The primary Judge (Delaney ADCJ) considered that Mr Avery’s costs were not capped by s 338(1) and remitted the matter to the costs assessor.

Section 338(1) applies where the “amount recovered on a claim for personal injury damages does not exceed $100,000” and s 343(2) states that in determining the “amount recovered” for personal injury damages “no regard is to be had to any part of the amount recovered that is attributable to costs or to the addition of interest”. The primary Judge considered that the expression “the addition of interest” in s 343(2) refers only to post-judgment interest, and therefore it was not open to the costs assessor to deduct the pre-judgment interest of $1,800 in determining the “amount recovered”. The State sought judicial review of that decision, on the basis that the primary Judge should have construed s 343(2) to require the deduction of the pre-judgment interest awarded to Mr Avery for the purposes of s 338(1).

Held, per Sackville AJA (McColl JA agreeing at [1], Simpson JA agreeing at [2]) dismissing the application:

(1) The expression “amount recovered” in s 338(1) means the amount of the judgment or order in favour of the plaintiff and not the amount actually paid to the plaintiff pursuant to the judgment. Therefore, where a plaintiff obtains judgment in contested proceedings, the “amount recovered” within s 338(1) does not include any post-judgment interest paid to the plaintiff. [69]-[74], [79]

Reiter v Commissioner of Taxation [2008] FCA 1068; 113 FCR 492 at 497 (Branson J); Wigens v Cook (1859) 141 ER 659; Fergusson v Davison (1882) 8 QBD 470.

(2) The function of s 343(2) is to ensure that where a claim is compromised or settled, the “amount recovered” does not include any post-compromise interest paid to the plaintiff which is to be disregarded [77]-[79]

(3) The direction in s 343(2) to disregard “any part of the amount recovered that is attributable to … the addition of interest” for the purposes of s 338(1) does not apply to interest included in the judgment sum pursuant to s 100(1) of the Civil Procedure Act, being pre-judgment interest. [79]-[84]

Newcastle City Council v McShane (No 3) [2005] NSWCA 437; 65 NSWLR 155; New South Wales v Williamson [2012] HCA 57; 248 CLR 417

(4) The primary Judge was correct to conclude that the costs assessor had erred in law in deducting the pre-judgment interest awarded to Mr Avery in the Assault Proceedings from the judgment sum in order to determine the “amount recovered” for the purposes of s 338(1) of the Legal Profession Act. [85], [90]

Judgment

  1. McCOLL JA: I agree with Sackville AJA’s reasons and the orders his Honour proposes.

  2. SIMPSON JA: I agree with Sackville AJA.

  3. SACKVILLE AJA: The applicant (the State) seeks judicial review pursuant to s 69 of the Supreme Court Act 1970 (NSW) (Supreme Court Act) of a decision of the District Court (Delaney ADCJ). [1] His Honour allowed an appeal from a determination made by a costs assessor on 24 February 2015. [2] Although this is not an appeal it is convenient to refer to Delaney ADCJ as the “primary Judge”.

    1. Avery v State of New South Wales (District Court (NSW), Delaney ADCJ, 17 August 2015, unrep) (Costs Judgment).

    2. The determination was accompanied by a statement of reasons, as required by s 370(a) of the Legal Profession Act 2004 (NSW) (Legal Profession Act).

  4. The costs determination was made in consequence of proceedings brought by the present respondent (Mr Avery) against the State, in which Mr Avery claimed damages for an assault allegedly carried out by a member of the New South Wales Police Force (Assault Proceedings). In the Assault Proceedings, the District Court gave judgment for Mr Avery in the sum of $101,800 and ordered the State to pay the costs of the five day trial on a party and party basis. [3] The judgment sum included general damages of $90,000, punitive damages of $10,000 and $1,800 in interest on the award of general damages.

    3. Avery v State of New South Wales (District Court (NSW), Elkaim SC DCJ, 29 November 2012, unrep) (Assault Judgment).

  5. The costs determination was unfavourable to Mr Avery because the assessor allowed only $20,000 (plus $2,000 GST) of the $70,750.12 Mr Avery claimed in respect of professional costs incurred by him in the Assault Proceedings. The assessor considered that the maximum sum Mr Avery could claim for professional costs was fixed by s 338(1) of the Legal Profession Act at $20,000 (plus GST). Section 338(1) applies where the “amount recovered on a claim for personal injury damages does not exceed $100,000”.

  6. The assessor took the view that the “amount recovered” by Mr Avery did not exceed $100,000 because s 343(2) of the Legal Profession Act states that in determining the “amount recovered” for personal injury damages “no regard is to be had to any part of the amount recovered that is attributable to costs or to the addition of interest”. In the assessor’s view, pre-judgment interest awarded by a court is within s 343(2) and thus must be deducted from the judgment sum in determining the “amount recovered” for the purposes of s 338(1).

  7. On Mr Avery’s appeal to the District Court, the primary Judge held that the costs assessor had erred in law. His Honour considered that the expression “the addition of interest” in s 343(2) of the Legal Profession Act refers only to post-judgment interest. Accordingly, it was not open to the costs assessor to deduct the pre-judgment interest of $1,800 awarded to Mr Avery in the Assault Judgment in determining the “amount recovered”. It followed that the statutory maximum did not apply to the costs assessment and the assessor had erred in concluding otherwise. The primary Judge therefore set aside the costs determination and remitted the matter to the costs assessor for redetermination in accordance with the judgment.

  8. There is no appeal to this Court from the Costs Judgment of the District Court. [4] It is for this reason that the State has filed a summons seeking orders in the nature of judicial review. The State contends that the District Court’s decision should be set aside on the ground of an error of law on the face of the record. The error is said to be that the primary Judge should have construed s 343(2) of the Legal Profession Act to require pre-judgment interest awarded to Mr Avery in the Assault Proceedings to be deducted from the “amount recovered on a claim” for the purposes of s 338(1).

    4. See Muldoon v Church of England Children’s Homes Burwood [2011] NSWCA 46; 80 NSWLR 282.

  9. The State submits that in any event the primary Judge erred in law by failing to deal with issues that arose in the State’s cross-appeal to the District Court. In that cross-appeal, the State challenged the assessor’s decision to allow $2,000 in GST on top of the maximum costs of $20,000 fixed by s 338(1) of the Legal Profession Act. The State’s cross-appeal to the District Court also contended that the assessor erred in allowing the plaintiff to recover counsel’s fees over and above the statutory cap.

The Legislation

Legal Profession Act

  1. Sections 338(1) and 343(2) of the Legal Profession Act are within Div 9 of Pt 3.2 of the Legal Profession Act. Division 9 (ss 337-343) establishes a regime fixing the maximum costs payable for legal services provided to a party in connection with a claim for personal injury damages.

  2. Division 9 was repealed as from 1 July 2015,[5] but it is common ground on the present application for judicial review that Div 9 applies to the costs assessment and to the appeal and cross-appeal to the District Court. In any event, New South Wales has re-enacted legislation in virtually identical form to Div 9. [6] It is therefore convenient to refer to the provisions of Div 9 as though they are currently in force.

    5. By the Legal Profession Uniform Law Application Act 2014 (NSW) (Application Act), s 167(a). Section 4 of the Application Act applies the Legal Profession Uniform Law set out in Sch 1 to the Legal Profession Uniform Application Act 2014 (Vic) as a law of New South Wales.

    6. Application Act, Sch 1.

  3. Section 338 of the Legal Profession Act relevantly provides as follows:

“(1)   If the amount recovered on a claim for personal injury damages does not exceed $100,000, the maximum costs for legal services provided to a party in connection with the claim are fixed as follows:

(a)   in the case of legal services provided to a plaintiff-maximum costs are fixed at 20% of the amount recovered or $10,000, whichever is greater,

(b)   in the case of legal services provided to a defendant-maximum costs are fixed at 20% of the amount sought to be recovered by the plaintiff or $10,000, whichever is greater.

…

(4)   When the maximum costs for legal services provided to a party are fixed by this Division the following provisions apply (subject to sections 339-341):

(a)   a law practice is not entitled to be paid or recover for those legal services  an amount that exceeds those maximum costs,

(b)   a court or tribunal cannot order the payment by another party to the claim of costs in respect of those legal services in an amount that exceeds that maximum,

(c)   in assessing the amount of those costs that is a fair and reasonable amount, a costs assessor cannot determine an amount that exceeds the maximum set by this section.

…

(6)   If proceedings are commenced on a claim, the amount sought to be recovered by the plaintiff is taken to be the amount sought to be proved by the plaintiff at the hearing of the claim.”[7]

7. The amounts and the percentages stated in s 338(1) may be varied by regulation s 338(2). No such regulations have been made.

  1. The expression “personal injury damages” has the same meaning in the Legal Profession Act as in Pt 2 of the Civil Liability Act 2002 (NSW) (Civil Liability Act). [8] Section 11 of the Civil LiabilityAct defines “personal injury damages” to mean “damages that relate to the death of or injury to a person”. In State of New South Wales v Williamson,[9] the High Court held that “personal injury damages” in the Legal Profession Act means any and every form of damages that relate to personal injury to a person, whether that injury results from a failure to take reasonable care or from the commission of an intentional act with intent to cause injury. [10] It follows that a claim for damages for unlawful assault is a claim for personal injury damages for the purposes of Div 9 of Pt 3.2 of the Legal Profession Act, notwithstanding that Pt 2 of the Civil Liability Act does not apply to such a claim. [11]

    8. Legal Profession Act, s 337(1).

    9. [2012] HCA 57; 248 CLR 417 (French CJ, Hayne and Kiefel JJ, Crennan and Bell JJ dissenting on this issue).

    10. State of New South Wales v Williamson [2012] HCA 57; 248 CLR 417 at [18] (French CJ and Hayne J); at [44] (Kiefel J); see also Certain Lloyd’s Underwriters v Cross [2012] HCA 56; 248 CLR 378 at [41] (French CJ and Hayne J), at [104] (Kiefel J).

    11. See Civil Liability Act, s 3B(1)(a).

  2. Section 337(1) of the Legal Profession Act contains the following additional definitions:

“‘defendant’ means a person against whom a claim for personal injury damages is or may be made.

‘party’ means plaintiff or defendant.

…

‘plaintiff’ means a person who makes or is entitled to make a claim for personal injury damages.”

“Law practice” is defined in s 4 of the Legal Profession Act to include a law firm, an incorporated legal practice and a multi-disciplinary partnership. [12]

12. See also s 302(2). See now the definition in s 6 of the Legal Profession Uniform Law.

  1. Section 339(1) of the Legal Profession Act provides that Div 9 does not apply to the recovery of costs payable as between a law practice and the practice’s client to the extent that recovery of those costs is provided for in a costs agreement that complies with Div 5. Thus the cap on costs imposed by Div 9 does not apply as between a lawyer and a client if a compliant costs agreement permits the lawyer to charge fees above the statutory cap.

  2. Section 340(1) states that if a party to a claim for personal injury damages makes a reasonable offer of compromise that is not accepted, Div 9 permits the court to award costs on an indemnity basis in respect of legal services provided after the offer is made.

  3. Section 341 provides as follows:

“A court hearing a claim for personal injury damages may by order exclude from the operation of this Division legal services provided to a party to the claim if the court is satisfied that the legal services were provided in response to any action on the claim by or on behalf of the other party to the claim that in the circumstances was not reasonably necessary for the advancement of that party’s case or was intended or reasonably likely to unnecessarily delay or complicate determination of the claim.”

  1. Section 343 was the focus of much of the argument in this Court. It addresses the meaning of “amount recovered”:

“(1)   A reference in this Division to the amount recovered on a claim includes any amount paid under a compromise or settlement of the claim (whether or not legal proceedings have been instituted).

(2)   In determining the amount recovered on a claim for personal injury damages, no regard is to be had to any part of the amount recovered that is attributable to costs or to the addition of interest.”

  1. Section 364(1) of the Legal Profession Act states that in conducting an assessment of legal costs payable as a result of a court order, the costs assessor must consider, among other matters, what is a fair and reasonable amount of costs for the work concerned. Section 364(2) identifies a number of matters that a costs assessor may take into account in considering what is a fair and reasonable amount for the work.

  2. A costs assessor is to determine an application for assessment of costs payable as a result of a court order by making a determination of the fair and reasonable amount of those costs (s 367A). The assessor must issue a certificate setting out the determination and the certificate must be accompanied by a statement of reasons for the determination (ss 368, 370).

  3. Section 384(1) of the Legal Profession Act provides for a party to a costs assessment who is dissatisfied with a decision of a costs assessor as to a matter of law to appeal to the District Court. Unless the District Court affirms the costs assessor’s decision, it may make such determination as the costs assessor should have made or it may remit the matter for redetermination (s 384(2)).

Civil Procedure Act

  1. Section 100(1) of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act) empowers the Court to include pre-judgment interest in the amount for which judgment is given, as follows:

“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.”

  1. Section 101 of the Civil Procedure Act provides for post-judgment interest. It relevantly provides as follows:

“(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.”

Background

  1. Mr Avery’s claim against the State in the Assault Proceedings was based on an unlawful assault allegedly committed by a police officer on 22 October 2010. Mr Avery’s injuries included a broken arm which required surgery. The surgery resulted in complications that delayed Mr Avery’s recovery.

  2. Elkaim DCJ heard the Assault Proceedings and found that the State was liable for the assault committed by the police officer. As I have noted, his Honour assessed general damages at $90,000 and awarded Mr Avery $10,000 in punitive damages. His Honour used the term “general damages” because the parties accepted that the assessment of damages in an action for unlawful assault is not governed by the provisions of the Civil Liability Act. [13]

    13. Assault Judgment at [3]-[4].

  1. Elkaim DCJ briefly dealt with Mr Avery’s claim to interest as follows:[14]

“The plaintiff is entitled to interest at 2%. I think this should be levied on half of the general damages. Allowing for two years of interest on $45,000 the result is $1,800”.

It was common ground in this Court that, although his Honour did not refer to s 100(1) of the Civil Procedure Act, the award of pre-judgment interest was an exercise of the power conferred by that provision.

14. Assault Judgment at [134].

  1. Elkaim DCJ entered judgment for Mr Avery in the sum of $101,800 and ordered the State to pay Mr Avery’s costs of the proceedings on a party and party basis. Since the case took five days to hear, the costs incurred by each party were substantial.

  2. Mr Avery applied to have his costs of the Assault Proceedings assessed. He claimed a total of $133,702.37, made up as follows:

$

Professional Costs

70,750.12

(inclusive of GST)

Disbursements

62,952.25

(inclusive of GST)

133,702.37

  1. The costs assessor considered that the fundamental issue was whether the pre-judgment interest of $1,800 was to be disregarded in determining the “amount recovered” by Mr Avery in the Assault Proceedings. The assessor said that s 343(2) of the Legal Profession Act required pre-judgment interest to be deducted from the judgment sum. Since the resultant figure was precisely $100,000, the cap imposed by s 338(1) applied. Accordingly, Mr Avery could only be allowed professional costs of $20,000, although the assessor added $2,000 to that figure to account for GST.

  2. The costs assessor issued a certificate of determination of party and party costs pursuant to ss 367A and 368 of the Legal Profession Act. The assessor determined that a fair and reasonable amount of costs to be paid by the State to the applicant was $83,384.75, made up as follows:

$

Total Professional Costs Claimed:

70,750.12 incl GST

Total Professional Costs Allowed:

22,000.00 incl GST

Total Disbursements Claimed:

62,952.25 incl GST

Total Disbursements Allowed: [15] 

61,384.75 incl GST

Total Costs Allowed:

83,384.75 incl GST

15. No issue arises in this Court as to the small adjustment to disbursements, although there is an issue as to whether the assessor should have allowed counsel’s fees.

  1. Mr Avery appealed to the District Court pursuant to s 384(1) of the Legal Profession Act against the cost assessor’s determination. As I have noted, the State cross-appealed on the grounds that the costs assessor should have concluded that counsel’s fees and GST are included in the statutory maximum of $20,000.

The Costs Judgment

  1. The primary Judge pointed out in the Costs Judgment that the practice in personal injuries cases is for the trial judge to make findings for each component of a damages award so that the parties are aware of the amount assessed under each head and can challenge any error on appeal. His Honour cited Haines v Bendall [16] for the proposition that an award of pre-judgment interest pursuant to s 94 of the Supreme Court Act (now s 100 of the Civil Procedure Act) is an “integral element in the attainment of the object of damages, namely, to compensate a plaintiff for injury sustained”. Thus an award of interest on past general damages is in the nature of damages and part of the compensation to which a plaintiff is entitled.

    16. [1991] HCA 15; 172 CLR 60 at 66 (Mason CJ, Dawson, Toohey and Gaudron JJ).

  2. In his Honour’s view, the fact that s 343(2) of the Legal Profession Act mentions costs before referring to “the addition of interest” supported Mr Avery’s position. He pointed out that if s 343(2) covers both pre- and post-judgment interest, a plaintiff who receives a settlement which does not differentiate between damages and interest would have an advantage over a plaintiff who obtains a judgment for the same amount but differentiates between the damages and interest components of the judgment.

  3. The primary Judge said that since pre-judgment interest is a component of the damages awarded to a plaintiff, s 343(2) of the Legal Profession Act cannot be taken to refer to that form of interest. His Honour’s view was reinforced by the words “in addition” in s 343(2), which would have no work to do if the sub-section covers both pre-judgment and post-judgment interest. If that was intended, Parliament could simply have said that “no regard is to be had to any interest”.

  4. His Honour concluded as follows:

“The amount recovered, in my opinion, is the amount of the verdict and judgment entered by the judge in the case, including damages, which were interest on past general, damages. It was not an addition of interest on the total verdict, but an addition of interest in accordance with authority on particular parts of the damages. If this had been a case where there was a claim for past economic loss, there would have been allowance for interest on past economic loss. This would not have been deducted. If this had been a case where [Mr Avery] had paid money for medical expenses, and had been out of pocket for a number of years in relation to that, it may have been that some allowance would have been made for interest on the past loss on the money paid for those expenses. These are all forms of damage …

In my opinion, it cannot be that this is one rule for those who go to court and have a judgment entered in their favour by a judge who decides the case, and another rule for those who go to court, have a judge consider their case, and then before verdict is given, settle, and terms of settlement are filed with no indication of what is included for past interest on general damages or other heads of damage. In my opinion, … s 343 should be construed in a way that is in conformity with the broader purposes provided by the statute [that is, to prevent a plaintiff deliberately delaying recovery of the amount of a judgment so as to increase it above the figure of $100,000 by the addition of post-judgment interest].”

  1. Having regard to this conclusion, the primary Judge did not consider it necessary to address the issues raised by the State’s cross-appeal.

Submissions

  1. It is common ground in this Court that the award of $10,000 for punitive damages in the Assault Proceedings is within the definition of “personal injury damages” in s 337(1) of the Legal Profession Act. Therefore neither party sought to distinguish between the award of $90,000 for general damages and the award of $10,000 for punitive damages. As I have pointed out, it is also common ground that the primary Judge’s award of pre-judgment interest to Mr Avery was made pursuant to s 100(1) of the Civil Procedure Act.

The State’s Submissions

  1. The State’s written submissions contended that the primary Judge erred by elevating common law principles as to the calculation of damages for personal injuries above the plain words of s 343(2) of the Legal Profession Act. His Honour had sought to mould the words of the statute in order to impute to Parliament an intention to implement a particular policy. This was precisely the approach of which French CJ and Hayne J had disapproved in Certain Lloyd’s Underwriters v Cross. [17] There was therefore no justification to read a limitation into the plain words of s 343(2) which would prevent the provision applying to pre-judgment interest.

    17. Certain Lloyd’s Underwriters v Cross [2012] HCA 56; 248 CLR 378 at [26].

  2. Ms McDonald SC, who appeared with Mr Gration for the State, pointed out that at common law a court has no general power to award interest on damages before entry of judgment. Provisions such as s 100 of the Civil Procedure Act are designed to enable a court to award interest in order to compensate a plaintiff for being kept out of his or her damages award. Such an award requires an exercise of discretion in a plaintiff’s favour. Ms McDonald submitted that the statutory mechanism for pre-judgment interest to be awarded to a plaintiff explains the words “the addition of interest” in s 343(2). Although compensating a plaintiff for being kept out of his or her money, an award of interest is made as an addition to the plaintiff’s award of damages.

  3. Ms McDonald submitted that the State’s construction of s 343(2) of the Legal Profession Act receives support from the provisions of the Civil Liability Act restricting a plaintiff’s entitlement to claim interest on damages awards. She relied on s 18(1) of the Civil Liability Act which precludes the award of interest on damages for non-economic loss, gratuitous attendant care services and loss of capacity to provide domestic services.

  4. Ms McDonald recognised that an award of damages for assault is not governed by the Civil Liability Act, but emphasised that s 338(1) of the Legal Profession Act commonly applies to damages awards that are subject to the Civil Liability Act. Both statutes would operate consistently with each other, so she argued, if the Civil Liability Act only allows pre-judgment interest on damages to be awarded in a limited range of cases, and the Legal Profession Act requires any award of pre-judgment interest to be deducted from the “amount recovered” for the purposes of the costs cap imposed by s 338(1) of the Legal Profession Act.

  5. Ms McDonald submitted that there is nothing incongruous in construing s 343(2) to require pre-judgment interest (and costs) to be deducted from the amount of a judgment in favour of a plaintiff, yet not to require any deduction where a plaintiff settles his or her claim for a sum inclusive of interest and costs. She said that it is open to the parties, if they wish to do so, to structure a settlement in a manner that separately identifies the quantum of interest and costs. Ms McDonald also noted that in State of New South Wales v Williamson, the High Court accepted that it is a consequence of Div 9 of Pt 3.2 of the Legal Profession Act that the cost limiting provisions of s 338(1) do not apply to a judgment entered in consequence of a settlement that does not identify how the agreed sum has been calculated.

Mr Avery’s Submissions

  1. Mr Campbell SC, who appeared with Mr Harding for Mr Avery, submitted that the primary Judge correctly concluded that the words “addition of interest” in s 343(2) of the Legal Profession Act refer to the addition of interest after verdict and judgment and not to pre-judgment interest. Mr Campbell contended that it is necessary to give meaning to every word of a statute. Unless the expression “addition of interest” is construed to refer only to post-judgment interest, so he argued, the words “addition of” are superfluous and have no work to do.

  2. Mr Campbell contrasted a judgment which includes an interest component as “an integral element in the attainment of the object of damages” and is therefore compensatory in character,[18] with an entitlement to post-judgment which flows from s 101 of the Civil Procedure Act without the need for any further court order. The latter entitlement is an “addition” to the plaintiff’s entitlement to receive the amount due under the judgment.

    18. Haines v Bendall [1991] HCA 15; 172 CLR 60 at 66 (Mason CJ, Dawson, Toohey and Gaudron JJ).

  3. Mr Campbell supported this contention by submitting that the introductory words of s 338(1) (“amount recovered on a claim”) are apt to include all amounts that are in fact recovered by or paid to the plaintiff by virtue of the judgment. These amounts include not only the judgment sum, but any post-judgment interest paid to the plaintiff under s 101 of the Civil Procedure Act. According to this argument, if Parliament intended to confine s 338(1) to the judgment debt and to exclude post-judgment interest, it could have done so simply by saying “[i]f the judgment on a claim for personal injury damages does not exceed $100,000 …”.

  4. Mr Campbell submitted that this construction allows ss 338(1) and 343(2) to sit together harmoniously. Section 343(2) is designed to prevent a plaintiff thwarting the overall objective of the legislation, which is to limit the costs of claims for personal injury damages. The provision prevents a plaintiff who obtains judgment for slightly less than $100,000 deliberately delaying enforcement action until accumulated post-judgment interest brings the total amount due to over $100,000.

  5. Mr Campbell rejected the State’s suggestion that the construction of s 343(2) he advanced creates a problem similar to the difficulty he said that s 343(2) was intended to avoid. He described as a “chimerical difficulty” the suggestion that a plaintiff might delay bringing a matter to finality in the hope that the delay would cause pre-judgment interest to accumulate and bring an otherwise marginal claim above the costs threshold. Since a plaintiff cannot know in advance precisely the quantum of damages that will be awarded, a delay merely to accumulate pre-judgment interest (assuming the court is prepared to make such an award in view of the delay) is hardly a realistic prospect. In any event, the court has ample case management powers to prevent such abuses.

  6. Mr Campbell invoked the principle that a court should construe legislation so as to minimise the impact on common law rights. The State’s construction of Div 9, so he argued, detracts from a successful plaintiff’s right to recover the full amount of assessed costs. Mr Campbell also invoked the principle of merger to argue that the costs assessor was not entitled to go behind the judgment. Since Mr Avery’s cause of action had merged in the judgment, the assessor could not attempt to unravel its component parts.

Reasoning

Principles of Construction

  1. There is no dispute between the parties that the approach to the construction of Div 9 of Pt 3.2 of the Legal Profession Act should be that stated in Project Blue Sky Inc v Australian Broadcasting Authority:[19]

“[69]   The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute. The meaning of the provision must be determined ‘by reference to the language of the instrument viewed as a whole’. In Commissioner for Railways (NSW) v Agalianos [20] , Dixon CJ pointed out that ‘the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed’. Thus, the process of construction must always begin by examining the context of the provision that is being construed.

[70]   A legislative instrument must be construed on a prima facie basis that its provisions are intended to give effect to harmonious goals. Where conflict appears to arise from the language of particular provisions, the conflict must be alleviated, so far as possible, by adjusting the meaning of the competing provisions to achieve that result which will best give effect to the purpose and language of those provisions while maintaining the unity of all the statutory provisions. Reconciling conflicting provisions will often require the court ‘to determine which is the leading provision and which the subordinate provision, and which must give way to the other’. Only by determining the hierarchy of the provisions will it be possible in many cases to give each provision the meaning which best gives effect to its purpose and language while maintaining the unity of the statutory scheme.

[71]   Furthermore, a court construing a statutory provision must strive to give meaning to every word of the provision.

…

[78]   … [T]he duty of a court is to give the words of a statutory provision the meaning that the legislature is taken to have intended them to have. Ordinarily, that meaning (the legal meaning) will correspond with the grammatical meaning of the provision. But not always. The context of the words, the consequences of a literal or grammatical construction, the purpose of the statute or the canons of construction may require the words of a legislative provision to be read in a way that does not correspond with the literal or grammatical meaning.” [Some citations omitted.]

19. [1998] HCA 28; 194 CLR 355 at [69]-[71], [78] (McHugh, Gummow, Kirby and Hayne JJ). The principles were restated by French CJ and Hayne J in Certain Lloyd’s Underwriters v Cross [2012] HCA 56; 248 CLR 378 at [23]-[26]; see also at [88]-[89] (Kiefel J), at [68]-[70] (Crennan and Bell JJ dissenting, but not as to the principles to be applied).

20. (1955) 92 CLR 390 at 397.

  1. The difficulty is not stating the relevant principles but applying them to legislation which may be expressed opaquely. In Certain Lloyd’s Underwriters v Cross,[21] a case involving Div 5B of Pt 11 of the Legal Profession Act 1987 (NSW) (1987 Act), the predecessor to Div 9, there was no significant dispute as to the principles of statutory construction. However, of the ten appellate judges who addressed the interrelationship between Div 5B of Pt 11 of the 1987 Act and Pt 2 of the Civil Liability Act in this Court[22] and the High Court, five took one view and five another. Statutory construction is not a mechanical task.

Interest

21. [2012] HCA 56; 248 CLR 378.

22. See Cross v Certain Lloyds Underwriters; Thelander v Certain Lloyds Underwriters [2011] NSWCA 136; New South Wales v Williamson [2011] NSWCA 183.

Pre-Judgment Interest

  1. At common law, the courts had only limited power to award interest on damages. That power did not extend to the “general run of cases” such as claims for personal injury damages. [23] Generally speaking, therefore, the authority to award interest on personal injury damages must be found in statute. In New South Wales, s 100(1) of the Civil Procedure Act provides that authority.

    23. Hungerfords v Walker [1989] HCA 8; 171 CLR 125 at 149 (Mason CJ and Wilson J), at 152 (Brennan and Deane JJ), at 156-157 (Dawson J).

  2. An award of interest up to the date of judgment is an award in the nature of damages. [24] The award is an integral element in compensating the plaintiff for the injuries he or she has sustained. Accordingly, the award of damages is compensatory in character and is designed to compensate the plaintiff for being kept out of money theoretically due to him or her from a time prior to the delivery of a judgment.

    24. This paragraph is based on Haines v Bendall [1991] HCA 15; 172 CLR 60 at 66 (Mason CJ, Dawson, Toohey and Gaudron JJ). See also MBP (SA) Pty Ltd v Gogic [1991] HCA 3; 171 CLR 657 at 663 per curiam.

  3. An award of personal injury damages, subject to statute, covers various heads of damage such as loss of earning capacity, non-economic loss, medical costs past and future, and the need for care services. In exercising the statutory discretion to award interest, the court generally differentiates between the heads of damage. This is because it is necessary to pay due regard to the nature of the detriment and the time for which the plaintiff has suffered the detriment, although “nice apportionment” among the various detriments is not always required. [25]

    25. Fire and All Risks Insurance Co Ltd v Callinan [1978] HCA 31; 140 CLR 427 at 132-133 per curiam.

  4. A plaintiff who seeks to have interest included in the judgment sum must specifically claim interest up to judgment pursuant to s 100(1) of the Civil Procedure Act. [26] If the court includes interest in the judgment entered in favour of a plaintiff, the court’s reasons ordinarily record the basis on which interest has been allowed and the calculations made to assess the quantum of interest to be included in the judgment. In practice, therefore, although the court usually gives judgment for an amount inclusive of interest (as in the present case), the interest included in the judgment sum is usually readily ascertainable.

Post-Judgment Interest

26. Uniform Civil Procedure Rules, r 6.12(6).

  1. Section 101(1) of the Civil Procedure Act provides that unless the court orders otherwise, interest is payable on so much of the amount of a judgment as is from time to time unpaid. A plaintiff who obtains a judgment for personal injury damages is therefore entitled to interest on the unpaid amount of the debt without the need for a court order to that effect. Interest is also payable on an amount due under a costs order unless the court orders otherwise. [27]

    27. Civil Procedure Act, s 101(4).

Legislative Scheme

  1. The legislative history of Div 5B of Pt 11 of the 1987 Act is recounted in the judgment of Crennan and Bell JJ in Certain Lloyd’s Underwriters v Cross. [28] Division 5B was carried over into Div 9 of Pt 3.2 of the Legal Profession Act and equivalent provisions are now found in the Application Act. It is not necessary for present purposes to repeat the account of the legislative history of Div 9.

    28. (2012) 248 CLR 378 at [55]-[61].

  2. In Newcastle City Council v McShane (No 3),[29] Mason P made general observations about the operation of Div 5B of Pt 11 of the 1987 Act, which apply equally to Div 9 of Pt 3.2 of the Legal Profession Act. The following comments reflect in part Mason P’s observations.

    29. [2005] NSWCA 437, 65 NSWLR 155 at [15] (Giles JA and Hunt AJA agreeing).

  3. The central provision of Div 9 is s 338(1). It fixes a statutory maximum for the costs for legal services provided to a party in connection with a claim for personal injury damages. The cap applies if the “amount recovered” on the claim does not exceed $100,000. Section 343(2) directs that in determining the “amount recovered” on a claim for personal injury damages, no regard is to be had to any part of the amount recovered that is attributable to costs or to the addition of interest.

  4. Subject to certain exceptions,[30] the maximum costs are fixed at 20 per cent of the amount recovered (or $10,000) in the case of a plaintiff and 20 per cent of the “amount sought to be recovered” (or $10,000) in the case of a defendant. Some “dim illumination”[31] is cast on the meaning of the expression “sought to be recovered”, by s 338(6). It provides that if proceedings are commenced on a claim, the “amount sought to be recovered by the plaintiff is taken to be the amount sought to be provided by the plaintiff at the hearing”.

    30. Section 338A, for example, increases the maximum costs for some claims heard by the District Court.

    31. Newcastle City Council v McShane (No 3) [2005] NSWCA 437; 65 NSWLR 155 at [15].

  5. Section 338(4) applies the statutory cap to:

  • costs payable as between a law practice and a client (s 338(4)(a));

  • an award of costs made by a court or tribunal against “another party” (s 338(4)(b); and

  • an assessment of fair and reasonable costs by a costs assessor (s 338(4)(c)).

  1. The statutory cap applies to legal services provided to a “plaintiff” and to a “defendant”. These terms are given extended definitions in s 337(1). A “plaintiff” is a person who makes or is entitled to make a claim for personal injury damages; a “defendant” is a person against whom such a claim is or may be made. Since the statutory maximum applies to law practices providing services to parties prior to the institution of proceedings, Div 9 is not restricted to costs for legal services incurred by parties in and after the commencement of legal proceedings. That this is the intention is reinforced by s 343(1), which expands the meaning of “amount recovered” in s 338(1) to include any amount paid under a settlement, whether or not legal proceedings have been instituted.

  2. The costs cap is capable of operating in a blunt manner. If the “amount recovered” by a plaintiff is precisely $100,000 (as the State says happened in this case), he or she cannot obtain a costs order from an amount greater than $20,000. If, however, the plaintiff recovers $100,005, the statutory cap does not apply. The difference in the recoverable costs, particularly in a factually complex dispute, may be considerable. There is, however, nothing new in legislation which conditions a plaintiff’s entitlement to recover costs from a defendant on obtaining judgment for a minimum amount. [32]

    32. The County Courts Act 1867 (UK), s 5, for example, provided that a plaintiff could not recover costs in a County Court action in which judgment was obtained for less than £20, unless a special order was made. In Fergusson v Davison (1882) 8 QBD 470, a plaintiff who recovered £19 2s 7d was deprived of his costs.

  3. Lawyers and their clients can protect themselves from the potentially blunt operation of Div 9 in three ways:

  • the costs cap does not apply to the recovery of costs payable as between a law practice and a client if they have entered into a costs agreement that complies with Div 5 (s 339(1));

  • either party to a claim for personal injury damages may make a reasonable offer of compromise which, if refused, opens the way to an order for indemnity costs (s 340(1)); and

  • the court may order certain services to be excluded from the maximum costs limitation (s 341).

  1. In Newcastle City Council v McShane (No 3),[33] Mason P said that the “obvious purpose” of what is now Div 9 is to promote efficiency on the part of the legal profession and to contain claims costs. His Honour deduced this legislative purpose both from the text of the legislation and the second reading speech of the Premier in introducing the original legislation. [34] In my view, there is nothing in Mason P’s analysis that is inconsistent with the approach of the majority in Certain Lloyd’s Underwriters v Cross.

    33. Newcastle City Council v McShane (No 3) [2005] NSWCA 437; 65 NSWLR 155 at [23].

    34. New South Wales Legislative Assembly, Parliamentary Debates (Hansard), 28 May 1987 at 2087. The relevant passage is reproduced in Newcastle City Council v McShane (No 3) [2005] NSWCA 437; 65 NSWLR 155 at [22].

Analysis

Amount Recovered

  1. It will be recalled that Mr Campbell submitted that the expression “amount recovered on a claim for personal injuries” in s 338(1) refers to the amount actually paid to a plaintiff on a claim for personal injury damages, as distinct from the amount of any judgment entered by the court in favour of the plaintiff. Once s 338(1) is understood in this way, so Mr Campbell argued, the purpose of s 343(2) becomes clear. Its purpose is to ensure that the “amount recovered” by the plaintiff (that is, the amount actually paid) does not include any portion of the amount attributable to costs or to the addition of post-judgment interest.

  2. Mr Campbell’s argument did not make it entirely clear whether he was contending that the “amount recovered” in s 338(1) means the amount actually received by a plaintiff pursuant to a judgment (whether more or less than the amount of the judgment) or the amount actually received by the plaintiff over and above the amount of the judgment. I understood him to be submitting that “amount recovered” is equivalent to the amount actually received pursuant to a judgment, whether more or less than the amount of the judgment. I shall proceed on this basis.

  3. It is of course clear that the “amount recovered” in s 338(1) includes any amount paid under a compromise or settlement of a claim, since s 343(1) says as much. But that does not necessarily mean that where a contested claim for personal injuries is finalised by a judgment or order of the court, the amount recovered is the amount actually paid under the judgment or order, rather than the amount of the judgment in favour of the plaintiff.

  4. In support of the contention that the “amount recovered” means the amount actually paid under a judgment, Mr Campbell correctly pointed out that s 338(1) does not say “the amount recovered in a judgment”, but refers simply to the “amount recovered”. He also pointed out that s 338(1) does not contain any other language explicitly stating that the “amount recovered” is confined to the amount of a court judgment rather than the amount paid by a defendant.

  5. The absence of any express reference to a “judgment” must be taken into account in construing s 338(1). But in my view, where a contested claim for personal injury damages is resolved by a judgment or order of the court, the expression “amount recovered on a claim for personal injury damages” refers to the amount of the judgment or order in favour of the plaintiff and not to the amount actually paid pursuant to the judgment. I reach this conclusion for several reasons.

  6. First, the general principle is that the word “recover” has a technical meaning signifying recovery by means of an enforceable judgment or order of a court, although the word may receive a broader interpretation depending on the statutory language. [35] In the absence of countervailing considerations, the language used in s 338(1) suggests that the provision is intended to apply to the judgment sum awarded by a court on a claim for personal injury damages and not to the amount actually paid to or received by the plaintiff pursuant to the judgment. The fact that specific provision is made in s 343(1) for amounts paid under a compromise or settlement tends to support this interpretation of the language in s 338(1). If the “amount recovered” in s 338(1) means the amount actually paid to a plaintiff on a claim for personal injury damages, there would presumably be no need for s 343(1).

    35. Reiter v Commissioner of Taxation [2008] FCA 1068; 113 FCR 492 at 497 (Branson J), citing Wigens v Cook (1859) 141 ER 659 and Fergusson v Davison (1882) 8 QBD 470.

  7. Secondly, had the drafter intended the expression “amount recovered” in s 338(1) to refer to an amount paid to the plaintiff, whether pursuant to a judgment or otherwise, it would have been very easy to say so. Other provisions in Div 9 explicitly distinguish between an “amount recovered” and an “amount paid”. Thus s 343(1) states that the “amount recovered” on a claim includes any “amount paid” under a compromise or settlement. Section 338(4)(a) provides that a law practice is not entitled to “be paid or recover” for legal services an amount that exceeds the maximum. The contrast in Div 9 between an amount recovered and an amount paid suggests that, subject to any express provision to the contrary (as in s 343(1)), the “amount recovered” in s 338(1) refers to the judgment or order of a court in favour of a plaintiff, rather than any amount actually paid in satisfaction of the judgment or order.

  8. Thirdly, if the statutory maximum imposed by s 338(1) applies whenever the amount actually received by a plaintiff pursuant to a judgment does not exceed $100,000, the legislation would produce odd results. Not all defendants in personal injury cases are insured. If a judgment proves difficult to enforce, a successful plaintiff wishing to have a costs order assessed may be unable to do so until it is known how much can be recovered under the judgment. Similarly, a costs assessor may not know whether the statutory cap applies to an assessment until the plaintiff has completed enforcement action. This is likely to have the effect, at least in some cases involving substantial costs, of delaying the assessment of costs and finalisation of the litigation. [36]

    36. If the defendant has no assets at all, the outcome of a costs assessment may not matter. But a costs assessment may permit the plaintiff to submit a larger proof of debt against the bankrupt estate of a defendant and thus have a greater share of any funds available for distribution among unsecured creditors.

  9. A law practice is unlikely to face the same difficulties in recovering costs from a client above the statutory cap since it can protect itself by entering into a costs agreement with the client. But if there is no such agreement, a law practice faces difficulties similar to those confronting a plaintiff seeking an assessment of party and party costs. If the “amount recovered” means the amount actually paid under a judgment, it may be unclear for a very long time whether the law practice is subject to the statutory cap.

  10. The present case involves a claim for personal injury damages that was determined by a judgment of the court awarding damages to the plaintiff and not by virtue of a compromise or settlement (which is addressed in s 343(1)). In such a case, for the reasons I have given, I construe the “amount recovered” in s 338(1) to mean the amount of the judgment in favour of the plaintiff and not the amount actually paid to the plaintiff pursuant to the judgment. It follows that where a plaintiff obtains judgment in contested proceedings, the “amount recovered” within s 338(1) of the Legal Profession Act does not include any post-judgment interest paid to the plaintiff.

Must Pre-Judgment Interest be Deducted?

  1. While I have not accepted Mr Campbell’s submission as to the meaning of s 338(1) of the Legal Profession Act, that is not the end of the analysis. It is still necessary to consider whether, in a case where the court has entered judgment in favour of a plaintiff for personal injury damages, s 343(2) requires pre-judgment interest to be deducted from the judgment sum in order to determine the “amount recovered” for the purposes of s 338(1).

  2. Section 343(2) must be read together with ss 338(1) and 343(1). For the reasons I have given, subject to s 343(1), the “amount recovered” for the purposes of s 338(1) does not mean the amount actually paid under a judgment but the amount of the judgment in favour of the plaintiff. The effect of s 343(1) is to include in the “amount recovered” the amount paid under a compromise or settlement. In a particular case, the amount paid under a compromise or settlement might include interest that has accrued after the date the parties entered into the compromise or settlement. For example, the terms of settlement may provide for the defendant to pay an agreed sum by instalments, with interest to accrue at a specified rate on so much of the agreed sum as is unpaid.

  3. In the absence of s 343(2), s 343(1) would presumably mean that the amount actually paid to a plaintiff under a settlement or compromise, including interest on deferred payments, would form part of the “amount recovered” for the purposes of s 338(1). This would allow a plaintiff who agrees to compromise his or her claim for not more than $100,000 to avoid the statutory cap by having interest paid on the settlement sum taken into account in determining the “amount recovered”. Section 343(2) prevents this result by providing that in determining the “amount recovered”, no regard is to be had to any part of the amount recovered that is attributable to “the addition of interest”.

  4. This statutory language is entirely apt to ensure that any interest that accrues and is paid to a plaintiff after the parties compromise or settle the plaintiff’s claim is to be disregarded in determining the “amount recovered”. The primary dictionary definition of “interest” is “a payment, or sum paid, for the use of money borrowed … or the forbearance of a debt”. [37] The expression “any part of the amount recovered that is attributable … to the addition of interest” is therefore appropriate to describe interest that accrues and is paid on the sum that the defendant has agreed to pay to compromise the plaintiff’s claim but has not yet been paid in full. To put the point another way, the function of s 343(2) in the statutory scheme is to ensure that where a claim is compromised or settled, the “amount recovered” does not include any post-compromise interest paid to the plaintiff. Contrary to the State’s submissions, the reason for s 343(2) using the expression “addition of interest” in s 343 is not to ensure that pre-judgment interest is deducted from the “amount recovered”, but to ensure that post-compromise interest paid to a plaintiff is deducted from what otherwise would be the “amount recovered”.

    37. The Macquarie Dictionery (2nd ed, 1990). The definition in The Shorter English Oxford Dictionary (3rd ed 1962) is to similar effect.

  5. I interpolate that I have already expressed the view that, independently of s 343(2), the “amount recovered” in s 338(1) does not refer to the amount paid to the plaintiff pursuant to a judgment or order given or made after a contested hearing. It follows that s 343(2) is not needed to ensure that post-judgment interest is to be disregarded in calculating the “amount recovered”, although it is possible that the provision is intended to put the matter beyond doubt. But even if s 343(2) has no application to post-judgment interest, it clearly has work to do in relation to the treatment of post-compromise interest in determining the “amount recovered”.

  6. The foregoing analysis suggests that s 343(2) of the Legal Profession Act, when construed in its statutory context, is not directed to whether pre-judgment interest included in a judgment or order of the court is to be deducted from the “amount recovered”. Specifically, it suggests that while s 343(2) requires post-compromise interest and perhaps post-judgment interest paid to a plaintiff to be disregarded in determining the “amount recovered”, it does not require pre-judgment interest awarded by a court to be deducted.

  7. This conclusion is consistent with the statutory language. If the term “interest” is understood in the sense to which I have referred, the inclusion of pre-judgment interest in a judgment or order is not readily described as “part of the amount recovered that is attributable … to the addition of interest”. An award of interest by a court pursuant to s 100 of the Civil Procedure Act compensates the plaintiff for having been kept out of the damages to which he or she is found to be entitled. Until the court exercises its statutory power to award interest, the plaintiff has no accrued entitlement to receive interest on any particular sum or in any particular amount. Indeed the plaintiff has no entitlement to the payment of a particular sum until damages are assessed and orders made. Furthermore, the award of interest and its inclusion in a judgment sum is not a mere mechanical task simply requiring interest at a given rate to be added to a given sum. The court must exercise a judgment as to whether an allowance for interest can and should be made in respect of a head of damage and, if so, how the quantum of interest should be calculated.

  8. As Mr Campbell submitted, if s 343(2) is intended to require both pre-judgment and post-compromise interest to be disregarded in determining the “amount recovered”, the wording of the provision is curious. As I have observed, the expression “addition of interest” is apt to describe the calculation required to determine the amount of interest payable on an amount or amounts a defendant has agreed to pay to compromise a claim. It is less apt to describe the process by which a court determines the amount of interest that should be included in a judgment in respect of the heads of damage claimed by the plaintiff. If s 343(2) was intended to apply to pre-judgment interest, it would have been simple to say so. Section 343(2) could have stated that in determining the “amount recovered” no regard is to be had to any part of the amount recovered that represents interest.

  9. For these reasons I think that the direction in s 343(2) of the Legal Profession Act to disregard “any part of the amount recovered that is attributable to … the addition of interest” does not apply to interest included in the judgment sum pursuant to s 100(1) of the Civil Procedure Act.

  10. The construction I favour is consistent with the purpose of Div 9 discerned by Mason P in Newcastle City Council v McShane (No 3). [38] The construction I favour also avoids an apparent anomaly identified by Mr Campbell although I do not regard the avoidance of the anomaly as a decisive consideration. If s 343(2) is construed to require pre-judgment interest to be disregarded, a plaintiff who obtains a judgment after a contested hearing will usually be in a worse position so far as the statutory cap is concerned than a plaintiff who settles the claim. That is because the interest component of the judgment will usually (although not invariably) be ascertainable, while the settlement sum will not ordinarily distinguish between damages and interest. In the latter case it would be difficult to attribute any part of the settlement sum to interest. [39]

    38. See at [64**] above.

    39. See New South Wales v Williamson [2012] HCA 57; 248 CLR 417 at [35] (French CJ and Hayne J, Kiefel J agreeing).

  1. It follows from what I have said that the primary Judge was correct to conclude that the costs assessor had erred in law in holding that the pre-judgment interest awarded to Mr Avery in the Assault Proceedings was to be deducted from the judgment sum in order to determine the “amount recovered” for the purposes of s 338(1) of the Legal Profession Act.

  2. It is therefore not necessary to address Mr Campbell’s argument that the State’s construction of s 343(2) of the Legal Profession Act would involve an intrusion on common law rights or his contention that the costs assessor was not entitled to go behind the District Court judgment. I note, however, that the first argument appears to lack a foundation since no common law right would be infringed and the second appears to overlook s 338(4)(c) of the Legal Profession Act.

  3. I should add that Div 9 gives rise to questions of construction that do not arise in the present case. For example, there may be an issue as to whether “any amount paid under a compromise or settlement” within s 343(1) includes an amount paid to the plaintiff pursuant to a consent judgment. There may also be an issue as to the treatment of an amount a defendant agrees to pay in settlement of a claim but which is not in fact paid. These issues should be left to cases in which they arise for decision.

Other Relief Claimed by the State

  1. In addition to seeking an order quashing the primary Judge’s decision on the ground that his Honour misconstrued s 343(2) of the Legal Profession Act, the State sought declarations that:

  • s 302B of the Legal Profession Act (which relates to GST) does not permit the statutory maximum for costs imposed by s 338(1) to be exceeded; and

  • a declaration that the statutory maximum includes the costs of legal services provided by counsel.

  1. Neither of these issues was addressed by the primary Judge on the ground that nothing turned on them in the District Court appeal. Moreover, since I have held that the primary Judge was correct to conclude that the statutory cap did not apply to the costs assessment, nothing turns on these issues on the present application. It is therefore not appropriate to deal with them.

Orders

  1. The State has not succeeded in establishing that the primary Judge erred in law in construing s 343(2) of the Legal Profession Act. His Honour concluded that s 343(2) does not require the interest included in the District Court’s judgment in favour of the plaintiff to be disregarded in determining the “amount recovered” for the purposes of s 338(1). That conclusion was correct. The State’s application must therefore be dismissed.

  2. I propose the following orders:

1.   The summons filed on 17 November 2015 be dismissed.

2.   The applicant (the State) pay the costs of the respondent (Mr Avery) of the summons.

**********

Endnotes

Amendments

01 August 2016 - Headnote - in Holding 2 should read "which is to be disregarded".

Decision last updated: 01 August 2016

Actions
Download as PDF Download as Word Document
Cases Citing This Decision

11

Wilkie v Brown (No 2) [2018] NSWCA 80
Wilkie v Brown (No 2) [2018] NSWCA 80
In the matter of Azzurri Group Holdings Pty Ltd (No 3) [2025] NSWSC 1245
Cases Cited

12

Statutory Material Cited

10

Reiter v Commissioner of Taxation [2008] FCA 1068
Newcastle City Council v McShane (No 3) [2005] NSWCA 437
New South Wales v Williamson [2012] HCA 57