Tjiong v Tjiong (No 2)

[2018] NSWSC 1981

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:	Tjiong v Tjiong (No 2) [2018] NSWSC 1981
Hearing dates:	1 June 2018
Date of orders:	19 December 2018
Decision date:	19 December 2018
Jurisdiction:	Equity - Applications List
Before:	Parker J
Decision:	(1) Order that the plaintiffs’ Notice of Motion filed 30 November 2017 be dismissed. (2) Order that the plaintiffs pay the defendant’s costs of the proceedings on the Notice of Motion.
Catchwords:	COSTS – interest on costs – Civil Procedure Act 2005 (NSW), ss 98(3), 101(4) – where an order for interest on costs not included in the principal judgment which was delivered years earlier – whether court no longer has power to award interest on costs because the claim is either statute-barred or has merged in the principal judgment – whether an order for interest on costs under s 98(3) must be sought at time of judgment – consideration of the doctrine of functus officio COSTS – interest on costs – Civil Procedure Act 2005 (NSW), ss 98(3), 101(4) – discretionary factors – delay – application of Limitation Act 1969 (NSW) by analogy – where delay justifies an award of interest at pre-judgment rate
Legislation Cited:	Civil Procedure Act 1833 (3 & 4 William IV c 42) Civil Procedure Act 2005 (NSW), ss 98, 100, 101 Common Law Procedure Act 1899 (NSW), ss 142, 143, 143A Courts Legislation Further Amendment Act 1995 (NSW), Sch 1 Federal Court Act 1976 (Cth), s 43 Immigration Act 1901 (Cth), s 4 Judgments Act 1838 (1 & 2 Vic c 110) Land and Environment Court Act 1979 (NSW), s 69A Legal Profession Act 1987 (NSW), s 208J Legal Profession Act 2004 (NSW), s 358 Legal Profession Reform Act 1993 (NSW), Sch 6 Legal Profession Uniform Law Application Act 2014 (NSW), ss 70, 74, 75, 76 Limitation Act 1969 (NSW), ss 14, 17, 24 Mayor’s Court Procedure Act (20 & 21 Vic c 157), s 10 Supreme Court Act 1970 (NSW), ss 76, 94, 95 Supreme Court Practice Note No. SC Gen 16 Supreme Court Rules 1970 (NSW), Pt 40 rr 3, 9, Pt 52 rr 45A, 54A, 63 Uniform Civil Procedure Rules 2005 (NSW), rr 6.12, 36.1, 36.7, 36.16
Cases Cited:	Attorney-General of NSW v Wentworth (1991) 24 NSWLR 347 Bailey v Marinoff (1971) 125 CLR 529; [1971] HCA 49 Carson v Minister Administering the Environmental Planning and Assessment Act 1979 (1994) 82 LGERA 179 Chateau Constructions (Aust) Ltd v Zepinic [2013] NSWSC 909 D'Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1; [2005] HCA 12 Drummond & Rosen Pty Ltd v Easey (No 2) [2009] NSWCA 331 Evans v European Bank Ltd (No 2) [2009] NSWCA 170 Fischer v David Syme & Co Ltd (1989) 18 NSWLR 6063 Flower & Hart v White Industries (Qld) Pty Ltd (2000) 103 FCR 559; [2000] FCA 1132 Flower & Hart v White Industries (Qld) Pty Ltd (2001) 109 FCR 280; [2001] FCA 370 Folkard v Metropolitan Railway Co (1873) LR 8 CP 470 Grace v Grace (No 9) [2014] NSWSC 1239 Gray v Richards (No 4) [2017] NSWSC 1714 Grigiel v Baine (No 2) [2005] NSWCA 434 Hancock v Arnold (No 2) [2009] NSWCA 19 Henderson v Henderson (1843) 3 Hare 100 at 115; 67 ER 313 Hunt v RM Douglas (Roofing) Ltd [1990] 1 AC 398 Illawarra Hotel Company Pty Ltd v Walton Construction Pty Ltd (No 2) (2013) 84 NSWLR 436; [2013] NSWCA 211 K v K [1977] 2 WLR 55 Koon Wing Lau v Calwell (1949) 80 CLR 533; [1949] HCA 65 Lahoud v Lahoud [2006] NSWSC 126 Lahoud v Lahoud [2011] NSWSC 994 Lahoud v Lahoud (2012) 17 BPR 33,071; [2012] NSWCA 401 Leda Pty Ltd v Weerden (No 2) [2007] NSWCA 283 Lucantonio v Kleinert (Costs) [2011] NSWSC 1642 McWilliams Wines Pty Ltd v Liaweena (NSW) Pty Ltd (1993) 32 NSWLR 190 Minister Administering the Environmental Planning and Assessment Act 1979 v Carson (1994) 35 NSWLR 342 New South Wales Insurance Ministerial Corporation v Edkins (1998) 45 NSWLR 8 Newton v The Grand Junction Railway Company (1846) 16 M & W 139; 153 ER 1133 Preston Banking Co v William Allsup & Sons [1895] 1 Ch 141 Re Inchcape (Earl of) [1942] Ch 394 Roads and Traffic Authority v Cremona (No 3) (2005) 140 LGERA 420; [2005] NSWCA 13 Roads & Traffic Authority of NSW v Palmer (No 2) [2005] NSWCA 140 Seiwa Australia Pty Ltd v Seeto Financial Services Pty Ltd (No 2) [2010] NSWSC 118 Short v Crawley (No 45) [2013] NSWSC 1541 Simmons v Colly Cotton Marketing Pty Ltd [2007] NSWSC 1092 Spedding v Nobles (No 2) (2007) 69 NSWLR 100; [2007] NSWCA 87 TA Field Pty Ltd v Frigmobile of Australia Pty Ltd [1978] 2 NSWLR 488 Thynne v Thynne [1955] 3 WLR 465 Timms v Commonwealth Bank of Australia (No 3) [2004] NSWCA 25 Tjiong v Tjiong [2010] NSWSC 578 Tjiong v Tjiong [2012] NSWCA 201 Zepinic v Chateau Constructions (Aust) Ltd (No 2) [2013] NSWCA 227
Category:	Costs
Parties:	Katrina May Lan Tjiong (First Plaintiff) Lindsay Kuang Djin Tjiong (Second Plaintiff) Richard Tat Tjhien Tjiong (Defendant)
Representation:	Counsel: D Steirn (First and Second Plaintiffs) M Castle (Defendant)   Solicitors: O’Brien Lawyers (First and Second Plaintiffs) Armstrong Legal (Defendant)
File Number(s):	2005/257959
Publication restriction:	Nil

Judgment

1. This is an application by the successful plaintiffs in the proceedings for an order that the defendant pay interest on costs awarded to them by the Court in 2010.

2. The proceedings were commenced in 2005. The plaintiffs’ primary claim was to set aside a discretionary trust, of which they were beneficiaries, on the basis that its establishment was procured by fraudulent misrepresentations. Further details of the claims do not matter. The proceedings went to trial before Palmer J in 2009. Judgment was delivered on 4 June 2010: Tjiong v Tjiong [2010] NSWSC 578.

3. His Honour found that the plaintiffs’ claims largely succeeded, and stood over the proceedings for orders to be brought in to give effect to the judgment, and for argument on costs. That argument took place on 29 June. On 7 July his Honour made formal orders giving effect to his decision and dealing with the question of costs. The orders were entered on 20 July. The costs order was in the following terms:

8.   AN ORDER that, subject to items 8.1 to 8.6 below, the defendant pay the plaintiffs’ costs of the proceedings on an indemnity basis.

8.1   Costs order made on 21 March 2005;

8.2   Costs order of 23 February 2007;

8.3   The order that the defendant pay the plaintiffs’ costs of the proceedings on an indemnity basis as set out above to include the plaintiffs’ costs of the plaintiffs’ Notice of Motion for leave to file an Amended Statement of Claim referred to in the orders made by Registrar Musgrave on 19 June 2007;

8.4   The plaintiffs and the defendant each to bear their own costs of the issue of failure to keep and render proper accounts as pleaded in paragraphs 64 to 70 of the Amended Statement of Claim;

8.5   The plaintiffs and the defendant each to bear their own costs of the issue of failure to preserve the assets of the trust – failure to properly invest the assets of the trust as pleaded in paragraphs 71 to 76 of the Amended Statement of Claim;

8.6   The plaintiffs to pay the defendants costs relating to the issues of improper investment of the assets of the estate of George Tijong, as attorney from 223 December 2001 to 30 January 2004 and as executor after 30 January 2004, as pleaded in paragraphs 77 to 91A of the Amended Statement of Claim.

4. The defendant appealed to the Court of Appeal. The appeal was dismissed in June 2012: Tjiong v Tjiong [2012] NSWCA 201.

5. It appears from correspondence in evidence that the costs of the appeal proceedings were assessed and the costs certificate was then filed as a judgment in December 2013. The amount due was set off against a costs judgment in favour of the defendant against the plaintiffs arising from some other proceedings which are not identified in the evidence and the balance (approximately $26,000) was paid by the defendant. The set-off took into account interest calculated from the filing of the respective costs certificates. It would seem that no order had been made for an award of interest on either of those costs awards, and there is no evidence that any such order was ever sought.

6. In December 2015 the plaintiffs applied for assessment of the costs awarded by Palmer J in July 2010. Neither the application, nor the bill upon which it was based, is in evidence, but the Assessor’s determination is. According to the Assessor’s reasons, the plaintiffs claimed costs in the sum of $1,048,676.98. The application was allowed in the sum of $968,010.32, together with a proportional share of the filing fee in the sum of $9,680.10, totalling $977,690.42. The Assessor issued a certificate of determination in that amount. The Assessor also awarded costs of the costs assessment in the sum of $7,603.75 against the defendant and issued a separate certificate in that amount. The certificates were dated 1 June 2016 but not sent out to the parties until 15 June.

7. An application was made for review, but in March 2017 the Costs Review Panel affirmed the Assessor’s determination. The Review Panel awarded a further $5,101.25 in costs against the defendant and issued a certificate of determination in that amount. The determination was dated 29 March 2017, but was not sent out to the parties until 26 June.

8. The defendant commenced District Court proceedings seeking to appeal the decision of the Review Panel but did not pursue the appeal.

9. In August 2017, the three costs certificates were filed in this Court, resulting in a judgment in favour of the plaintiffs against the defendant of $990,395.42. I will refer to this as the “costs judgment”. At the time of the hearing before me, it remained unsatisfied.

10. The application for interest on the costs award made by Palmer J was made by way of Notice of Motion filed in November 2017. Interest was claimed in the sum of $650,438.83 for the period from 5 June 2010 to 30 November 2017. But the plaintiffs have the benefit of a separate statutory entitlement to interest on the costs judgment. That entitlement runs from the date of entry of the costs judgment (2 August 2017) onwards. At the hearing, counsel for the plaintiffs accepted that interest could not be awarded after that date in this application, because to do so would involve double counting.

11. In evidence is an affidavit from the plaintiffs’ solicitor which annexed a list of costs said to have been “paid by the plaintiffs in relation to these proceedings”. The list began in June 2004 and ended in January 2018. The total amount was $1,213,419.27. The dates given in the list were apparently the dates on which invoices or bills were issued to the plaintiffs. At the hearing, a supplementary affidavit was filed from the first plaintiff, stating that the bills had been paid “on or around” the dates shown in the list. The items on the list simply identified the date and the biller; they contained no details of what was done. It is not clear whether the payments cover any of the costs paid for the appeal proceedings. It also seems likely that the items dated over the past year or so reflect work other than that covered by Palmer J’s order (and may well include work done on this application).

Issues for determination

12. The defendant resists the application on a number of grounds, which can be grouped under three headings. Some of the grounds go to the Court’s power to make the order in the circumstances of this case, in particular given that more than seven years passed between the making of the costs order in July 2010 and the making of the present application in November 2017. The defendant also contends that the Court is functus officio. Other grounds go to the exercise of the Court’s discretion.

13. It is convenient first to set out the relevant statutory provisions, their history and the main authorities on the question. I will then discuss the scope of the plaintiffs’ entitlement to an award, before dealing with the defendant’s grounds of objection under the headings identified above.

Statutory provisions

14. The award of interest on costs is governed by the Civil Procedure Act 2005 (NSW) (“CPA”), ss 101(4) and 101(5). Those provisions were amended in November 2015 but the transitional provisions provide that the previous version of the legislation applies to the current application. This judgment is concerned only with the law in its pre-November 2015 form.

15. Section 101, in its pre-November 2015 form, relevantly provided:

101   Interest after judgment

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

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

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

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

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

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

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

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

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

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

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

16. Also contextually relevant is the Court’s general power to award costs contained in CPA s 98, which relevantly provided in November 2015 (and still provides):

98   Courts powers as to costs

(1)   Subject to rules of court and to this or any other Act:

(a)   costs are in the discretion of the court, and

(b)   the court has full power to determine by whom, to whom and to what extent costs are to be paid, and

(c)   the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.

...

(3)   An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings.

(4)   In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to:

(a)   costs up to, or from, a specified stage of the proceedings, or

(b)   a specified proportion of the assessed costs, or

(c)   a specified gross sum instead of assessed costs, or

(d)   such proportion of the assessed costs as does not exceed a specified amount.

Legislative history and course of authority

17. The provisions under consideration in this case have a lengthy and complicated history. The development of the legislation and of the relevant practice is traced in a number of judgments of the Court, in particular TA Field Pty Ltd v Frigmobile of Australia Pty Ltd (below at [29]); Fischer v David Syme & Co Ltd (below at [41]); Minister Administering the Environmental Planning and Assessment Act 1979 v Carson (below at [161]); and Zepinic v Chateau Constructions (Aust) Ltd (No 2) (below at [80]).

18. In England, the Judgments Act 1838 (1 & 2 Vic c 110) was the first general enactment providing that a judgment debt should carry interest. It provided for interest at a specified rate to run from the time of “entering up the judgment” until the judgment was satisfied. This provision was copied in New South Wales in 1861 (24 Vic c 8). It was re-enacted in ss 142 and 143 of the Common Law Procedure Act 1899 (NSW) (“CLPA”) which provided:

142	(1)	Every plaintiff who obtains judgment upon a verdict shall be entitled to interest at the rate of four per centum per annum on the amount of such verdict from the time of obtaining such verdict until the time of entering up judgment thereon.
(2)	The amount of such interest shall be included in the judgment.
143	(1)	Every judgment debt recovered in the Court shall carry interest at the rate of four per centum per annum from the time of entering up the judgment until the same is satisfied.
(2)	Such interest may be levied under a writ of execution on such judgment.

19. It was decided early on that a “judgment debt” for the purposes of legislation in the form of CLPA s 143 included a judgment for costs. This was recognised in CLPA s 143A which was introduced in 1965 by the Law Reform (Miscellaneous Provisions) Act 1965 (NSW), s 18. That provided:

143A	Notwithstanding anything in sections one hundred and forty-two and one hundred and forty-three—
(a)	interest shall not be payable on the amount of the verdict if such amount is paid to or at the direction of the plaintiff within twenty-one days after the date of verdict;
(b)	interest shall not be payable on costs payable to the plaintiff if the amount of such costs is paid within twenty-one days after assessment or after taxation.

20. Once a judgment debt has been quantified, then it can and should be paid. If not paid, it is enforceable by court process. The imposition of an obligation to pay interest on the debt, with a 21 day period of grace, fits naturally within the coercive purpose of the law.

21. The coercion principle cannot apply until judgment is given. But where a claim succeeds, it can be seen retrospectively that the judgment amount has been “fructifying in the wrong pocket” (to use a phrase by Alderson B from Newton v The Grand Junction Railway Company (1846) 16 M & W 139 at 141; 153 ER 1133 at 1134). This supports a power to award interest for the pre-judgment period, by way of compensation.

22. In England, a statutory power to award pre-judgment interest has existed since the Civil Procedure Act 1833 (3 & 4 William IV c 42). But that power was limited to certain types of claims, which were mainly commercial in nature. The relevant statutory provisions were adopted in NSW with similar limitations. It was not until SCA s 94, enacted in 1970, that the Court was given full power to award pre-judgment interest in any type of case. That provision conferred full power on the Court to award interest from the accrual of the cause of action in question, or from any later date, and a discretion as to the rate of interest to be awarded. The amount of interest was to be determined at the time judgment was entered, and included in the amount of the judgment. These features have been carried forward into the current provision, which is CPA s 100.

23. Once provision was made for judgment debts to carry interest, it was natural to assimilate a costs order, once quantified and therefore capable of being paid, to a judgment debt for the purposes of carrying interest. The coercion principle is equally applicable to a costs liability which has been quantified.

24. But the process of taxation could take a long period, during which the successful party might well be out of pocket. When the amount was eventually quantified, it could be seen that the costs sum had been “fructifying in the wrong pocket”. Indeed, where the successful party had paid his or her own lawyers during the course of the proceedings, the compensation principle would support an award of interest going back to the point at which the costs had been paid. But no provision existed for a compensatory award of pre-quantification interest on costs to be included in the certificate of taxation, or otherwise to be awarded by the Court.

25. The 19th Century English practice was to draw up the judgment specifying the amount of the verdict (if the plaintiff was successful) but leaving the costs figure blank. When the costs were taxed and the figure was known, it would be inserted into the blank which had been left in the formal record of the judgment. On its face, the record of the judgment, which would be dated at the time the judgment was given, would then include an amount for costs. This led to a question as to whether interest on the costs should run from the date the costs order was made (”the incipitur rule”) or from the date the certificate of taxation issued (“the allocatur rule”).

20. Under the allocatur rule, the successful party would receive nothing by way of compensation for the period up to the completion of the taxation. In theory, one advantage of the incipitur rule was that it gave the successful party some measure of compensation for the time value of money between the making of the costs order and the issue of the costs certificate. But it was a blunt instrument. It would overcompensate a successful party who did not actually pay costs to his or her lawyers until the taxation was finished. Nor would it compensate for the time value of costs paid prior to the beginning of the taxation.

21. In New South Wales, the allocatur rule prevailed in equity. The incipitur rule originally applied at law. But, at least from the enactment of CLPA, s 143A, it must have had little, if any, application because if the costs were paid within 21 days of the certificate of taxation being issued, no interest would be payable.

22. CLPA ss 142, 143 and 143A were replaced in this Court by the Supreme Court Act 1970 (NSW) (“SCA”), s 95. That provided:

(1)   Where judgment is given or an order is made for the payment of money, interest shall, unless the Court otherwise orders, be payable at the prescribed rate from the date when the judgment or order takes effect on so much of the money as is from time to time unpaid.

(2)   Notwithstanding subsection one of this section, where, in proceedings on a common law claim, the Court directs the entry of judgment for damages, and the damages are paid within twenty-one days after the date of the direction, interest on the judgment debt shall not be payable under subsection one of this section unless the Court otherwise orders.

(3)   Notwithstanding subsection one of this section, where, in proceedings for damages on a common law claim, the Court makes an order for the payment of costs and the costs are paid within twenty-one days after ascertainment of the amount of the costs by taxation or otherwise, interest on the costs shall not be payable under subsection one of this section unless the Court otherwise orders.

29. In TA Field Pty Ltd v Frigmobile of Australia Pty Ltd [1978] 2 NSWLR 488, judgment was directed for the plaintiff in a sum of money, together with costs to be assessed or taxed. The costs were taxed and the certificate of taxation issued. The plaintiff then applied for a direction that judgment be entered for the certified amount of costs, together with interest on that amount from the date on which the damages judgment had originally been entered.

30. Master Allen, as Allen J then was, traced the history of the legislative provisions, and practice, leading up to the enactment of SCA s 95. Consistently with the view expressed by the English Court of Appeal in the then recent decision in K v K [1977] 2 WLR 55, he saw the practice in equity based on the allocatur rule as preferable to the practice at law based on the incipitur rule. He said that prior to the enactment of CLPA s 143A, the practice of solicitors had been to treat interest as running from the date of the certificate of taxation. He continued (at 490-491):

Clearly it is reasonable that the party who had been ordered to pay costs be not mulcted in interest if he pays promptly after taxation. The new section recognized this. But it did more. It suggested, by implication, that the date upon which interest commenced to run on taxed costs was the date of the taxation – albeit that the payer was relieved from such interest if he paid the costs within twenty-one days. It would be a bold view (and not one I would be disposed to take) that, as a matter of construction, the section, by implication, altered the pre-existing law that interest ran from the date of entry of the original judgment. But the new section did have this practical effect, namely, that it was generally assumed by practitioners that the position that interest ran from the certificate of taxation had been recognized by the legislature. For all practical purposes the position thereafter at law was the same as it was in equity, namely, that interest on taxed costs did not commence to run until costs were taxed.

31. Master Allen considered the question of when a costs order “[took] effect” for the purposes of SCA, s 95(1). He said (at 491):

I have no doubt that in the ordinary usage of language it “takes effect” when the amount of the costs which are to be paid has been ascertained. The question is not as to when the order for costs was made. It is as to when it takes effect.

…

If s 95 of the Supreme Court Act is so to be construed, it effects no substantial departure from the position as it was prior to the commencement of that Act. It would do no more than clearly confirm the reality, in the usages of the profession, of the fact that the sensible practice of equity had prevailed over the technicalities of procedures at law.

32. Master Allen also referred (at 491-492) to Supreme Court Rules 1970 (NSW) (“SCR”), Pt 40, r 3. That rule provided:

(1)   Where a judgment is entered pursuant to a direction of the Court the judgment shall take effect as of the date of the direction.

(2)   Where a judgment is entered otherwise than pursuant to a direction of the Court the judgment shall take effect as of the date of entry.

(3)   Subject to subrules (1) and (2) an order shall take effect as of the date on which it is made.

(4)   Notwithstanding subrules (1), (2) and (3), the Court may order that a judgment or order take effect as of a date earlier or later than the date fixed by those subrules.

33. Master Allen considered that notwithstanding Pt 40, r 3, an order awarding interest on costs took effect from the date when the costs were taxed. He said:

That, in my opinion, is implicit in the very nature of the order. The party ordered to pay costs cannot commit any breach of that order by not paying until the amount of the costs is ascertained. Until then there is nothing to pay. Indeed, unless taxation is proceeded with and a certificate of taxation obtained, nothing ever becomes payable.

34. Master Allen considered that there was another reason why the application failed. He referred (at 492) to SCR Pt 52, r 63 which provided:

Where the amount of any costs has been certified under this Part, the Court may, on motion by a party, direct the entry of such judgment for the costs as the nature of the case requires.

35. Master Allen said that r 63 was directed to a situation where legislation other than the Supreme Court Act authorised taxation of costs in the Court and provided that judgment might be entered in the Court for the amount of the costs so taxed. But he said (at 492):

This rule does not make it necessary for there to be a further direction for entry of judgment in the case where the court has already directed entry of judgment for costs in such sum as is ascertained by taxation. Nor is it appropriate that there be such a further direction. There should not be two judgments in respect of the same matter.

36. The costs certificate was part of the record of the Court and reference could no doubt be made to it of the quantum payable, where that was necessary for enforcement purposes. Of course, the parties might agree on quantum, in which case the costs liability would usually be settled between them with no need for the Court to be involved. But in Attorney-General of NSW v Wentworth (1991) 24 NSWLR 347, the unusual situation arose where the parties agreed on the quantum of costs but enforcement action then needed to be taken. Young J (as his Honour then was) held that, despite what Master Allen had said in TA Field about it being inappropriate to have two judgments, the Court could enter a judgment in the amount of the agreed costs so that enforcement could proceed. His Honour said that Part 52 r 63 was not as limited in its application as Master Allen thought.

37. There is, with respect, nothing surprising about his Honour’s view. Frequently, in equity, a court makes an order which defines the parties’ rights but which may require further orders to be made to carry the initial order into effect. In particular, further factual enquiries may be needed to quantify the relief to which the successful party is entitled. An order for an account is a prime example of this. The processes which follow from the making of an order for costs are, in my view, analogous.

38. The qualification in Wentworth did not necessarily affect the rest of Master Allen’s reasoning in TA Field. In December 1983, amendments were made to the Supreme Court Rules. SCR Pt 40, r 3 was amended so as to introduce sub-rule (4) in the following terms:

(4)   Notwithstanding subrules (1) and (3), where an order of the Court directs the payment of costs and the costs are, pursuant to any Act or the rules, to be taxed, the order shall take effect as of the date of the certificate of taxation.

39. This rule reflected the view taken by Master Allen in TA Field. But sub-rule (5) provided that the Court might order that the judgment or order take effect as at a date earlier or later than the date fixed by sub-rule (4).

40. A new rule 54A was also inserted in Pt 52. It provided:

Where the Court makes an order for the payment of the costs of a party and his costs are taxed, the taxing officer may exercise the powers of the Court under section 95(1) of the Act to make orders for interest to be payable –

(a) at the rate prescribed by Part 40 rule 7(2) or ordered, otherwise than by the taxing officer, under section 95(1) of the Act;

(b)   on any amount paid before the conclusion of the taxation by the successful party to his solicitor for or on account of the costs to be payable;

(c)   as of the date on which the amount was paid.

41. The new rules came before Smart J in Fischer v David Syme & Co Ltd (1989) 18 NSWLR 6063. The plaintiff succeeded in a defamation action with judgment entered in his favour in May 1987 and the defendant being ordered to pay his costs. The plaintiff paid his solicitors in July 1987. The plaintiff’s solicitors sought payment of the costs from the defendant’s solicitors and foreshadowed that if agreement were not reached within 21 days, an application would be made for an award of interest on the costs under SCR Pt 52, r 54A. Eventually, the plaintiff’s bill was taxed and the figure for which costs would be allowed was fixed. The plaintiff to that point had not asked for an order under SCR Pt 52, r 54A. The plaintiff then sought such an order and the taxing officer referred the question to Smart J.

42. Smart J differed from Master Allen about the status and merits of the allocatur rule. In particular, in the meantime the decision of the English Court of Appeal in K v K had been overruled by the House of Lords: see Hunt v RM Douglas (Roofing) Ltd [1990] 1 AC 398. Smart J also had a different recollection of the practice which had prevailed before the enactment of CLPA s 143A in 1965. He suggested that there had been scope to apply the incipitur rule in common law cases, although frequently solicitors did not bother to do so.

43. Smart J did not find it necessary to confront the decision of Master Allen directly. His Honour pointed out there was power in s 95(3) (and in Pt 40, r 3(5)) to “otherwise order”. Master Allen had not considered this power in TA Field. Smart J said (at 616):

In my opinion, the words “otherwise orders” provide an important degree of flexibility and allow the Court to do what is just in the case where the usual position would be unfair. They allow the Court to avoid rigidity and to accommodate the position recognised in the English cases that neither the incipitur rule nor the allocatur rule will operate justly in all circumstances. What is just in the particular case should be the touchstone.

44. In the end, Smart J ordered that the costs order take effect as from the date when the plaintiff paid his solicitor’s bill after judgment. He pointed out that the defendant was a commercial organisation and said that the plaintiff had been out of pocket for a long time.

45. Clearly those who drafted SCR Pt 52 r 45A intended that it should be used, as Smart J used it, as a way of providing some compensation to a successful party for being out of pocket during the taxation. It gave the Court more flexibility than simply choosing one or other of the allocatur and incipitur dates. But it remained an indirect, and imperfect, reflection of the compensation principle as it applies to interest on costs.

46. By purporting to confer the Court’s power under s 95(1) on the taxing master, Pt 52 r 45A ensured that any award of interest under the rule would be made well after the original costs order had been made. I say “purporting to” because, it seems to me, it may have been open to question whether that was consistent with the terms of s 95(1). The wording of s 95 suggests, to my mind, that the power to “otherwise order” in s 95(1) was to be exercised at the time the judgment took effect. I think the wording also suggests that the power was intended to enable the Court to suspend the running of interest so that it would start after the judgment had taken effect, not to enable interest to run retrospectively from before the judgment took effect (compare my discussion of SCA s 95(4) at [56]-[60] below). But r 45A may have been supported by some other statutory provision even if it was inconsistent with s 95(1), and the question does not seem to have been raised while it was in force.

47. In McWilliams Wines Pty Ltd v Liaweena(NSW) Pty Ltd (1993) 32 NSWLR 190, Rogers CJ Comm D was asked to make an award of interest on costs in a commercial case. His Honour pointed out the commercial unfairness in the successful party being out of pocket between when the costs were paid and when they were assessed. He said the position under SCA s 95 was neither clear nor satisfactory, especially as it applied to Commercial Division proceedings which were not covered by ss 95(2) and 95(3). He continued (at 192):

There is some room for alleviation of this situation. Part 40 of the Supreme Court Rules1970 gives power to the Court to back date a judgment, to a date earlier than that fixed by the subrules, in which event presumably the interest on costs could run from the date of the judgment. Yet it would be, in a sense, farcical for a court to back date a judgment for the purpose of achieving a just result so that the judgment would operate from a date which was determined only by the happenstance that it was the date when the litigant, having the benefit of an order for costs, made a payment to his, her or its own solicitors.

48. Rogers CJ Comm D’s comment that backdating could be “in a sense, farcical” reflected the fact that using the Court’s power under s 95(1) to award interest on costs was somewhat contrived. His Honour considered that the problem could be solved by relying on the Court’s general power to award costs, found in SCA s 76, to make an award of interest. At the same time he suggested that the power to make an award of interest on a costs award be put on an express statutory basis. This was done two years later with the introduction of SCA s 95(4) which is the predecessor of CPA s 101(4) (see [59]-[60] below). The suggestion proved prescient, because subsequent authority was to establish that a general power to make an award of costs such as SCA s 76 does not extend to making an award of interest on the costs so awarded (see [61]-[64] below).

49. Meanwhile, in November 1993 (but with effect from July 1994) the then version of the Legal Profession Act 1987 (NSW) (“LPA”) was amended so as to replace the old system of court taxation of costs with the current system of assessment of costs by private practitioners acting as assessors. As a consequence, the reference to “taxation” in sub-s 95(1) was replaced with a reference to assessment: Legal Profession Reform Act 1993 (NSW), Sch 6.

50. The amendments to the LPA provided, consistently with this approach, for the old procedure whereby a certificate of taxation was issued by the taxing master to be replaced by a certificate of determination issued by the costs assessor. Section 208J(3) then provided:

(3)   In the case of an amount of costs that has not been paid, the certificate is, on the filing of the certificate in the office or registry of a court having jurisdiction to order the payment of that amount of money, taken to be a judgment of that court for the amount of unpaid costs.

51. This provision was carried forward in the Legal Profession Act 2004 (NSW) s 358(5) and the Legal Profession Uniform Law Application Act 2014 (NSW) s 70(5). But the amendments to the LPA confined the assessor’s power to determine costs and not interest: Legal Profession Reform Act 1993 (NSW), Sch 6, s 208F. This too has been carried forward: Legal Profession Uniform Law Application Act 2014 (NSW) ss 74-76.

52. As a result of the amendments, Pt 52, r 45A was repealed. But nothing was put in its place. The result was that the Court was, for a time, thrown back on SCA s 95(1) and 95(3).

53. But in 1995, s 95 was amended by the introduction of sub-s (4): Courts Legislation Further Amendment Act 1995 (NSW), Sch 1.8 [4]. That provided:

(4)   If an order is made for the payment of costs, the Court may order that interest is to be paid on the amount so ordered, at the prescribed rate, from the date or dates when the amount in respect of costs was duly paid.

54. The amending Act contained the following explanatory note:

At present, interest is generally payable on a judgment debt arising under the Supreme Court Act 1970. That interest is calculated from the date when the judgment debt came into being, or from a later specified date. The proposed amendment deals with the calculation of interest on that part of the judgment debt which is an order as to the payment of costs. The proposed amendment will allow the Supreme Court to order a party to pay interest on the other party’s costs from the date on which the successful party paid the amount in respect of costs.

55. Thus the Court acquired for the first time a direct power to award interest on costs. The power also expressly permitted an award of interest for the period after the costs were incurred and before the order for costs was made.

56. In terms, s 95(4) applied to the whole of the period of time after costs were paid, whether before or after the issue of the costs certificate. But interest after the costs certificate was registered was governed specifically by the LPA. I think that s 95(4) must be read consistently with that, and was accordingly limited to interest up to that point.

57. The authorities which bear directly on this application begin with Timms v Commonwealth Bank of Australia (No 3) [2004] NSWCA 25. The case concerned the costs a successful appeal to the Court of Appeal. In September 2002 the Court of Appeal made a costs order in favour of the appellants. The costs were assessed. The costs assessor’s certificate was issued in November 2003 and filed in the Court, thereupon taking effect as a judgment, in December 2003. In January 2004 the appellants sought an order under SCA s 95(4) for interest on the assessed costs as from the dates on which those costs had been paid. But Beazley JA (as her Honour then was) said that once the certificate had been filed the Court had no power to make an award of costs and dismissed the application. Her remarks implied, however, that an application for interest could have been made up until the certificate was filed.

58. In Roads and Traffic Authority v Cremona (No 3) (2005) 140 LGERA 420; [2005] NSWCA 13 the Court of Appeal made a costs order in favour of the successful respondent, Ms Cremona, in December 2001. After attempts at negotiations, a formal application was made for assessment in July 2004. In September 2004 an application was made for an order for interest on costs. The respondent had not yet filed a costs certificate. What Beazley JA had said (or, strictly speaking, implied in the way she expressed herself) in Timms about the period prior to registration of the costs certificate had been obiter, but Sheller JA did not advert to this. His Honour purported to follow her Honour, and made an award of interest.

55. CPA s 101 was introduced in 2005, replacing SCA s 95 (as well as comparable provisions in other New South Wales courts). It was clearly based on SCA s 95 but involved a number of changes. One was that costs orders were no longer dealt with under the same provision as applied to judgments and other monetary orders by the Court. The effect (which may have been unintended) was that the award of interest on costs ceased to be a statutory entitlement subject to the Court otherwise ordering, and became dependent upon the exercise of the Court’s discretion in favour of the successful party. At the same time the 21 day period allowed to pay and avoid interest in common law damages cases was removed.

56. CPA s 101(4) also referred to the award of interest on costs “payable”, whereas SCA s 95(4) had referred to an award on costs “ordered”. But it does not appear to have been suggested that the provision had any effect on the Court’s previous ability to award interest on costs for the period prior to the making of the costs order.

57. In Flower & Hartv White Industries (Qld) Pty Ltd (2000) 103 FCR 559; [2000] FCA 1132 Goldberg J questioned whether Rogers CJ Comm D had been correct in McWilliams in deciding that an award of interest on costs could be made under a general statutory power to award costs (in this case, the Federal Court Act 1976 (Cth) (“FCA”), s 43). Instead he concluded that the Federal Court’s statutory power to award pre-judgment interest (the equivalent of CPA s 100) permitted an award of interest on costs awarded by the Court.

58. On appeal ((2001) 109 FCR 280; [2001] FCA 370) the Full Court confirmed that FCA s 43 did not extend to making an award of interest on costs. The Full Court also rejected Goldberg J’s conclusion that such an award could be made under the Court’s power to award pre-judgment interest on a judgment on a “cause of action”.

59. The Full Court said (at [59]):

Any party to proceedings may apply for an order for costs pursuant to s 43. Indeed, it may be an unduly narrow construction to limit such entitlement to parties. However a mere right to apply cannot be properly characterised as a cause of action. This is demonstrated by the fact that an applicant cannot plead, "every fact which is material to be proved to entitle the plaintiff to succeed", if "success" is the recovery of money. One of the "facts" necessary to establish such an entitlement is a favourable exercise of the discretion conferred by s 43. It is only after the discretion has been exercised in favour of the applicant that he or she has a legal entitlement to recover costs. See Boylan v Farthing (1999) 86 FCR 120 at 126 (von Doussa, Branson and Sundberg JJ) and Oshlack v Richmond River Council (1998) 193 CLR 72 at 86-88 per Gaudron and Gummow JJ and at 121 per Kirby 1. Even that entitlement may depend upon subsequent quantification. An order for costs does not prove that recoverable costs have necessarily been incurred. That is left for the taxing officer to determine.

64. The Full Court’s reasoning was adopted by the Court of Appeal in Spedding v Nobles (No 2) (2007) 69 NSWLR 100; [2007] NSWCA 87 (see at [17]). It is thus completely clear that the source of the power to make an award of interest on a costs award is CPA s 101(4), not CPA s 98 or CPA s 100.

65. CPA s 101(4) confers a discretion on the Court with respect to two different variables. One is the rate of interest. The rate is the prescribed rate but the Court has power to order to fix some other rate. The other variable is the date from which interest runs. The Court has power to award interest from the date on which the “costs concerned” were paid, or some later date, but not earlier.

66. The latter variable presents a practical difficulty because in many cases costs will be paid at numerous different times and there is not necessarily a direct relationship between the amount(s) paid and the amount ultimately assessed. In Lahoud v Lahoud [2006] NSWSC 126 Campbell J (as his Honour then was) considered this problem. He said (at [84]-[85]):

[84] The form of the order for interest on costs has occasioned me some concern. As the plaintiffs have succeeded in obtaining an order for indemnity costs in relation to only one issue in the proceedings, it is possible that there will be some costs and disbursements which the plaintiff has paid from time to time as the litigation progressed, but which are not allowed on assessment. It might sometimes be possible to cast an order in the form of allowing interest only on such costs as the plaintiff has paid as are allowed on assessment – but such an order would require the assessor to conduct what would amount to a separate assessment in relation to each payment that the plaintiffs had made. While the making of such a series of costs assessments would be within the scope of section 353 Legal Profession Act 2004, adopting such a procedure has the potential for making the costs assessment itself more complex and expensive. Further, it sometimes happens in the course of litigation – and the evidence does not tell me whether it has happened in the course of this litigation – that a litigant makes payments to his lawyers from time to time of lump sums on account of costs, without purporting to allocate those payments to particular memoranda of fees or items of work performed. If that had happened in the present case, one could not tell whether the whole or any part of such a payment had been allowed on assessment.

[85]   In all the circumstances, the appropriate way of calculating interest on costs is to ascertain the total of the amounts which the plaintiffs have paid and are liable to pay for costs and disbursements, ascertain the total amount of costs and disbursements allowed on assessment, calculate the percentage which the total amount allowed on assessment bears to the total costs and disbursements which the plaintiffs have paid or are liable to pay, and allow the plaintiffs interest on that percentage of each payment which they have made from time to time on account of costs and disbursements.

67. I will refer to an order calculating interest in this way as a Lahoud order. In Lahoud, the order took the following form:

In this order:

X – equals the total amount of costs and disbursements which the plaintiffs have paid or are liable to pay to their legal advisers in connection with these proceedings.

Y – equals the total amount of costs and disbursements allowed on assessment to the plaintiffs in connection with these proceedings.

The Allowed Percentage equals ((y/x ) x 100)%

Order the defendants to pay to the plaintiffs interest on costs and disbursements, at the rates set out in Schedule 5 Uniform Civil Procedure Rules, on the Allowed Percentage of each amount of costs and disbursements actually paid by the plaintiffs, from the date of payment by the plaintiffs of each such amount of costs and disbursements until the first to occur of:

(a)   such time as the defendants have paid the costs due to the plaintiffs under any order made in these proceedings, or

(b)   any further order relating to interest on costs in these proceedings.

68. A Lahoud order results in a figure for interest on costs which is determined by a mathematical formula down to the last cent. But the impression of mathematical precision is somewhat illusory. In Lahoud, Campbell J said (at [86]):

I recognise that that method of proceeding contains within it the possibility that the plaintiffs might have paid for some items of work which the assessor discounts considerably or totally. If the plaintiffs had paid such an amount comparatively early in the course of the litigation, and interest was allowed on the percentage of that amount which seems to me to be appropriate, then the plaintiffs would be somewhat overpaid interest, by comparison to the amount that the plaintiffs would receive if individual assessments of each payment made were carried out. Conversely, if the plaintiffs paid for such an item of work comparatively late in the course of the litigation, the method of proceeding which I am proposing to adopt could result in the plaintiffs being underpaid interest, by comparison to the amount that the plaintiffs would receive if individual assessments of each payment made were carried out. However, it seems to me that those possibilities are ones which fall within the ambit of the degree of approximation and estimation which is frequently involved in assessing compensation. I do not regard them as a reason for not following that method.

69. A Lahoud order does not, at least in form, operate simply by specifying a date or dates and a rate or rates of interest and applying that role to the costs award as ultimately determined. It involves the rate being applied to a figure calculated by reference to the total costs incurred and the total costs assessed. Nevertheless no-one seems to have suggested that the order goes beyond the power under CPA s 101(4). To the contrary, the Lahoud order is frequently used in practice and has been sanctioned by usage in the Court of Appeal: see, for example Leda Pty Ltd v Weerden (No 2) [2007] NSWCA 283 at [7]-[9], where the Court of Appeal expressly adopted what Campbell J had said in Lahoud in formulating its orders.

70. The form of a Lahoud order reflects the fact that it is designed to be made in advance of an assessment. It provides a formula for the calculation of the interest, but the actual amount of interest awarded cannot be calculated until the assessment has been undertaken.

71. In Drummond & Rosen Pty Ltd v Easey (No 2) [2009] NSWCA 331 the Court of Appeal allowed an appeal and made orders dealing with the costs of the trial of the appeal, but gave leave to apply for additional or varied orders within fourteen days of publication of the decision. One of the parties made application for a variation within the fourteen day period. The plaintiff made an application for variations two months later, well outside the fourteen day period. Handley AJA said that the fourteen day period was the period allowed for a variation application under the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”), r 36.16 (see [115] below) and that the period could not be extended. The plaintiff’s notice of motion was dismissed as incompetent.

72. In dealing with the application which had been made in time, Handley AJA expressed the view that an award of interest on costs could not be made unless the amount of costs had actually been paid. His Honour noted that the existence of such evidence had been described as a “precondition to the operation of s 101(4)” in Evans v European Bank Ltd (No 2) [2009] NSWCA 170 at [34]. He said that it might not be appropriate to treat this statement as a decision that evidence of this nature was a statutory precondition in every case but that in any event no award of interest on costs should be made where the Court was invited to make an order without knowing what its practical effect would be.

73. But the majority took a different view on this point. Macfarlan JA, with whom Tobias JA agreed, said (at [3]):

In my view it is unnecessary for there to be evidence of the date or dates on which the costs concerned were paid for an order for the payment of interest to be made under subsection (4). Indeed, such evidence would often not be particularly useful. If the Court does not choose to order that interest be payable from a later date, interest will run, if an order is made under subsection (4), from the date or dates on which the costs concerned were paid. If the costs were paid promptly, interest will run from an earlier date than that from which it would run if there was delay in payment. That is an appropriate result as the purpose of an order for payment of interest is essentially compensatory. I do not see why in the usual case the Court needs to know when the costs were paid.

74. A contrary view, which did not refer to the decision in Drummond, was expressed in Illawarra Hotel Company Pty Ltd v Walton Construction Pty Ltd (No 2) (2013) 84 NSWLR 436; [2013] NSWCA 211. But in Grace v Grace (No 9) (at [83] below), Brereton J (as his Honour then was) analysed the state of the authorities and concluded that what was said in Illawarra Hotel was not binding (see [57]-[62]). I will follow his Honour’s approach in that regard.

75. It is clear that an award of interest on costs can be made in the form of a formula before the assessment is undertaken. In fact, there is no reason why it cannot be made before the costs are actually paid; the Lahoud formula allows the date(s) of payment of the costs to be “plugged in” in due course, after the assessment.

76. It follows that if there is a dispute about calculation or it is necessary to record the amount of interest awarded on a costs award for the purpose of enforcement, the Court must specify the amount by separate judgment. In Drummond the order made was in the Lahoud form with an additional order granting liberty to apply for “an order for payment of a specific amount in respect of the interest awarded” under the Lahoud order. Macfarlan JA explained this was necessary because the amount of interest could not be determined by the costs assessor (see [51] above). Although SCR Part 52 r 63 (referred to in Wentworth, see [36] above) has disappeared, the Court would presumably have power to make such an order under UCPR r 36.1 which allows it to “give such judgment, or make such order, as the nature of the case requires”.

77. In Lahoud Campbell J made an order reserving for further consideration whether interest on costs should continue to run. His Honour explained the reason for this as follows (at [88]):

When judgment is given for a sum of money which is ascertained, it is usual for post-judgment interest to run on that sum of money until such time as the judgment has been paid. An order for payment of interest on costs operates somewhat differently, in that the amount of the costs is not quantified at the time of making of the order. Further, a measure of co-operation is needed to quantify that order for costs. If it were to happen that Joseph’s [the successful party’s] interests were to delay in obtaining an assessment of costs, the result could be that Victor [the unsuccessful party] was obliged to pay interest, at the comparatively high rates of Schedule 5, during the period that Joseph was delaying. There is no basis in the evidence for concluding that it is likely that Joseph will delay assessment of the costs, but I do not think it right that Victor should be at risk of having to continue to pay interest if Joseph were to delay assessment of the costs, either deliberately, or through some unplanned happening like illness.

78. In September 2011, the case returned to his Honour pursuant to the leave which he had granted: Lahoud v Lahoud [2011] NSWSC 994. One of the applications which was made was that interest should not run during four particular periods of time on the basis of alleged delay, or some other disqualifying conduct by the successful party. It was argued for the successful party that the court had no power to make such an order because it would in substance be a variation of earlier orders. Campbell J accepted that there was no power to vary, with retrospective affect, the order which had been made in 2006. But his Honour (at [52]) considered that the court did have power, pursuant to the leave which had been reserved, to make an order which prevented interest on costs from running for a period of time in the future. In the result, his Honour did not consider that any such variation should be made and the application was unsuccessful. An appeal from Campbell J’s decision was subsequently dismissed: Lahoud v Lahoud (2012) 17 BPR 33,071; [2012] NSWCA 401.

79. After the enactment of s 101(4), there were several decisions at first instance which applied the obiter statement by Beazley JA in Timms that an award of interest on costs could be made if the costs certificate had not been filed as a judgment. There included Simmons v Colly Cotton Marketing Pty Ltd [2007] NSWSC 1092 (Bergin J, has her Honour then was); Seiwa Australia Pty Ltd v Seeto Financial Services Pty Ltd (No 2) [2010] NSWSC 118 (Harrison J); Lucantonio v Kleinert (Costs) [2011] NSWSC 1642 (Brereton J, as his Honour then was); and Chateau Constructions (Aust) Ltd v Zepinic [2013] NSWSC 909 (Robb J).

80. But in Zepinic v Chateau Constructions (Aust) Ltd (No 2) [2013] NSWCA 227, McColl JA reached a different conclusion. The costs order in that case was made in May 2010. The application for interest on costs was made in June 2013, well outside the fourteen day period prescribed under UCPR r 36.16(3A). McColl JA considered the decision of Beazley JA in Timms but declined to follow it insofar as it suggested that, no costs certificate having been filed, an award of interest was still open. McColl JA held that any application for interest had to be made at the time of the original costs order and no award could be made outside the fourteen day period.

81. Then in Short v Crawley (No 45) [2013] NSWSC 1541, an application was made to White J (as his Honour then was) for a lump sum costs order and an order for interests on costs arising out of earlier orders made in the litigation. The orders in question had been made in December 2007 and December 2008. There were subsequent appeal proceedings which did not disturb those costs orders. The Court of Appeal delivered its decision in May 2010. The application for interest was made in October 2012. White J made an order for determination of a separate and preliminary question, namely whether there was power to make the orders sought.

82. His Honour analysed the previous authorities and determined that none of them were binding on him as a Judge sitting at first instance. His Honour found he had power to make an order for a lump sum costs order under CPA s 98(3). He determined not to follow the decision of McColl JA in Zepinic and answered the preliminary question accordingly.

83. The issue arose again before Brereton J in Grace v Grace (No 9) [2014] NSWSC 1239. The order in question had been made in March 2013 and the application for an order for interest on the costs was made in March 2014. His Honour reached the same conclusion as White J in Short (although for somewhat different, and in one respect, inconsistent, reasons) and made the order sought.

84. In Gray v Richards (No 4) [2017] NSWSC 1714 the plaintiff obtained a judgment in his favour in 2011 followed by a costs order in his favour in April 2012. On appeal to the Court of Appeal, the costs order was set aside but it was restored as a result of a further appeal to the High Court. Negotiations to resolve the quantum of the costs were unsuccessful and the plaintiff proceeded to assessment. The certificate of assessment was issued in November 2017. McCallum J allowed the plaintiff’s application for an award of interest on the costs awarded under the restored order of April 2012. Her Honour preferred the conclusions of White J in Short and Brereton J in Grace to that of McColl JA in Zepinic. She did not find it necessary to decide between the two lines of reasoning advanced by White J and Brereton J, to the extent that they diverged.

Entitlement to award of interest on costs

85. The interest award sought by the plaintiffs has four components:

(1)   interest on $968,010.32 (the amount allowed for the costs of the trial), from 5 June 2010 (the day after the day judgment was delivered);

(2)   interest on $9,680.10 (the share of the application fee), from 22 December 2015 (the date the application for assessment was filed);

(3)   interest on $7,603.75 (costs of the costs assessment) from 1 June 2016 (the date of the Assessor’s determination);

(4)   interest on $5,101.25 (costs of the review) from 26 June 2017 (the date the Review Panel’s decision was sent out).

86. Components (2), (3) and (4) represent interest on costs of the assessment process awarded by the Assessor and the Review Panel. Those costs awards were not made by this Court. They were made by the Assessor or by the Review Panel under statutory powers conferred by the LPA. In my view, the Court’s power under s 101(4) is limited to an award of interest on the costs awarded by the Court in these proceedings. Components (2), (3) and (4) are not available.

86. The remaining claim (component (1)) is a claim for interest on the assessed value of the costs order made by Palmer J in July 2010 ($968,010.32). The plaintiffs do not seek a Lahoud order. Rather they simply seek interest at the prescribed rate on the ultimately assessed amount, calculated from 5 June 2010 to 2 August 2017.

87. I think there is difficulty in fitting this basis of calculation within the terms of s 101(4). The problem is that s 101(4) does not permit the Court to award any interest on any costs award for the period prior to when the “costs concerned” were paid. If the Court could be satisfied that all of the costs had been paid by a particular date, it could award interest on the amount from that date forward. The plaintiffs are not seeking any interest for the period prior to 5 June 2010. But the evidence does not establish that the whole of the costs which were the subject of Palmer J’s order were paid before that date. In fact, the evidence shows costs totalling $470,000 for the period from October to December 2010 and further costs totalling $330,000 between July 2011 and June 2013. It may be that some of those costs relate to the appeal proceedings, but the evidence does not make that clear.

88. This would not have been a difficulty for a costs order made in advance of the assessment. In such a case, the date of payment could be established as part of the calculation of the interest. In the present case, however, the plaintiffs have brought an application which seeks both to impose a liability for interest and to fix the amount due, but they have failed to present the evidence necessary to undertake the calculation.

89. The situation is unsatisfactory. But given the amount involved, I would not allow this deficiency in the evidence to defeat the claim if it is otherwise meritorious. I will deal with the remaining issues on the footing that if the application is sustained, the plaintiffs will have a further opportunity, at their cost, to put on evidence identifying when the plaintiffs paid the last of the costs the subject of Palmer J’s award, and interest will be calculated from that date.

Power to award interest on costs in this case

91. Counsel for the defendant argued that the Court no longer has power to make an award of interest on the costs awarded by Palmer J in July 2010. Counsel argued that the claim was statute barred; or alternatively that it was barred by the doctrine of merger in judgment. Counsel also argued that the rules required the plaintiffs to claim an award of interests on costs in their Statement of Claim, and they had not done so.

Merger

92. In Timms, Beazley JA reasoned as follows (at [9]-[12]):

[9]   …A final judgment, regularly entered, conclusively determines the issues raised in the proceedings to which it relates. It cannot ordinarily be set aside except in accordance with powers or rights otherwise conferred by statute or rule of court or in other well recognised circumstances such as fraud.

…

[11] A claim for interest under s 95(4) is part of the claim that a party has in relation to costs. It is not a separate or independent cause of action. If no application for interest is made and determined before entry of judgment for costs, the claim for interest merges with the judgment for costs. That is what has occurred in this case. The claimants obtained a final judgment for their assessed costs when they filed the Costs Certificate on 11 December 2003.

[12] Part 40 r 9 [now UCPR r 36.16; see [115] below] governs the setting aside or varying of a judgment or orders of the Court. The circumstances in which a judgment that has been entered may be set aside are limited and none apply here. There was no application made under the slip rule nor do the circumstances, on the evidence before me, indicate that the rule applies. The claimants’ claim under s 95(4) appears to have been made without an appreciation of the effect of the judgment entered on 11 December 2003. In those circumstances, the only course available to the Court is to dismiss the motion with costs.

93. This reasoning depended upon the application of the doctrine of merger in judgment. But that aspect of the reasoning was rejected in each of the subsequent reasoned decisions which considered the issue.

94. In Zepinic McColl JA pointed out, based on earlier Court of Appeal authority, that the “judgment” which results from filing a cost assessor’s certificate is merely a ministerial act and is not strictly a judgment of the Court. The effective costs judgment is the original costs order made by the Court, not the certificate which merely quantifies the entitlement (at [74]-[79]).

95. In Short White J pointed out that the power to award interest on costs is derived wholly on statute and is conferred by s 101(4) and not by s 98. His Honour stated that there could be no merger of the right to interest in the award of costs because the right to interest was not the very same right or cause of action which was claimed under the costs award. He also said that he should follow the reasoning of McColl JA in Zepinic (at [70]-[76]). In Grace, Brereton J likewise agreed with McColl JA’s analysis on this point (see at [31]).

96. Counsel for the defendant in this application pointed out that in this case, as in Timms, the application was made after the filing of the relevant cost certificate as a judgment. That was not the case in Zepinic, Short or Grace.

97. The combined weight of authority in Zepinic, Short and Grace is such that I think I should follow the analysis in those decisions, with which I respectfully agree. Indeed I would go somewhat further. The reasoning in Flower & Hart, adopted in Spedding, means that an award of interest is not a judgment on a cause of action. It follows that the doctrine of merger in judgment cannot apply at all.

Limitation

98. In Grace, Brereton J said (at [54]):

In my judgment…if there is a time limit for seeking an order under CPA, s 101(4), it is not the making of the relevant costs order (or 14 days thereafter), and no viable alternative has been identified, let alone suggested to be applicable in this case. (Arguably, the (NSW) Limitation Act 1969 may provide one, by s 14(1)(d) or s 17, and the Court might decline as a matter of discretion to entertain an unduly belated application [cf Cotie v Cox, [25]-[26]], but it is unnecessary to explore those possibilities further).

99. Counsel for the defendant in this application picked this up and submitted that s 14(1)(d) was indeed applicable (counsel did not rely on s 17). Section 14(1)(d) provides:

(1)   An action on any of the following causes of action is not maintainable if brought after the expiration of a limitation period of six years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims:

…

(d)   a cause of action to recover money recoverable by virtue of an enactment, other than a penalty or forfeiture or sum by way of penalty or forfeiture.

100. I cannot accept counsel’s submission. The authorities referred to at [61]-[63] above establish that a claim for an award of costs is not a “cause of action”. It follows that a claim for an award of interest on costs cannot be a “cause of action” either. Section 14(1)(d) is not applicable.

101. This does not exclude the possibility of the Court applying s 14(1)(d), or some other provision of the Limitation Act, by analogy. I will return to that question when considering discretion, below.

Requirement of specific pleading

102. UCPR r 6.12 specifies the relief which must be claimed in proceedings. Counsel for the defendant relied on sub-r (6), which provides:

An order for interest up to judgment must be specifically claimed.

103. This rule applies to a claim for pre-judgment interest on costs under CPA s 100. Sub-rule (4) expressly provides that costs need not be claimed. If costs need not be claimed, then it would be absurd to suppose that interest on costs needs to be claimed. UCPR r 6.12 is no obstacle to the plaintiffs’ application.

Functus officio

104. Counsel for the defendant next relied on what I will refer to as the “functus officio” doctrine. This doctrine was stated by Barwick CJ in Bailey v Marinoff (1971) 125 CLR 529; [1971] HCA 49 in the following terms (at 530):

Once an order disposing of a proceeding has been perfected by being drawn up as the record of a court, that proceeding apart from any specific and relevant statutory provision is at an end in that court and is in its substance, in my opinion, beyond recall by that court. It would, in my opinion, not promote the due administration of the law or the promotion of justice for a court to have a power to reinstate a proceeding of which it has finally disposed.

105. The doctrine recognises an exception in the case of errors and omissions which are covered by the “slip rule”. The functus officio doctrine does not prevent the Court from later granting ancillary relief which does not affect an “operative and substantive” part of the order made: see Bailey at 532 and 535. An example is found in Thynne v Thynne [1955] 3 WLR 465. In that case, the applicant sought to amend a petition for dissolution of marriage by substituting the particulars of the marriage ceremony which had been proved in the proceedings with those of an earlier marriage ceremony between the same parties to which no reference had been made. The English Court of Appeal held that the court had power under its inherent jurisdiction to vary, modify or extend its own order so as to correctly express the intention of the order.

106. The functus officio doctrine is based on the principle that, apart from narrowly confined exceptions, judicial decisions are final: D'Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1; [2005] HCA 12 at [34]-[35]. The doctrine of res judicata is based on the same principle. But the two doctrines are distinct. The functus officio doctrine is concerned with a particular legal proceeding, whereas the doctrine of res judicata prevents the re-agitation of claims in any later legal proceeding. On the other hand, the doctrine of res judicata only applies to a final judgment disposing of a cause of action. The functus officio doctrine applies to decisions in legal proceedings generally. In Bailey v Marinoff, it was applied to appeal proceedings.

107. The rule that the judicial determination of a claim once formally entered as a judgment or order of the Court is final applies to a costs order. This was recognised at an early stage in England. In Preston Banking Co v William Allsup & Sons [1895] 1 Ch 141, one of the holders of debentures issued by the defendant company, Lindsay, was appointed receiver and manager of its property. Lindsay applied for an order for sale of the business and assets of the company under the direction of the court. The court made an order for sale, but on condition that Lindsay paid £250 into court by way of security; if the £250 was not paid, no sale was to take place and Lindsay was to pay the costs of the application. Lindsay defaulted in paying the £250 and then made a further application to vary the costs order earlier made so that the costs of the application should be costs in the cause.

108. The Vice Chancellor refused the application. Lord Halsbury LC (sitting in the Court of Appeal) said:

If by mistake or otherwise an order has been drawn up which does not express the intention of the Court, the Court must always have jurisdiction to correct it. But this is an application to the Vice-Chancellor in effect to rehear an order which he intended to make, but which, it is said, he ought not to have made. Even when an order has been obtained by fraud, it has been held that the Court has no jurisdiction to rehear it. If such a jurisdiction existed it would be most mischievous. The fact that in the present case the application to rehear is made to the particular Judge who made the order is immaterial; for if one Judge can rehear the order another can. Any application which may be made to the Vice-Chancellor for an order in the nature of a supplemental order is, of course, still within his jurisdiction; but he has no jurisdiction to rehear or alter this order.

109. The other judges who sat (Lindley LJ and AL Smith LJ) spoke to similar effect. Lindley LJ was careful to add, however, that the decision would not prevent Lindsay from later applying to have his costs paid out of the proceeds of sale of the property. His Lordship clearly took the view that a later order for payment out of a fund would be a supplemental order which would not vary or contradict the costs order against Lindsay.

110. The functus officio doctrine, as it applies to a costs order, is subject of course to the slip rule exception. The authorities suggest this may be generously applied, so as to cover an omission by a party to ask for an order as well as an error or omission by the Court in dealing with an application for an order.

111. In Re Inchcape (Earl of) [1942] Ch 394, proceedings were brought to determine the domicile of a testator and an order was made in the usual form for the payment of the costs of all parties out of the estate. Costs had been incurred before the proceedings were brought in obtaining evidence and advice on the question, but counsel omitted to ask for those costs to be included in the order and the order was formulated in a way which did not cover them. Morton J held that, although the order had been passed and entered, it could be supplemented or varied under the “slip rule” so as to apply to the omitted costs.

112. In New South Wales Insurance Ministerial Corporation v Edkins (1998) 45 NSWLR 8 the Court of Appeal considered an appeal against cost orders made after the delivery of judgment in the District Court. The District Court judge handed down reserved judgments in two actions by a plaintiff against separate defendants, which had been heard together. In each action he ordered the defendant to pay the plaintiffs’ costs. After the judgments were delivered, counsel for one of the defendants applied for a costs order in favour of that defendant for part of the proceedings, based on an offer of compromise which had been made. In response, counsel for the plaintiff applied for an order that the defendant in the second action pay any costs awarded against the plaintiff in the first action. The trial judge upheld both applications, with the result that the plaintiff was ordered to pay the costs of the first defendant from a particular date and the defendant in the second action was ordered to indemnify the plaintiff against that liability.

113. It was argued for the second defendant on appeal that the trial judge became functus officio at the point where he announced his verdicts and costs orders in the two actions, and he thereafter had no power to entertain the application for the further two costs orders. Priestley JA, speaking for the Court of Appeal, said:

… in my opinion there is no merit in the argument concerning the judge being functus officio at the point where he announced his verdicts and costs orders in the two actions. Although he did not know it at that moment, he had not then completed his duties in the cases, there was a costs argument still to be heard. He heard it immediately and acted quite properly and with proper authority in doing so.

114. The reference to the application for further costs orders being heard “immediately” after judgment was delivered suggests that the initial costs orders might not have been entered. But, if so, this is not mentioned in the judgment. Priestley JA referred to a costs argument “still to be heard” but did not suggest that it had been foreshadowed before the judgment. On the face of it, his Honour appears to accept that the parties were entitled to make an application for further costs orders when the result of the case was known. But although not expressed in the language of the slip rule, the decision could be justified by an expansive reading of that rule.

115. The functus officio doctrine operates subject to any contrary provision in the legislation or rules governing the Court’s procedure. The doctrine is recognised, and some limited exceptions are provided to it, in UCPR r 36.16, which provides as follows:

(1)   The court may set aside or vary a judgment or order if notice of motion for the setting aside or variation is filed before entry of the judgment or order.

(2)   The court may set aside or vary a judgment or order after it has been entered if:

(a)   it is a default judgment (other than a default judgment given in open court), or

(b)   it has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order, or

(c)   in the case of proceedings for possession of land, it has been given or made in the absence of a person whom the court has ordered to be added as a defendant, whether or not the absent person had notice of the relevant hearing or of the application for the judgment or order.

(3)   In addition to its powers under subrules (1) and (2), the court may set aside or vary any judgment or order except so far as it:

(a)   determines any claim for relief, or determines any question (whether of fact or law or both) arising on any claim for relief, or

(b)   dismisses proceedings, or dismisses proceedings so far as concerns the whole or any part of any claim for relief.

(3A)   If notice of motion for the setting aside or variation of a judgment or order is filed within 14 days after the judgment or order is entered, the court may determine the matter, and (if appropriate) set aside or vary the judgment or order under subrule (1), as if the judgment or order had not been entered.

(3B)   Within 14 days after a judgment or order is entered, the court may of its own motion set aside or vary the judgment or order as if the judgment or order had not been entered.

(3C)   Despite rule 1.12, the court may not extend the time limited by subrule (3A) or (3B).

(4)   Nothing in this rule affects any other power of the court to set aside or vary a judgment or order.

116. In Roads & Traffic Authority of NSW v Palmer (No 2) [2005] NSWCA 140 the plaintiff had sued three defendants, the RTA and two others. As a result of the appeal, the plaintiff was ordered to pay the RTA’s costs and the unsuccessful defendants were ordered to pay the plaintiff’s costs. The orders were made in March 2003 and entered in July 2003. An application was later made for a further order that the costs payable by the unsuccessful defendants to the plaintiff should include the costs payable by her to the RTA.

117. On behalf of the plaintiff, reliance was placed on SCR Pt 40, r 9(4), the predecessor to UCPR, r 36.16(3)(a). Giles JA, giving the judgment of the Court of Appeal, stated that the costs orders had (at [21]):

determined claims for relief, the relief claimed being orders disposing of the costs of the trial and of the appeals.

118. His Honour was prepared to infer that an application for a Bullock order had been overlooked and, on this basis, he held that the slip rule was available, but on the facts, the application for a Bullock order failed.

119. In Hancock v Arnold (No 2) [2009] NSWCA 19 at [10] it was suggested (in obiter) that r 36.16(3)(a) allowed a party to vary a costs order after the entry of the substantive judgment. But since then, the subsequent decisions have made it clear that courts should continue to follow RTA v Palmer (No 2). White J referred to the authorities in Short at [21]. It follows that, as his Honour observed, and subject to the fourteen period for reconsideration allowed by UCPR r 36.16, and the operation of the slip rule, and any contrary statutory provision, an order for costs, once made, is final.

120. If a claim for an award of costs is a “claim for relief” then a claim for an award of interest on costs must likewise be a “claim for relief”. Clearly it follows from this, at least, that once an order making an award of interest on costs has been made, it cannot thereafter be varied except in accordance with UCPR 36.16. White J expressly acknowledged this in Short at [80]. The question is whether the functus officio doctrine, as it applies to a costs order, includes the exercise of power to award interest on those costs, so that if such a power is not exercised at that time it cannot thereafter be exercised.

118. McColl JA dealt with the question in Zepinic at [82] and [85]-[87]. She referred to Handley AJA’s decision in Drummond that the plaintiff’s application, made outside the fourteen day period, was incompetent (see [71] above). Her Honour said that the other members of the Court had apparently agreed with this aspect of the decision. In any event, she said it was correct in principle. Just as a costs order must be sought at the time of judgment, or with any time limited by UCPR, r 36.16, so too must an application for an award for interest on costs. McColl JA said this was consistent with the principle of finality of judgments. The argument to the contrary, namely an application for an award of interest was a separate one, was “simply semantic”.

119. But in Short, White J considered that this reasoning was outflanked by statute. His Honour said that prima facie the litigation before him had been disposed of by the final order dealing with costs and no further order could be made. But he considered that CPA s 98(3) gave the Court a statutory power to make an award of interest on costs after having made the initial costs order, by way of exception to the functus officio doctrine.

120. White J said (at [81]-[83]):

[81] Section 98(3) of the Civil Procedure Act confers a power to make an order “as to costs” after the conclusion of the proceedings. If that power extends to the making of an order for interest on costs then the principles of finality of litigation are not offended because those principles are subject to contrary statutory provision.

…

[83]   In my view, an order “as to costs” means more than “a costs order”. Even though a separate statutory power is needed to make an order for interest on costs and even though, for that reason, a claim for interest on costs is not merged in a final order for costs, I consider that a claim for interest on costs is a claim “as to” costs within the meaning of s 98(3). The expression “as to” denotes a relationship between the order to be made and costs. It means “as it regards, so far as it concerns, with respect or reference to” (Oxford English Dictionary). An order for interest on costs has such a relationship.

124. Brereton J’s analysis in Grace was different. He said (at [37]-[38]):

[37]   …It may be allowed that s 98(3) is concerned with costs orders after the substantive decision has been given, and must be subject to finality from entry of costs orders already made, so that it would not not authorise re-opening a final costs order that has already been made [Roads and Traffic Authority of New South Wales, Council of the Shire of Evans and Pioneer Road Services Pty Ltd v Palmer (No 2) [2005] NSWCA 140, [17] (considering (former) SCR, Pt 52A r 5)]. But subject to that qualification it is, in the words used by Barwick CJ, a "specific and relevant statutory provision" to the contrary.

[38]   Accordingly, an order for costs can be made after the conclusion of proceedings, so long as it does not impugn or alter a final costs order already made [see also Cotie v Cox [2006] NSWSC 859, [22]–[27] (Latham J)]. And if an order as to costs can be made after the conclusion of proceedings, it must follow that an order for interest on costs can be made after the conclusion of proceedings. This conclusion does not depend on the view, expressed by White J in Short v Crawley (at [81]–[83]), that an order for interest on costs is an order “as to costs“ within s 98(3), with which I am inclined, respectfully, to disagree. CPA, Part 7 deals with Costs in Div 2 (which includes s 98), and Interest in Div 3 (which includes s 101). Section 98 appears under the heading, “Courts powers as to costs“. It provides that costs are in the discretion of the court, that the court is empowered to determine by whom, and to what extent they are to be paid, and on what basis. Read as a whole, and in the context in which it appears, CPA, s 98 deals with allocation of responsibility for costs. Section 98(3) is concerned with when the court may exercise those powers. This is confirmed by the opening words of s 98(4), “In particular …“, which then lists specific types of costs orders — and does not include an interest order. As has been explained above, the source of power to order interest on costs is not CPA, s 98, but CPA, s 101. In my view, an order “as to costs“, for the purposes of s 98(3), is one allocating responsibility for costs, not one for interest [cf Lucantonio v Kleinert, [28]]. However, that does not mean that s 98(3) is irrelevant: because it authorises an order as to costs after the conclusion of proceedings, it necessarily indicates that an order for interest on costs must also be available after the conclusion of the proceedings.

125. Between them, White J in Short and Brereton J in Grace also identified three further points in support of their rejection of the reasoning of McColl JA in Zepinic. The points can be summarised as follows.

126. First, White J referred to the discretionary nature of the power to award interest. In his Honour’s view, events occurring after the order for costs was made could be relevant to the exercise of the discretion under s 101(4), and it must have been intended that the power could be exercised after the initial costs order had been made.

127. Second, Brereton J rejected the proposition that an entitlement to interest was part of a party’s overall entitlement to costs. Instead, his Honour saw the entitlement as a separate one.

128. Third, Brereton J pointed out that prior to the enactment of s 101(4) the Court’s power with respect to interest on costs was exercised, under the Supreme Court Rules, by the taxing officer. This meant that the power was exercised long after the costs order had been made. His Honour considered that there was nothing in s 101(4) to displace this, and the subsection should be interpreted consistently with that prior practice.

Statutory interpretation

129. An award of interest must follow, or happen at the same time as, the award of costs to which it relates. The usual practice is that a costs order is dealt with alongside the other orders made by the Court in its final judgment, or, if not dealt with at that time, is made the subject of express liberty to apply: see, for example Grigiel v Baine (No 2) [2005] NSWCA 434 at [11]-[12]. It is therefore convenient to discuss first whether there are any time limits on when the Court may make an order for costs.

130. Section 98(3) does provide that the Court’s power “to make an order as to costs” may be made either at any stage of the proceedings “or after the conclusion of the proceedings”. But that does not mean that such an order may be made at any time after the conclusion of the proceedings, no matter how remote.

131. In Koon Wing Lau v Calwell (1949) 80 CLR 533; [1949] HCA 65, the High Court was concerned with amendments to s 4 of the Immigration Act 1901 (Cth) made in 1949. As amended, s 4 permitted the Minister to issue to an immigrant a certificate exempting the immigrant from any provisions of the Act restricting entry into or stay in the Commonwealth (sub-s (1)). But sub-s (4) provided that “upon the expiration or cancellation” of the certificate, the Minister had power to declare the immigrant in question to be a prohibited immigrant and order his or her deportation. The argument was that the power might be exercised years after the revocation of the certificate, at a time when the immigrant had become assimilated as a member of the community. It followed, so the argument ran, that the grant of power was unconstitutional.

132. As a prelude to considering the constitutional argument, both Dixon J and Williams J considered the scope of the Minister’s power as a matter of statutory construction. Dixon J said (at 573-574):

The next question which arises is that already mentioned, whether after the expiration or cancellation of a certificate the Minister may, without any limitation of the time that elapses, at any date, however distant, act under subs (4) and make a declaration that the person is a prohibited immigrant and order his deportation. The word "upon," in the expression "upon the expiration or cancellation" does not, I think, mean immediately upon and, as the Supreme Court of New South Wales has decided, it does mean "after": Ex parte Lesiputty; Re Murphy (1947) 47 SR (NSW) 433; 64 WN 113.

But, in accordance with the ordinary rule, that must be taken to mean within a reasonable time after the expiration and cancellation of the certificate of exemption. What is a reasonable time will depend upon all the facts, including the conduct of the person named in the certificate. It does not necessarily mean that by successfully evading the authorities for a long period of time, he can escape from the operation of subs (4). But the operation of subs (4) is limited to a reasonable time after the expiry or cancellation of the certificate.

133. Williams J said (at 590):

I agree with the Supreme Court in Lesiputty's Case (1947) 47 SR (NSW) 433; 64 WN 113 that "upon" means "after" but it does not, in my opinion, mean an indefinite time afterwards but within a reasonable time afterwards: Folkhard v Metropolitan Railway Co (1873) LR 8 CP 470. The Minister may make the declaration upon either the expiration or cancellation of the certificate. Presumably a certificate would not be cancelled except for good cause and with a view to a declaration being made. I think that the subsection means that the declaration must be made immediately or within a reasonable time after the expiration or cancellation of the certificate.

134. Folkard v Metropolitan Railway Co (1873) LR 8 CP 470, referred to by Williams J, concerned the Mayor’s Court of the City of London. The Court’s governing statute (the Mayor’s Court Procedure Act (20 & 21 Vic c 157)) provided for an appeal from a decision of the Court in point of law, provided that notice of the appeal was given within two days after the decision (s 8). Section 10 provided that “upon the trial of any issue” the judge could grant leave to the affected party to set aside the verdict and enter a new verdict or a non-suit, or move for a new trial, in a superior court. The Deputy Recorder constituting the Mayor’s Court delivered a decision nonsuiting a plaintiff on a Thursday. An application under s 10 was immediately made and refused. Four days later, on the Monday, the Deputy Recorder reconsidered his decision and granted leave.

135. The Deputy Recorder’s grant of leave was overturned by the Court of Common Pleas. Bovill CJ said (at 471-472):

Questions have arisen with regard to the time within which various things must be done under the provisions of many Acts of Parliament, the language of which slightly differs. Here the Act provides that leave must be given “upon the trial.” That clearly does not mean during the trial, but, as it appears to me, it must mean within a reasonable time afterwards.

…

It appears to me that the application and refusal so made determined the reasonable time, and any subsequent application would be too late. If it were not so, it seems to me that the 8th section of the Act shows that the extreme limit of time during which leave might be given would be two days.

136. The statutory context in Folkhard suggested that the power of reconsideration had to be exercised while the decision was fresh in the Deputy Recorder’s mind. Section 98(3) does not necessarily have this feature. But Folkhard and Calwell do support the general principle that a statutory power to do something following, or after, an event must be exercised within a reasonable time of the event occurring. What is reasonable will vary depending on the statutory context and the circumstances of the case. The starting point in the present case is therefore that the power to make an order as to costs under s 98(3) must be exercised within a reasonable time after the conclusion of the proceedings. The question is, what was a reasonable time in the circumstances of this case.

137. As in Folkhard, the first step in assessing what is a reasonable period in this case involves looking at other provisions of the relevant statute. This focuses attention on s 98(4), which expressly provides that certain types of orders as to costs must be made before the costs are referred for assessment.

138. Section 98(4) is somewhat elliptically expressed. It does not refer to an order for costs in conventional form, or to the usual practice that costs orders are made at or soon after the conclusion of the proceedings. Instead, it refers to a number of different types of orders as to costs and says they may be made at any time prior to “costs” being referred to assessment.

139. A gross sum costs order is referred to in subparagraph (c). The Court’s power is to make an order for costs in a specified gross sum “instead of assessed costs”. The use of the words “instead of” and not “rather than” suggests that such an order may be made after an order has been made for costs to be assessed in the ordinary way, provided that this is done before the costs are referred for assessment. A gross sum costs order takes the place of an assessment.

140. The other types of costs order identified in subsection (4) all involve variations on an order for costs to be assessed. It might be argued, if the provision for a gross sum costs order under subparagraph (c) allows a variation to be made to an existing costs order, that the other subparagraphs also contemplate the possibility of varying an existing costs order. That is difficult to square with the Court of Appeal authorities referred to above, but the effect of s 98(4) was not considered by the Court of Appeal in any of those cases.

141. It is not necessary to try to resolve this question in the present case. To my mind, subsection (4) indicates that, if a costs order against a party is to proceed to assessment, then that costs order must be in its final form, at the latest, before the referral to assessment takes place, and no further variation of that order can take place thereafter. Similarly, if the quantum of costs is agreed between the parties no further order as to costs could be made after that agreement had been reached.

142. Turning to an award of interest on costs, I think that the terms of the former SCA s 95(4) implied that any award of interest on costs had to be made at or about the time that the Court exercised its power to make an order for costs. The provision said that the power to make an award of interest could be exercised where an award of costs “[is] made”, not where an award of costs “has been made” in the past.

143. Section 101(4) is not worded in the quite the same way. There is no sign that the change in wording was intended to have any substantive effect for present purposes. It may be that s 101(4) should be read, against this background, as conveying the same implication. But even if not, then the principle of statutory construction to which I have referred would require that the power to award interest be exercised within a reasonable time after the making of the costs order.

144. It is not necessary for present purposes to resolve the disagreement between White J and Brereton J as to the width of the phrase “order as to costs” in s 98(3). If, in accordance with White J’s view, s 98(3) covers an order for interest on costs, then the requirement that the application be made within a reasonable time after the conclusion of the proceedings applies directly to an application for an award of interest on costs. If, in accordance with Brereton J’s view, an “order as to costs” is limited to an order as to the incidence of costs, then the requirement of reasonable time in s 98(3) does not directly apply but there is a separate requirement implicit in s 101(4) that the order be made within a reasonable time of the making of the underlying order as to costs.

145. I would, however, observe that an order for gross sum costs under s 98(4)(c) must be an order “as to costs”. That phrase must go beyond an order dealing simply with the incidence for costs. It must, at least, include an order which fixes the amount.

146. I think that a requirement that the costs order be in final form (and include interest, if it is to be claimed) before assessment is consistent with principle. An award of interest is compensatory. It should, in my opinion, be seen as closely analogous to other adjustments the Court might make in exercising its power as to costs so as to achieve proper compensation, for instance by discounting the costs (by a percentage or perhaps by fixed amount) of the successful party to reflect failure on particular issues or unsatisfactory aspects of the way the proceedings were conducted. In my opinion, there is every reason why it is desirable for the question of interest on costs to be addressed at the same time as other compensation issues are dealt with, which is when the Court exercises its power to award costs.

147. The unsuccessful party who is required to pay costs also needs to know where he or she stands. An award of interest may have the effect of “scaling up” the costs quite dramatically, as in this case. From the point of view of the party who has to pay costs, the question whether the costs carry interest from the date of payment may be more important than disputes about the reasonableness of particular items or categories of cost. In my opinion, it would be unfair if, having taken a particular course for the purposes of an assessment, the unsuccessful party could later be faced by an application to “scale up” the amount awarded in the assessment by making an award of interest.

148. I therefore conclude, tentatively, that where costs are to be assessed, an order for interest on costs cannot be made any later than the point at which the costs are referred for assessment. It remains to consider whether any of the three points made by White J and Brereton J in response to McColl JA’s reasoning in Zepinic leads to a different conclusion.

Post-costs order discretionary factors

149. In Short, White J said (at [84]-[85]) of his conclusion that an award of interest on costs could be sought outside the fourteen day period referred to in UCPR, r 36.16:

[84] This construction of UCPR, r 36.16 and s 98(3) of the Civil Procedure Act is in accordance with the dictates of ss 56 and 57(2) of that Act. That can be illustrated by the facts in Roads and Traffic Authority v Cremona (No 3) and Zepinic. In both cases the ground, or a substantial part of the ground, for seeking an order for interest on costs was the conduct of the judgment debtor after the costs order was made and the successful party had paid costs to her or its solicitor. In Zepinic it was claimed that the party liable to pay costs absented himself, and so delayed the costs assessment process, and then further delayed proceedings by appealing the assessment unsuccessfully to a review panel. In Cremona, the Roads and Traffic Authority failed to make any reasonable response to the successful plaintiff’s attempt to negotiate a reasonable figure for costs and delayed the process of assessment. These are material considerations to the exercise of the discretion to award interest on costs. Unsurprisingly, the cases show that a party liable to pay costs can cause the process of assessment to be delayed, so that a judgment creditor, who may not have paid costs until after he or she has recovered a verdict, will be out of pocket until a certificate or assessment is filed.

[85]   A construction of the Act and the Rules that requires a judgment creditor to seek an order for interest on costs when the costs order is made or within 14 days thereafter is likely to lead to unjust outcomes. At that time the successful party may not have paid costs. That is not a necessary bar to an order for interest on costs (Drummond & Rosen Pty Ltd v Easey (No 2), but it may be a sufficient discretionary reason for refusing an order (Spedding v Nobles; Spedding v McNally (No 2)). Events that occur well after the making of the costs order may well be highly relevant to whether an order for interest on costs should be made, as was the case in Cremona and was said to be the case in Zepinic.

150. I accept that there may be cases where events occurring after the making of the costs order could be relevant to the exercise of the Court’s discretion as to whether to award interest on costs. But reading s 98(3) as allowing such an application to be made at any time after the costs order is not a complete solution to the problem. The functus officio doctrine means that once the discretion has been exercised and a decision has been made to award or refuse interest, that decision cannot subsequently be varied by reference to events which occur later. This is so unless the order is made subject to a specific reservation of further consideration, as Campbell J did in Lahoud. But as the second Lahoud decision shows, even if such a reservation is made it can only allow the order to be varied going forward. Events going to discretion which occur after the order is made but before a further order is made cannot directly be taken into account.

151. As Campbell J acknowledged in Lahoud, this is a particular problem for the unsuccessful party. If an order is made for the payment of costs together with interest on those costs, then the unsuccessful party is at the mercy of the successful party who may delay the assessment of the costs in the knowledge that interest will accrue in the meantime.

152. The converse position seems less likely to give rise to a compelling problem. An award of interest on costs, being compensatory, is made virtually automatically. A Lahoud order creates an entitlement which compensates the successful party irrespective of whether the delay in assessment is short or long. To apply for such an order at the end of the proceedings when costs are being considered costs nothing. If a mistake is made and the successful party omits to ask for an award of interest, the problem can be fixed using the slip rule. In such circumstances, it is hard to see why the Court would exercise a discretion at a later point to make an award of interest in favour of a party who had not applied for one at the end of the proceedings.

Separate entitlement?

153. In Grace, Brereton J said (at [35]):

One element of McColl JA's reasoning is that a relevant costs order must itself be made not later than the final judgment disposing of the proceedings. Generally speaking, unless the question of costs has been dealt with, explicitly or implicitly, in the final judgment, a costs order does not involve any variation of or attack on the final substantive judgment. Accordingly, the finality principle is not offended by subsequently entertaining and dealing with an application for costs because it does not involve impugning "the operative and substantive part" of the judgment. In NSW Insurance Ministerial Corporation v Edkins (1998) 45 NSWLR 8, the Court of Appeal held that a judge was not functus officio after giving judgment and making costs orders if the duties in the case were not otherwise completed (even though the judge was not then aware of it), and that in circumstances where there was a costs argument still to be heard - although it had not until that point been made - he was not functus officio and was entitled to entertain and deal with an application for a special costs order made immediate following the delivery of judgment. While that result could be supported as a variation to the order made on application before it was entered, under the then equivalent of UCPR r 36.16, that is not how the Court of Appeal put it (at 12E):

Also in my opinion there is no merit in the argument concerning the judge being functus officio at the point where he announced his verdicts and costs orders in the two actions. Although he did not know it at that moment, he had not then completed his duties in the cases, there was a costs argument still to be heard. He heard it immediately and acted quite properly and with proper authority in doing so.

154. It must be accepted that an award of interest on costs is made under a separate statutory provision from the costs award itself and that a separate judgment must be given by the Court for interest once the costs have been quantified by the assessor (if there is a dispute). But arguably these are matters of form, not substance. In Bailey v Marinoff, Barwick CJ spoke (see [104] above) of the functus officio doctrine making the proceeding “in its substance” beyond recall by the Court.

155. The power to award interest on costs is not a standalone power but is ancillary to the Court’s power to award costs. An award of costs is compensatory, and so too is an award of interest on costs. The measure of compensation in an interest award, even when a Lahoud order is made, is an estimate. Its proper analogy is with an award of pre-judgment interest on an unliquidated claim, not with a contractual or statutory entitlement to interest on a liquidated debt. In my view, these considerations lend force to the views expressed by both Beazley JA and McColl JA that interest should be seen as part of the successful party’s overall entitlement to costs.

156. For reasons I have given above, the doctrine of res judicata does not apply in the present context. Nevertheless, I think it has some relevance by analogy, and that relevance includes not only the doctrine in its strict sense (cause of action estoppel) but also the “extended principle” stated by Sir James Wigram VC in Henderson v Henderson (1843) 3 Hare 100 at 115; 67 ER 313 at 319:

“…where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.”

157. Arguably, once it is concluded that an order for interest should be seen as part of a successful party’s overall entitlement to costs, and treating the application for costs as a piece of litigation, an application for interest on costs would readily be seen as a “point which properly belonged to the subject of” that litigation.

Previous practice and authority

158. In concluding in Grace that previous practice and authority involved the exercise of the power to award interest on costs long after the initial award of costs, Brereton J referred to the pre-1993 practice of the taxing master; the judgment of Smart J in Fisher; and the decision of Bignold J in Carson v Minister Administering the Environmental Planning and Assessment Act 1979 (1994) 82 LGERA 179.

159. The former practice of the taxing master was based on the provisions of SCR Part 52 r 45A. As I have pointed out above, the approach was somewhat contrived and, had the question been asked, it might have been debatable whether the rule was consistent with the underlying statutory power. More importantly, the power was repealed in 1993, two years before s 95(4) was enacted. The decision of Smart J in Fischer was likewise based on SCR Pt 52 r 45A.

160. In Carson the relevant statutory power was the Land and Environment Court Act 1979 (NSW), s 69A, which was equivalent to the then SCA s 95(1). Bignold J concluded that this power could be exercised in the course of assessment, well after the date on which costs were awarded. His Honour rejected a functus officio argument as “highly technical” and unmeritorious in the circumstances of the case, where the successful plaintiff had made it plain from an early stage that interest would be claimed in this way.

161. Bignold J’s decision on this point was not departed from in the Court of Appeal. But, as the Court of Appeal noted, the contrary was not argued: see Minister Administering the Environmental Planning and Assessment Act 1979 v Carson (1994) 35 NSWLR 342 at 346.

162. Bignold J’s decision was based on the wording of s 69A and the decision of Smart J in Fischer. But, as I have already noted, SCA s 95(4) was in a different form, which to my mind suggests that an award of interest on costs under that provision was to be made at or about the time the costs award was made. Bignold J pointed out that an award of interest on costs was separate from an award of costs (which, with respect, was correct, but arguably was a matter of form rather than substance). His Honour also thought that as a matter of practice, an award of interest would usually be made after a costs order rather than at the same time. But even if that was so, the widespread use of the Lahoud order, as sanctioned by the Court of Appeal, suggests that the practice has changed.

163. Arguably, then, the previous practice and authorities on this question are of limited weight. They all concern the Court’s previous power to make an order varying the date on which a costs judgment took effect. Section 95(4) represented a new departure. The Court now has a freestanding power to award interest on costs which is not tied to the rules concerning the date on which a judgment takes effect. There is no analogy with the situation created by the former rules because an assessor cannot award interest. As McColl JA pointed out in Zepinic at [81] the current statutory context is thus quite different.

Conclusion

164. I acknowledge the force of what White J said in Short and Brereton J said in Grace. But in the end I do not propose to depart from my preliminary conclusion that an application for an award of interest on costs must be made, if the order proceeds to assessment, before the assessment is undertaken. No application for assessment had been made in Short or Grace. Nor did their Honours consider the application of the principle of statutory construction that a power to be exercised after a particular event must be exercised within a reasonable time of the event happening. My decision is contrary to that of McCallum J in Gray, but the point was not argued in that case.

165. This is sufficient to deal with the plaintiffs’ application in this case. It is not necessary to decide whether, in accordance with the views expressed by McColl JA in Zepinic, the Court’s power to order interest on costs ceased (subject to the slip rule) when the order made by Palmer J was entered in July 2010; or whether, in accordance view the views expressed by White J and Brereton J, it continued up until his Honour’s order was referred for assessment in December 2015. In deference to the conflicting views on each side of the question, I do not propose to try to resolve it.

166. If I am wrong in my view that interest had to be sought before referral to assessment, I would still consider that the power to make an award on interests on costs ceased once the plaintiffs filed the costs certificate in the Court as a judgment without making application for an award of interest. This is not because of the doctrine of merger. I accept that technically the doctrine does not apply and an award of interest on costs would result in a separate judgment of the Court for the amount of the interest. But I respectfully agree with Beazley JA and McColl JA in thinking that, as a matter of commercial reality, a claim for interest is not separate from a claim for costs but is part of the successful party’s overall entitlement.

167. While there may need to be two separate judgments (a deemed judgment arising from filing the certificate and a judgment quantifying the interest), I think that by the time a judgment is obtained from the Court, the unsuccessful party should be in a position to know the whole of the costs liability is, including interest. It would be most undesirable if there could first be judgment, followed by enforcement, for the principal amount of costs, followed by a further judgment, followed by enforcement, for an amount of interest. In my view, if the outer limit of reasonable time is not reached when the costs are referred for assessment, it is reached once the costs certificate has been filed.

Discretion

168. In case I am wrong in the view that the Court no longer has power to make an award of interest on the costs ordered by Palmer J on July 2010, the fact remains that there is no reason why the application could have been made at that time. For reasons I have given, delaying the application until after the assessment of costs has begun (and, in this case, completed) is undesirable and potentially unfair.

169. For these reasons, I would, if called upon to exercise my discretion, have refused the application. For completeness, however, I will briefly consider two other discretionary points.

Application of limitation period by analogy

170. At [98]-[100] above, I concluded that the provisions of the Limitation Act do not directly apply to an application for costs, or an application for an award of interest on costs. But it does not necessarily follow that the provisions of the Limitation Act are irrelevant in exercising the Court’s discretion. Equitable relief is discretionary and, with some exceptions, the provisions of the statutes of limitation do not apply directly to equitable claims. But where there is a sufficient analogy between an equitable claim and a claim which is subject to the statute of limitations, equity will apply the statute by analogy. There is room to argue that the Limitation Act should be applied by analogy in exercising the discretions under s 98(1) and s 101(4).

171. As we have seen, Brereton J in Grace referred both to s 14(1)(d), which applies to an action “to recover money recoverable by virtue of an enactment”, and to s 17, which applies to an action “on a judgment”. Although a power to award interest on costs is statutory, I think the more compelling analogy in the present case is with a judgment. The filing of a costs certificate, while not strictly speaking a judgment, operates in effect as if it were a judgment for the purposes of enforcement and for the accrual of interest.

172. The Limitation Act, s 24(2), provides that an action to recover arrears of interest on principal monies is maintainable so long as the action to recover the principal is maintainable. The limitation period prescribed for an action on a judgment under s 17 is twelve years. It is therefore unnecessary to decide whether the Limitation Act should be applied by analogy when exercising the discretion to award interest on costs under CPA, s 101(4). If there is any limitation period applicable by analogy, it would be the twelve year period provided by s 17, which has not yet expired.

Rate of interest

173. As we have seen, the payment of interest under a judgment is justified both as a matter of compensation and coercion, but the award of interest in the period up to quantification is only justified by the principle of compensation.

174. Interest on a judgment debt, once quantified, has always been at a prescribed rate (subject, since the enactment of SCA, s 95(1), to the Court ordering otherwise). The rate of pre-judgment interest, by contrast, was not prescribed. But in the past it was the practice of the Court, unless there was something unusual about the circumstances, to apply the prescribed rate.

175. This approach changed in 2010. As a result of amendments made to UCPR, r 36.7 and to the Court’s practice note (See Practice Note No. SC Gen 16), since 1 July 2010, the prescribed rate has been the cash rate as published by the Reserve Bank of Australia plus six per cent, whereas the rate to which the Court “has regard” in fixing pre-judgment interest has been the RBA cash rate plus four per cent. The difference between the two rates reflects the additional coercive purpose involved in an award of interest once the judgment has been quantified and is enforceable.

176. There was a very long, and unexplained, delay in making the claim for an award of interest on costs in this case. The only justification for an award of interest in this case would have been a compensatory one. Had I considered, in the exercise of my discretion, that I should make an award of interest on costs, I would have awarded interest at the lesser, pre-quantification, rate.

Conclusion and orders

177. I have concluded that the Court’s power to make an award of interest on the costs the subject of the order made by Palmer J in July 2010 is spent. The plaintiffs’ application fails and must be dismissed. I see no reason why costs should not follow the event.

178. The orders of the Court are:

1. Order that the plaintiffs’ Notice of Motion filed 30 November 2017 be dismissed.

2. Order that the plaintiffs pay the defendant’s costs of the proceedings on the Notice of Motion.

**********

Amendments

19 December 2018 - Corrected formatting issues.

20 December 2018 - Amended typographical errors in cover page.

Decision last updated: 20 December 2018