Trevorrow v State of South Australia (No 6)
[2008] SASC 4
•1 February 2008
SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
TREVORROW v STATE OF SOUTH AUSTRALIA (No 6)
[2008] SASC 4
Judgment of The Honourable Justice Gray
1 February 2008
INTEREST - RECOVERABILITY OF INTEREST - AWARD OF INTEREST AS DAMAGES
PROCEDURE - COSTS - RECOVERY OF COSTS
Plaintiff successful in claim for damages - plaintiff sought an award of interest on portion of damages sum pursuant to section 30C of the Supreme Court Act 1935 (SA) - consideration of purpose of interest award - consideration of retrospective operation of section 30C - consideration of discretionary nature of section 30C - consideration of relevant time period for purpose of interest calculation - consideration of relevance of inflation - consideration of appropriate rate of interest and amount on which interest should run - consideration of appropriateness of lump sum award in lieu of interest.
Held: Plaintiff awarded lump sum of $250,000 in lieu of interest in exercise of discretion.
Supreme Court Act 1935 (SA) s 30C; Supreme Court Act Amendment Act 1972 (SA); Statutes Amendment (Courts) Act 1993 (SA), referred to.
Trevorrow v State of South Australia (No 5) (2007) 98 SASR 136; Clarke v Foodland Stores Pty Ltd [1993] 2 VR 382; Grincelis v House (2000) 201 CLR 321; Sager v Morton and Morrison (1972) 5 SASR 143; Wheeler v Page (1982) 31 SASR 1; Duke Group Limited v Pilmer & Ors (1999) 73 SASR 64; MPB (SA) Pty Ltd v Gogic (1991) 171 CLR 657; New South Wales v Moss (2000) 54 NSWLR 536; O’Brien v McKean (1968) 118 CLR 540; Johnson v Perez (1988) 166 CLR 351, considered.
TREVORROW v STATE OF SOUTH AUSTRALIA (No 6)
[2008] SASC 4Civil
GRAY J
This is an application, pursuant to section 30C of the Supreme Court Act 1935 (SA), for an award of interest on a judgment for damages.
On 1 August 2007, the plaintiff, Bruce Allan Trevorrow, was awarded damages against the defendant, the State of South Australia, in a total amount of $525,000. [1] The plaintiff now claims interest on a portion of that award.
[1] Trevorrow v State of South Australia (No 5) (2007) 98 SASR 136.
The plaintiff submitted that interest should be awarded on that part of the damages sum which constituted past unremunerated losses. This loss was said to be $401,892.20. It was contended that interest should be calculated at four per cent per annum for a period of almost 50 years, spanning from the time of the plaintiff’s wrongful separation to the date of judgment. The plaintiff sought an award of interest of about $800,569. This calculation assumed that the total loss had been sustained as at the time of separation. No allowance was made for the fact that a significant portion of the damage and loss had been sustained at later times.
The primary submission of the State was that interest should be allowed on an amount of $401,892.20 from the date of the issue of proceedings to the date of judgment, reduced by one half to account for the long passage of time since the date of the injury. This led to a calculation of interest of $75,597.30. This approach appeared to have inadequate regard to the fact that much of the plaintiff’s losses had been sustained prior to the issue of proceedings. As King CJ observed in Wheeler v Page:[2]
If, ... , a substantial part of the pre-trial loss is sustained before the issue of the writ, fairness may require that interest be awarded on the whole of the pretrial loss for the whole period between the commencement of the proceedings and judgement, the under-compensation in respect of the pre-writ loss cancelling out the over-compensation in respect of the post-writ loss.
[2] Wheeler v Page (1982) 31 SASR 1 at 4.
The general function of an award of interest is to compensate successful plaintiffs for being kept out of money of which they would otherwise have had the use and benefit. When summarising the effect of the authorities, the Full Court of the Supreme Court of Victoria in Clarke v Foodland Stores Pty Ltd,[3] observed:
It may be accepted that the purpose of the statutory power to allow interest is to compensate the plaintiff for being kept out of his money, although not because he has on that account lost the opportunity to invest it, but because he has thereby been deprived of its use. This has been laid down now by a unanimous High Court in relation to interest on damages for personal injuries: M.B.P. (S.A.) Pty Ltd v Gogic (1991) 171 CLR 657 at pp. 663, 666, approving what was said in this respect by Gibbs C.J. in Batchelor vBurke (1981) 148 CLR 448 at p.455; see also Thompson v Faraonio (1979) 24 ALR 1, at p.3 (J.C.) and, in England, General Tire and Rubber Co. v. Firestone Tyre and Rubber Co. Ltd. [1975] 1 WLR 819, at pp. 836, 841; [1975] 2 All ER 173, at pp. 188, 192; B.P. Exploration Co. (Libya) Ltd v Hunt (No. 2) [1979] 1 WLR 783, at pp. 845-6; [1982] 1 All ER 925, at pp. 974-5 …
[3] Clarke v Foodland Stores Pty Ltd [1993] 2 VR 382 at 396 (Fullagar, Marks and J.D. Phillips JJ).
More recently, in Grincelis v House,[4] Gleeson CJ, Gaudron, Gummow and Hayne JJ articulated the statutory purposes of an award of interest:
As was noted in Gogic:
“The function of an award of interest is to compensate a plaintiff for the loss or detriment which he or she has suffered by being kept out of his or her money during the relevant period.”
There is no doubt that this is a very important purpose of statutory provisions providing for the award of interest on the amount of a debt or damages in respect of the period between the cause of action accruing (or, in some statutory provisions, the commencement of the proceedings) and the date of judgment. It may be, however, that statutory provisions for interest serve not only that purpose, but also a purpose of encouraging early resolution of litigation. That statutory awards of pre-judgment interest may have such a purpose may be more readily understood in relation to claims for debts or sums certain than in personal injury cases where it will often be in the interests of the plaintiff to wait until injuries have stabilised before bringing the action to trial. For present purposes, however, it is sufficient to have regard to the compensatory purpose of interest.
Legislative Scheme
[4] Grincelis v House (2000) 201 CLR 321 at [16] (footnotes omitted).
History
Section 30C was inserted into the Supreme Court Act in 1972.[5] It then provided:
[5] See Supreme Court Act Amendment Act 1972 (SA).
30C(1)Unless good cause is shown to the contrary, the court shall, upon the application of a party in favour of whom a judgment for the payment of damages, compensation or any other pecuniary amount has been, or is to be, pronounced, include in the judgment an award of interest in favour of the judgment creditor in accordance with the provisions of this section.
(2) The interest —
(a)shall be at the rate of seven per centum per annum or such lower rate as may be fixed by the court;
(b) shall be calculated —
(i)where the judgment is given upon an unliquidated claim — from the date of the commencement of the proceedings to the date of the judgment; or
(ii)where the judgment is given upon a liquidated claim — from the date upon which the liability to pay the amount of the claim fell due to the date of judgment, or in respect of such other period as may be fixed by the court; and
(c)shall be payable in respect of the whole or any part of the amount for which the judgment is given in accordance with the determination of the court.
(3) No interest shall be awarded in respect of —
(a)damages or compensation in respect of loss or injury to be incurred or suffered after the date of the judgment; or
(b) exemplary or punitive damages.
(4) This section does not —
(a) authorize the award of interest upon interest;
(b)apply in relation to any sum upon which interest is recoverable as of right by virtue of an agreement or otherwise;
(c)affect the damages recoverable upon the dishonour of a negotiable instrument;
(d)authorize the award of any interest otherwise than by consent upon any sum for which judgment is pronounced by consent; or
(e)limit the operation of any other enactment or rule of law providing for the award of interest.
Section 30C was amended in 1993[6] and now provides:
[6] See Statutes Amendment (Courts) Act 1993 (SA).
30C—Power to award interest
(1)Unless good cause is shown to the contrary, the court shall, upon the application of a party in favour of whom a judgment for the payment of damages, compensation or any other pecuniary amount has been, or is to be, pronounced, include in the judgment an award of interest in favour of the judgment creditor in accordance with the provisions of this section.
(2) The interest—
(a) will be calculated at a rate fixed by the court; and
(b) will be calculated in respect of a period fixed by the court (which must, however, in the case of a judgment given on a liquidated claim, be the period running from when the liability to pay the amount of the claim fell due to the date of judgment unless the court otherwise determines); and
(c) is payable, in accordance with the court's determination, in respect of the whole or part of the amount for which judgment is given.
(3)Where a party to any proceedings before the court is entitled to an award of interest under this section, the court may, in the exercise of its discretion, and without proceeding to calculate the interest to which that party may be entitled in accordance with subsection (2) of this section, award a lump sum in lieu of that interest.
(4) This section does not—
(a) authorise the award of interest upon interest; or
(ab) authorise the award of interest upon exemplary or punitive damages; or
(b) apply in relation to any sum upon which interest is recoverable as of right by virtue of an agreement or otherwise; or
(c) affect the damages recoverable upon the dishonour of a negotiable instrument; or
(d) authorise the award of any interest otherwise than by consent upon any sum for which judgment is pronounced by consent; or
(e) limit the operation of any other enactment or rule of law providing for the award of interest.
[Emphasis added]
Retrospective Operation
In Sager v Morton and Morrison,[7] the Full Court of this Court concluded that section 30C as enacted in 1972 was retrospective in its operation. Bray CJ observed:
I agree that s 30c of the Supreme Court Act 1935-1972 is retrospective in its operation in the sense that it extends to judgments delivered after the Supreme Court Act Amendment Act of 1972 came into force, even in actions commenced before that date. I think that the section itself shows that Parliament had in mind at least all judgments delivered after the commencement of the Act. I stress the words "upon the application of a party in favour of whom a judgment … has been, or is to be, pronounced". I cannot think that this wording would have been adopted if it had been intended to restrict the operation of the amending Act to judgments in actions begun after its commencement. Indeed, an argument could be advanced for the proposition that that wording even permits the re-opening of judgments pronounced before the amending Act came into force, though I can see very formidable obstacles to its success, but it is not necessary to discuss that now.
In addition, however, I agree also that the alteration to the law made by the section is procedural in the sense in which that word is used when the retrospectivity of statutes is called in question, and, in addition to the authorities cited by Zelling J., I refer to the decisions on costs; see Maxwell, Interpretation of Statutes, 12th ed. (1969) p. 224; Wright v. Hale. It has been held that statutes restricting or enlarging the right to costs apply to judgments delivered after the coming into force of legislation in actions commenced before it, even though, in a loose sense, it could be said that the rights of the parties with regard to costs, as they existed at the time the action was commenced, had been retrospectively altered. There is an analogy between the power to award costs to a successful party and the power to award interest to him.
[7] Sager v Mortonand Morrison (1972) 5 SASR 143 at 152-153 (footnotes omitted).
The courts of this State have treated the 1993 amendment as having retrospective effect. Authorities from other States dealing with comparable legislation have on occasions treated analogous legislation as substantive. However, in the present case there was no challenge to the retrospectivity of the 1993 amendments. It was accepted that Sager had resolved this question.
The State submitted that by removing the restriction on the award of interest from the date of the issue of proceedings and substituting a period to be fixed by the Court, the character of an award of interest fundamentally changed from one which was constrained by statute and which allowed a party to understand and know its exposure to interest once proceedings had been issued, to one in which an award of interest is entirely within the discretion of the Court. such that a defendant may be completely unaware that it is exposed to interest. Such is the position of the State in the present proceedings. However, it was submitted that the Court’s broad discretion provided by the terms of the amended section 30C would allow protection from any unfairness arising from the retrospective operation of the statute.
Calculating a Section 30C Award
A Wide Discretion
In Wheeler v Page[8] King CJ pointed to the wide discretions in section 30C(2) and (3):
[I]t is necessary to observe that they relate to the principles upon which a trial judge ought to exercise a discretion which is given him by the statute in very wide terms. The amount upon which interest is allowed, the period for which it is allowed, and the rate are all discretionary.
The discretion, however, must be exercised on a principled basis.[9]
[8] Wheeler v Page (1982) 31 SASR 1 at 4.
[9] Duke Group Limited v Pilmer & Ors (1999) 73 SASR 64 at [538].
Interest and Inflation
There has been considerable discussion in authorities throughout Australia concerning the construction and application of broadly comparable statutory provisions providing for the award of interest on damages. The Court in Grincelis[10] summarised the effect of aspects of earlier authority:
The question in Gogic was what rate of pre-judgment interest should be awarded under s 30c of the Supreme Court Act 1935 (SA) in respect of damages for a plaintiff's non-economic loss incurred before trial. The Court pointed out that, although the determinants of rates of interest had been the subject of much dispute among economists, it was clear that, during periods of significant inflation, commercial rates of interest reflect a component to compensate a lender for the decline, by reason of inflation, in the real value of money. And, because damages for pre-trial non-economic loss are assessed in accordance with the value of money at the time of trial, “[i]n no way is any loss which a plaintiff incurs by reason of being deprived of his or her damages for pre-trial non-economic loss brought about by inflationary factors”. Accordingly, the Court concluded that to award interest by reference to commercial rates on damages for that kind of loss incurred before trial would compensate the plaintiff for a “loss” which had not been sustained. That being so, the Court accepted that using a rate of 4 per cent which had been selected in Wheeler v Page, although “somewhat arbitrary” was more likely to achieve fair and reasonable compensation for plaintiffs than the use of a real interest rate figure derived, for example, by taking the commercial rate or a ten year bond rate and deducting some figure for inflation.
Essential to the reasoning in Gogic was the recognition that, pre-trial non-economic loss being assessed according to monetary values prevailing at the date of judgment, the damages which were awarded were unaffected by whatever may have happened to the purchasing power of money in the period between the accrual of the plaintiff's cause of action and judgment.
[10] Grincelis v House (2000) 201 CLR 321 at [17]-[18] (footnotes omitted).
Loss Sustained on an Ongoing Basis
In Wheeler v Page,[11] King CJ discussed the approach to be taken in circumstances where damages and losses continue to be sustained over time:
The first and second questions relate to period. The prima facie period provided in the section is from the issue of the writ until the date of judgment but there is a discretion to fix some other period. In Fire and All Risks Insurance Co. Ltd. v. Callinan the High Court said that “a proper exercise of discretion must necessarily involve the paying of due regard to the time of manifestation and to the duration of the various detriments in question”. Logically interest should run during the whole of the period for which a particular detriment is suffered. However, although it has never been decided that the section precludes the fixing of a period commencing at a date earlier than the issue of the writ, the intention is clear that in the generality of cases the commencing date of the period should be the date of the commencement of the action. If interest is allowed on the whole of the pre-trial loss for a period beginning at the date of the issue of the writ, the effect is that the plaintiff is not fully compensated for being kept out of that part of the damages which relates to detriments incurred before the issue of the writ, but is over-compensated in respect of the detriments occurring between the issue of the writ and judgment. Fairness requires that the discretion be exercised in a way which takes that into account. If the writ is issued soon after the injury is sustained or if for some other reason only a minor part of the pre-trial loss is sustained before the issue of the writ, it may be necessary to fix a sum by way of or in lieu of interest on the basis of a reduced period. In these circumstances judges sometimes calculate interest on the pre-writ loss for the whole period and interest on the post-writ loss for a reduced period.
[11] Wheeler v Page (1982) 31 SASR 1 at 4-5 (footnotes omitted).
The Rate of Interest and the Amount on which Interest should Run
Both parties accept that four per cent was the appropriate interest rate to be used. As the High Court observed in MBP (SA) Pty Ltd v Gogic:[12]
No doubt the selection of a figure such as the 4 per cent figure chosen in Wheeler v Page is somewhat arbitrary. But it represents the judgment of the Supreme Court of South Australia as to what is fair and reasonable compensation for a plaintiff in that State for being deprived of the use of his or her money after taking into account that, from time to time, the real rate of interest will rise above or fall below that figure. Until the present case it had been acted upon in South Australia for over seven years. In the circumstances, the use of the 4 per cent figure seems to us to be more likely to achieve fair and reasonable compensation for plaintiffs than the use of the real rate of interest figure — which may result at times in a plaintiff obtaining no or little interest and at other times an amount of interest greater than the return which could be achieved by real-life investors on a comparable sum after the incidence of income tax.
The parties also agreed that interest should run on a portion of the damages - $401,892.20. However, as earlier observed, there was disagreement as to the period over which interest should run and whether the amount of $401,892.20 should be adjusted to take account of the fact that the losses have been sustained over time.
A Lump Sum in Lieu of Interest
[12] MPB (SA)Pty Ltd v Gogic (1991) 171 CLR 657 at 666.
In Wheeler v Page,[13] it was also recognised that as a concomitant of the exercise of a wide discretion under section 30C of the Supreme Court Act, a judge may award a lump sum in lieu of interest:[14]
[T]here is an overriding discretion simply to award a lump sum in lieu of interest. This Full Court can do no more, in those circumstances, than to offer guidelines for judges who must exercise these discretions, with the object of achieving some reasonable degree of uniformity in the manner in which the discretions are exercised.
[13] Wheeler v Page (1982) 31 SASR 1.
[14] Wheeler v Page (1982) 31 SASR 1 at 4.
In the present proceedings I have concluded that it is appropriate to adopt this approach and to exercise the broad discretionary power and award a lump sum in lieu of interest.
In the course of my reasons in Trevorrow (No 5)[15] I made detailed findings about the compensable loss and damage sustained by the plaintiff. Those findings are set out in [1143] to [1203] of my judgment, which I incorporate by reference into these reasons. I also include the following findings of particular relevance to the awarding of a lump sum in lieu of interest:[16]
[15] Trevorrow v State of South Australia (2007) 98 SASR 136.
[16] Trevorrow v State of South Australia (2007) 98 SASR 136 at [1170], [1172], [1175]-[1179], [1188], [1191], [1203].
I find that the removal of the plaintiff from his family caused injury and damage. That injury and damage included the distress following removal and later short and long term disabilities, manifested through childhood and adult life.
...
I find that the return of the plaintiff to his mother and natural family, in the circumstances in which it occurred, exacerbated the damage that had already occurred and was already apparent by that time.
…
The plaintiff entered adult life with an impaired ability to cope with the problems of indigenous life. He lacked the personal resources developed by his siblings.
The plaintiff has suffered psychiatric and psychological illness. It has been accepted that this may be fairly described as a major depressive disorder. From time to time the illness has been grave. His problems and inability to cope may be contrasted with the resilience demonstrated by his siblings.
The plaintiff has suffered from ongoing depression. He will continue to do so. At times his depression has been disabling, at other times its effects have been less serious. He has needed and has received treatment from time to time. The plaintiff’s depression has manifested itself in misery, isolation and a sense of great unhappiness. In part this has been due to his perception that he does not belong to any community of people. He has no affinity to the Ngarrindjeri indigenous community. He has been unable to become a participating member of his wife’s indigenous community. As a result of his depression, he suffers feelings of a lack of any real worth or purpose.
I have reached the conclusion that the plaintiff has, thus far, generally had a miserable life. He does not belong. He feels isolated. His depression has led him to abuse alcohol. This abuse has compounded his problems.
I am satisfied, however, that the plaintiff’s symptoms have fluctuated and that, at times, and for not insignificant periods of his life, he has found life to be of value. For example, the plaintiff considers that his part-time work, as a drug and alcohol counsellor for Aboriginal youth suffering addiction, is worthwhile. Another example is his relationship with his grandchildren. This contact gives him some satisfaction.
...
I am satisfied that the plaintiff has lost an earning capacity as a result of his illnesses and that at times this loss has led to a loss of earnings. However, on the evidence I am quite unable to quantify those losses. An affidavit of loss was tendered but I have no confidence that the plaintiff was able to accurately recall his employment history and in particular whether his absences were related to ongoing depression or to his poor general health. This loss of capacity has only been a partial loss. The evidence does not allow any specific calculation to be made. The use of a multiplier is of no assistance. What is required is the exercise of a discretionary judgment. In the present case in making an award of general damages I have included such a discretionary allowance.
...
I am satisfied that the plaintiff has suffered from depression since early childhood. He will continue in the future to suffer from depression. As earlier observed, the symptoms associated with his depression have fluctuated and there have been periods of his life when he has been able to work, have social contact, participate in family activities and to a material degree enjoy life. On the other hand there have been significant periods of his life when his state of depression has led to symptoms that have caused him considerable distress. A review of the hospital records from the late 1960s to the present time disclose depression as an ongoing diagnosis. His depressive state is a mental illness and is compensable. This illness has led him to abuse alcohol which in turn has exacerbated his depressive symptoms. His depression has made it more difficult to resist alcohol abuse from time to time.
...
In assessing damages and having regard to the plaintiff’s poor health, I have concluded that the major component of the assessment relates to prejudgment losses. In the result I have reached the broad conclusion that 90% of the damages to be awarded are referrable to prejudgment losses.
It is also convenient to record extracts from the final paragraphs of my reasons in Trevorrow No 5):[17]
[17] Trevorrow v State of South Australia (No 5) (2007) 98 SASR 136 at [1228], [1231], [1233], [1235]-[1236], [1239].
The plaintiff, as an infant and as a child, was dealt with by the State without lawful authority in a manner that affected his personal well-being and freedom. He was the subject of misfeasance in public office. He was falsely imprisoned. He was the subject of breaches of the common law duty of care owed by the State.
...
The plaintiff had a very troubled childhood and adolescence. His siblings who remained with the natural family were able to overcome the difficulties they encountered and were able to achieve their potential in life. This was not so for the plaintiff. The plaintiff has struggled throughout life, suffering ongoing and serious depression. His adult life has been scarred by his earlier experiences. In these circumstances I have concluded that the State is liable to compensate the plaintiff.
...
I am satisfied that the conduct of the State, amounting to misfeasance in public office, together with the false imprisonment of the plaintiff, has been a material cause of the plaintiff’s long-term depression. It was this conduct that ruptured the bond between the plaintiff and his mother and natural family. The breaches of duty of care that occurred were also a material cause of his depression and other losses. Those losses include the loss of his Aboriginal identity. Although there may have been other contributing causes, the conduct of the State was a material contributing cause.
...
Where it is clear that a plaintiff has suffered loss the court should do its best to place a dollar value on that loss, notwithstanding the paucity or absence of evidence. The court is not permitted to abandon the task through want of evidence, but a discretionary judgment should be formed. As Heydon JA in New South Wales v Moss observed:[18]
Though the trier of fact in arriving at the discretionary judgment must achieve satisfaction that a fair award is being made, since what is involved is not the finding of historical facts on a balance of probabilities, but the assessment of the value of a chance, it is appropriate to take into account a range of possible outcomes even though the likelihood of any particular outcome being achieved may be no more than a real possibility.
I have found this assessment of damages challenging. There is always an inherent difficulty in equating personal injury with a dollar sum. The best that one can do is to adopt an holistic approach.
...
I make an award of damages in favour of the plaintiff in respect of his injuries and losses of $450,000.00. I have assessed the damages in the money of today – the day of the verdict.[19] I make an award of exemplary damages with respect to his unlawful removal and detention, that is, in respect of misfeasance in public office and false imprisonment of $75,000.00. The plaintiff is entitled to judgment in the sum of $525,000.00.
[18] New South Wales v Moss (2000) 54 NSWLR 536 at [87].
[19] O’Brien v McKean (1968) 118 CLR 540; Johnson v Perez (1988) 166 CLR 351.
In exercising my discretion, I have had regard to the reasons recorded in Trevorrow (No 5), including my findings and conclusions concerning the State’s breach of fiduciary duty and reasons for granting extensions of time. I have also had regard to the fact that the plaintiff’s losses have extended from the time of his separation from his family to the date of my judgment.
A relevant consideration, in the exercise of my discretion, is the fact that the State had no exposure to statutory interest until 1972 and was not aware of the plaintiff’s impending claim until the mid-1990s. The retrospective effect of the legislation in the present proceedings could be described as dramatic and as involving an element of unfairness. On the other hand, the plaintiff has been delayed in receiving his damages for a lengthy period.
Weighing all factors has led me to award a lump sum in lieu of interest in an amount of $250,000.00. The judgment in favour of the plaintiff is to include this amount.
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