Web Wealth Pty Ltd (ACN 096 047 022) v Callipari (No 2) - [2010] SADC 125

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
WEB WEALTH PTY LTD (ACN 096 047 022) v CALLIPARI (No 2)
[2010] SADC 125
Judgment of His Honour Judge Tilmouth
1 October 2010
PROCEDURE - JUDGMENTS AND ORDERS - INTEREST ON JUDGMENTS - RATE
It was appropriate to award interest on judgment in this case. A reasonable if not conservative rate was 6.5 per cent, however in the circumstances lump sum interest awarded.
District Court Act 1991 (SA) s 39; District Court Civil Rules 2006 6 R 261; Maidment v Davis (2000) 77 SASR 167; Supreme Court Act 1935 s 39, referred to.
Grincelis v House (2000) 201 CLR 321, applied.

PROCEDURE - COSTS
General rule - Costs follow the event - discretion conferred by s 42 of the District Court Act 1991. Depriving successful party of some costs on account of certain aspects of the conduct of its case.
District Court Act 1991 (SA) s 42; District Court Act Rules 2006 Rule 263(1), referred to.
Latoudis v Casey (1990) 170 CLR 534; Forlyle Pty Ltd v Tiver (2007) 252 LSJS 387; [2007] SASC 464, applied.

WEB WEALTH PTY LTD (ACN 096 047 022) v CALLIPARI (No 2)
[2010] SADC 125
The issue

The court delivered reasons in this matter in May 2010, making certain findings in and about a loan agreement of January 2005 and associated later agreements.[1] No final judgment was delivered. Further submissions were sought as to whether or not certain sums detailed later, should be brought into account before judgment was entered and as to consequential issues of interest and costs.[2] These reasons deal with those three outstanding issues.
[1] [2010] SADC 60
[2] At para [99]
The findings of the court
Before dealing with those questions, the critical findings should be detailed. The court found there was a loan in the sum of $630,000 taken by the defendant Mr Callipari personally and a company controlled by him, Helimount Pty Ltd dated 24 January 2005.[3] However it was held the plaintiff was not entitled to enforce this agreement as against Mr Callipari personally, because it elected to proceed against Helimount in enforcement proceedings taken out of the Federal Court of Australia, exercising insolvency jurisdiction.[4]
[3] At para [32]
[4] At paras [42-44]
On the other hand, it was held the plaintiff was entitled to enforce as against him a subsequent agreement, comprising a settlement of the Federal Court proceedings of 24 May 2006.[5] By this agreement the plaintiff agreed with Mr Callipari and Helimount, that Mr Callipari would himself pay $1.1 m by 5 July 2006 in order to bring those proceedings to an end. Failing that payment the parties reserved, in effect, their extant legal rights. I held this stood as “an effective, separate, freestanding arrangement, independent of that reached in January 2005”.[6] Mr Callipari failed to make the subject payment. Accordingly the court concluded the plaintiff was entitled to succeed on this contract as against Mr Callipari in the principal sum of $1.1 m, subject to the outstanding issues.[7]
[5]    Detailed at para [46]
[6]    At [48]
[7]    At [99]
The “set-off” issue
This question arises from two findings with respect to payments received by Web Wealth, the first shortly after January 2005 and the second as a consequence of the judgment of the Federal Court in favour of Helimount’s liquidator. In his reasons for judgment, Mansfield J ordered the liquidator to pay Web Wealth Pty Ltd such sum as represents the proceeds of the sale of two properties, the titles thereto being given to Web Wealth by Mr Callipari as security for the January loan.[8] His Honour found two mortgages handed over by Mr Callipari effectively to Web Wealth in support of the subject loans, were equitable mortgages which Web Wealth was entitled to enforce.
[8] Above at [6] Web Wealth Pty Ltd v Helimount Pty Ltd In Liquidation [2007] FCA 1936 [46]
The first a cash payment of $25,000, was received from Mr Callipari, however there was no evidence as to the capacity in which it was so given.[9] It was certainly applied to the benefit of the plaintiff. The second was a payment of $335,299.83 received to Web Wealth’s benefit on 3 January 2008 from the liquidator of Helimount, as a consequence of an order of Mansfield J in the Federal Court of 7 December 2007.[10]
[9] Above at [6]
[10] At [33]
It is not to the point that the plaintiff did not proceed in default of the payment by Mr Callipari to proceed any further to enforce in the winding up proceedings. It is clear from the Federal Court judgment there were no other remaining funds to be realised, other than what was paid over to Web Wealth.[11] In any case clause 3.2 of the May 2006 agreement allowed it to enforce in an “appropriate court”, which it has done in these very proceedings.
[11] [2007] FCA 1936 at [5]
The question then becomes whether these sums should be deducted from the $1.1 m for which Mr Callipari is now liable? The findings of Mansfield J were based fairly and squarely on the January 2005 loan agreement.[12] The primary liability thereunder was the principal of $630,000, plus interest at the rate of $63,000 per month, so that as of the date of winding up, 26 July 2006, this had become $1,701 m or thereabouts, and in any event well beyond $1.1 m. The simple fact of the matter is that on any reckoning, the combined total of the subject payments - $360,299.83 – could not bring that debt below the level of $1.1 m due on the agreement of May 2006, so that in that circumstance it is not appropriate to set them off or deduct them therefrom. Furthermore, as to the $25,000 paid by Mr Callipari, it is difficult to accept this was not brought into account in the negotiations arriving at that figure of $1.1 m, when that agreement was reached.
[12] [2007] FCA 1936 at [3], [7], [14-17]
The question of interest
The court has upheld a contract effectively of loan in the principal sum of $1.1 m entered into on 24 May 2006. The plaintiff submits s 39 of the District Court Act 1991(SA) applies. This provides that:
39—Pre-judgment interest
(1)     Unless good reason is shown to the contrary, the Court will, on the application of a party in whose favour a monetary judgment has been, or is to be, given include in the judgment an award of interest in accordance with 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, in accordance with the Court's determination, payable in respect of the whole or part of the amount for which judgment is given.
(3)     The Court may, without proceeding to calculate interest under subsection (2), award a lump sum instead of interest.
…
No sufficient reason was put forward suggesting that other than the general rule should be applied in this instance. Although counsel for the defendant made a number of points directed to the plaintiff’s conduct of the case, these essentially go to the question of costs. In so far as the defendant contends there should have first been a demand, there is no requirement for demand to be made for what is effectively a statutory consequence following a favourable judgment. It is sufficient that interest was claimed in the original statement of claim.
Although paragraph 3 of the subject agreement itself wrapped up the principal sum as “inclusive of interest up until and including 5 July 2006”, that says nothing about the liability for interest thereafter. An award of interest is designed to compensate a successful party for being kept out of the use of monies it was entitled to earlier than judgment: Grincelis v House.[13] Accordingly it is appropriate to award interest, the next question then being at what rate?
[13] (2000) 201 CLR 321 at [16]
For this purpose the plaintiff has pointed to DCR 6R 261, relating to interest on judgment debts. This is not the same period contemplated by s 39: Maidment v Davis.[14] The rate provided for in this rule is 6.5 per cent per annum from 4 September 2006 (when the new rules took effect) to 30 September 2008, at the rate of 10 per cent between 1 October 2008 to 30 June 2010 and thereafter at the rate of 6 per cent, plus in each instance the cash rate of interest “last set by the Reserve Bank of Australia prior to 1 July”.
[14] (2000) 77 SASR 167
The precise rate at which interest is ultimately allowed is in the unfettered discretion of the court. Practice Direction 13 sets out as a guide only, suggestions for pre-judgment interest under s 30C of the Supreme Court Act 1935 (the direct equivalent to s 39), at the said cash rate plus 4 per cent.[15] According to the Reserve Bank of Australia website, the effective cash rate from 5 May 2010 is 4.5 per cent.[16]
[15] See Lunn Civil Procedure of South Australia Volume 1 page 6770.51
[16] >
On any footing, the proposal of the plaintiff to fix interest at a rate of 6.5 per cent per annum, is both conservative and eminently reasonable. However interest should only accrue from 5 July 2006 when the subject payment was supposed to have been made. This is effectively cancelled out in the calculation by Mr Dal Cin in his substituted schedule B, which omits a further month from 26 August to the present time.[17] In any case in my view a lump sum is an appropriate vehicle for the calculation of interest for a matter running the length this debt has. Accordingly I propose to allow lump sum interest of $240,000.
[17] Total calculation of $245,756.36 at 6.5 per cent, after factoring in the receipt of the $335,299.83 in January 2008
Costs
Several points were made on both sides of the bar table with respect to the issue of costs. The plaintiff sought full costs, whereas the defendant argued at best, for an order that each party bear its own costs, or alternatively the plaintiff should be denied a substantial proportion of costs owing to its conduct of the case.
There was no dispute that costs are to be awarded in the unfettered discretion of the court and that as a general rule costs should follow the event: s 42 District Court Act Rule 263(1) District Court Civil Rules 2006. Nor was there any argument as a matter of principle, that the successful party has a reasonable expectation of obtaining an order for costs, unless for some reason connected with the case, a different order was warranted: Latoudis v Casey;[18] Forlyle Pty Ltd v Tiver.[19]
[18] (1990) 170 CLR 534 at 557 and 569
[19] (2007) 252 LSJS 387; [2007] SASC 464 at [29]
For the reasons following, I am of the view that the plaintiff should be awarded 80 per cent of its costs on account of these factors related to the conduct of its case in this litigation:
·The plaintiff’s original statement of claim founded on the January 2006 agreement and it was not until late amendments towards the end of the trial (19.2.10) that the subsequent agreements were sought to be enforced.
·The paucity of documents led by the plaintiff in proof, their confusing nature and the multiple versions of the January 2006 loan document, caused delay, and at one point led to an adjournment so that the plaintiff could consult its accountant.[20]
·The fact that the plaintiff failed on a wider claim of more than $4 m and recovered effectively about one quarter of that.
·The accounting material presented by the plaintiff was extremely thin, requiring close examination of the objective circumstances, making proof of ownership of the loan funds more difficult than it ought to have been, especially as some undiscovered documents were produced during the trial.[21]
·The fact that the plaintiff failed on issue estoppel.[22]
[20] See judgment paras [23-24]
[21] See judgment paras [18 – 20]
[22] See judgment paras [61-69]
These factors combined translated in my estimation to extending what would have been no more than a four day trial into one lasting five days.
Orders
For the above reasons judgment will be entered in favour of the plaintiff against the defendant for $1.1 m, based on the agreement of 24 May 2006, plus with lump sum interest of $240,000, making a total of $1.34 m. There will be an order that the plaintiff have 80 per cent of its costs to be agreed or taxed on a party to party basis.
As nothing of substance was put forward in support thereof, the oral application by the defendant for a stay of judgment is refused.