Eadie v National Bank of New Zealand Ltd HC Auckland CP1290/91
[2002] NZHC 706
•4 July 2002
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY CP.1290/91
BETWEEN: DAVID GEORGE EADIE
and
LEONA JEAN EADIE
Plaintiffs
A N D: NATIONAL BANK OF
NEW ZEALAND LTD
Defendant
Hearing: 1 July 2002
Judgment: 4 July 2002
Counsel:Julian Miles QC and John Clark for plaintiffs Doug Alderslade for defendant
RESERVED JUDGMENT OF WILLIAMS J
Solicitors:
Edwards Clark Dickie, DX CP24032 Auckland, for plaintiffs
Chapman Tripp Sheffield Young, DX CP24029 Auckland, for defendant
Copy for:
Julian Miles QC, DX CX10258 Auckland
Issue
At the conclusion of this Court's reserved judgment delivered on 12 December 2001, the Court found in favour of the plaintiffs and entered judgment for them on their first cause of action against the defendant for the agreed sum of $334,424.47, reserving leave for the parties to make submissions as to the rate and duration of any award of interest on that sum. This judgment deals with the further hearing which took place on the question of interest.
Facts
For a detailed review of the facts relating to this claim, reference should be made to the earlier judgment. For present purposes, the following chronology should suffice:
Period up to 15 August 1985: | Negotiations between plaintiffs and defendant concerning foreign exchange loan with loan agreement executed and drawdown occurring. |
3 September 1985-3 September 1986: Period of plaintiffs' claimed
losses arising out of defendant's
refusal to re-denominate
currency ($220,415) plus excess interest paid for period 3September 1985-23 October
1990 ($114,009.47).
6 November 1990: Offshore loan fully repaid.
15 August 1991: Plaintiffs commence the
proceeding.
14 August 1992: Plaintiffs serve proceeding on
defendant
September 1992-November 1993: Particulars provided, discovery sought, lists filed, inspection takes place, amended claim and defence filed.
November 1993-October 1995: Plaintiffs engaged in settlement negotiations with defendant and little occurred in furthering proceeding.
October 1995-May 1996: Discussions concerning
quantification, timetable sought, further and better discovery sought, and parallel private settlement negotiations.
May 1996-October 1997: Defendants did not inspect plaintiffs' documents though available, correspondence over adequacy of defendant's
discovery with plaintiffs
applying for further discovery, culminating in defendant's inspection and withdrawal of plaintiffs' application for further discovery.
October 1997-July 1999:
August 1999-June 2000:
August 2000-December 2001:
Settlement negotiations
abandoned, plaintiffs change solicitors, timetable sought, defendant applies to dismiss proceedings for want of prosecution culminating in
reserved judgment of
Nicholson J delivered 19 July 1999 dismissing defendant's application.
Defendant files appeal. Appeal heard and dismissed on 26 June 2000.
Discovery against non-party,
refinement of pleading,
preparing for trial, trial and delivery of judgment.
Certain points need to be noted concerning that generalised broad chronology.
The first of those is that there was a dispute between the parties as to the degree of settlement activity between the parties in the periods mentioned.
The second is to note that in his reserved judgment on the striking-out application, that learned Judge noted that the delay between the commencement and service of the proceeding was said to be caused by Mr and Mrs Eadie's not wishing to antagonise Countrywide further as they were endeavouring to negotiate a more favourable financial package. That, and the dispute over the degree of settlement activity notwithstanding, the learned Judge took the view that the delay of 12 years between 1986 and the date he heard the striking-out application, including 7 years from the commencement of the proceedings to the hearing before him, could only be regarded as inordinate. That finding was not challenged on appeal.
Turning to responsibility for the delay, the Judge held (p 7)
I am of the view that responsibility for the overall delay lies mainly with the Eadies but that Countrywide contributed to it in substantial measure. The Eadies were hopeful of recovering their losses by a change in their foreign currency fortunes. When this did not transpire they sought amicable resolution with Countrywide. To achieve this they delayed issuing and then serving proceedings. They then found themselves in a position of difficulty in proving their claim. When they became aware of Mr Murray's apparent knowledge and interest in foreign exchange transactions they hitched their wagon to his star. When the brightness of that star diminished, they sought other expert assistance. They then sought to make up lost time by prompt completion of discovery and inspection and they sought timetabling. However, their efforts were thwarted by the substantial delays of Countrywide in the inspection and discovery of documents and its deferral of timetabling.
The Eadies filed their list of documents in October 1994. Their documents were not inspected by Countrywide until October 1997, some three years later. The Eadies sought further and better discovery from Countrywide in March 1996 but a supplementary list of documents was not provided by Countrywide until September 1997. There had been substantial omission of documents in initial discovery.
I consider that Countrywide bears a substantial part of the responsibility for the inordinate delay in the resolution of the proceedings. ...
The Judge then found that the passage of time when seen against the factual background not create substantial prejudice for Countrywide. He dismissed the application.
The Court of Appeal accepted (para [14] pp 5-6) Nicholson J's view that Mr and Mrs Eadie were the principal cause of delay, saying that they "preferred to negotiate settlement .. and dragged their feet so far as settlement was concerned until towards the very end" but, as far as Countrywide was concerned, the Court of Appeal took the view that Nicholson J was in error in suggesting that Countrywide contributed to delaying its inspection of Mr and Mrs Eadie's documents since it was up to the opposing party to inspect or not. He was also in error in his view that Countrywide did not co-operate in timetable applications because the Court's assistance was not invoked. However, the Court of Appeal accepted that the period taken by Countrywide to produce further discovery unreasonably delayed the hearing by at least 18 months. The overall delay was unjustified and Countrywide contributed in that regard. However, the Court of Appeal agreed with Nicholson J that serious prejudice to Countrywide had not been demonstrated. As to the interests of justice, while the Court of Appeal agreed (para [18] p 7) that Mr and Mrs Eadie's "conduct in not issuing ... until there were limitation dangers and even then delaying service for the maximum period invites some criticism" it held that the claim should not be dismissed for that fact and that there was (ibid) "room for the view it was reasonable to await crystallisation of quantum as well as possible favourable movements in the forex market for some of that period". The Court of Appeal took the view that there were "unsatisfactory" aspects to the speed at which the proceeding continued but noted that both parties were partially responsible. The appeal was dismissed.
Countrywide did not dispute that Mr and Mrs Eadie were entitled to interest on their judgment but, from that résumé it will be seen that it submitted that the period for which interest should be awarded should be reduced because of the factual background and the plaintiffs' delays at times during the lengthy period since the loan the subject of the claim was drawn down. There was also a dispute as to the appropriate rate.
Submissions and Law
For Mr and Mrs Eadie, Mr Miles QC submitted that the Court should follow what he suggested was the general rule, namely that interest should be paid from the
date the cause of action arose down to judgment, relying on Day v Mead [1997] 2 NZLR 443, 463-464, Somers J, where the following appears :
The first and obvious point is that s 87(1) confers a discretion — "the Court may, if it thinks fit" order interest "on the whole or any part of the debt or damages for the whole or any part of the period between the date when the cause of action arose and the date of the judgment". The discretion not being limited by any express provision must therefore be exercised as the justice of the case requires.
Next I think the general purpose for which the power was conferred on the Court was to enable proper compensation to be given to the plaintiff. So long as he is out of the debt or damages the plaintiff is unable to obtain those advantages which possession of the money to which he is entitled would afford him. The corollary is that the defendant who has had the money, but ex hypothesi ought not to have had it, enjoys its use; he may have put it out at interest or otherwise have profitably employed it, or, if he needed to borrow in order to pay he has saved the interest he would have incurred in such borrowing. In times of inflation these matters have particular force ...
Third, interest could hardly be claimed under s 87(1) where the transaction between the parties involves an agreement to pay interest at a rate as great as or exceeding the statutory rate down to such time as the debt or damages are paid or merge in the judgment. Whether it would apply where the contractual rate is less than the statutory rate may be left until the question arises. ...
Upon these considerations I would conclude that generally justice may require interest to run from the date the cause of action arose down to judgment, for it is from that date that the plaintiffs entitlement to the debt or damages arises. ...
There are cases in which interest has been refused or a lesser rate awarded as an expression of disapproval of the conduct of the plaintiff or as a punishment for his delays and to encourage expedition in other cases. ... I would not go so far as to say that a plaintiffs delays may not be brought to account; but I consider they require to be weighed carefully against other factors. A defendant has opportunities of bringing a case to trial, the award of interest is compensatory, and, as mentioned above, the defendant will have had the use of the plaintiffs money or has been saved from borrowing at interest in order to pay the plaintiff. It is also material that the maximum rate of interest bears little relation to commercial rates. To a debtor litigation may well be cheaper than an overdraft. In the end it is a question of what the justice of the case requires. There are no inflexible rules as to the rate to be awarded or the date from which it should run.
Hillyer J held (at 469) that defendants are "entitled to let sleeping dogs lie' but ... should not complain about the consequences".
Those observations, in this Court's view, need now to be seen against the background of R 426A which has been in force since 1 January 1993 and which, in this Court's view, reinforces the advantages to defendants of letting "sleeping dogs lie". Secondly, similar expressions of principle to that in Day v Mead can be found in Equiticorp Industries Group (In Statutory Management) v The Crown (No.3) (Judgment No.51) [1996] 3 NZLR 690, 692 and O'Malley v Garden City Helicopters Ltd (CP73/87 HC Christchurch, 5 February 1997, pp 64-65) varied on appeal Garden City Helicopters Ltd v O'Malley (CA 31/97, 11 September 1997, pp 12-13).
Though in submissions originally filed on their behalf Mr and Mrs Eadie were prepared to concede a deduction of one year's interest for their part in the delays in this proceeding, at the hearing Mr Miles resiled from that and submitted that the plaintiffs should be allowed interest for the whole period from drawdown.
For Countrywide, Mr Alderslade submitted that the commencement date for interest was discretionary (Wilson & Horton Ltd v Attorney-General [1997] 2 NZLR 513, 530) and that interest entitlements may be truncated for plaintiffs' failing to exercise their rights (Equiticorp (supra), Volk v Hirstlens (NZ) Ltd [1987] 1 NZLR 385, 395) that delay including delay after commencement of proceedings (O'Malley (supra)).
Both counsel made submissions as to the appropriate rate with Mr Alderslade helpfully providing figures from Countrywide showing that the average rate paid by it for 90-day term deposits between 3 September 1986, the date of conversion into USD, and 14 August 1992 the date of service, was 13.7% while the average rate during the period from January 1993 to December 2001 for such deposits was 6.6%.
Mr Miles submitted that Mr and Mrs Eadie should be awarded interest at the maximum allowable rate, 11%, throughout partly to compensate them for the deficiency in recovery prior to August 1992. Alternatively, he submitted that 8% would be the appropriate rate drawing attention to that rate being allowed in Garden
City Helicopters, Topaz Holdings Ltd v Clark (CP31/95, HC Rotorua,11 August 2000, Williams J, para [30] p13), 11% in W & R Jack Ltd v Fifield (CP436-IM01 HC Auckland, 14 December 2001, Nicholson J, para [30] p11), 10% in Commercial Helicopters Ltd v Attorney-General (CP37/93 HC Hamilton, 8 March 1994, Hammond J, pp 28-29) and 7.5% in Kirk v Valiant Hooker & Partners (2000) 15 PRNZ 9, paras [16] [20] pp 12-13). The Court notes that the maximum allowable rate after 1 August 2002 will be 7.5%.
Decision
Having carefully considered those submissions, re-read the various judgments concerning this claim and reflected on the matter, the Court first takes the view that no allowance for interest should be ordered for the period up to the service of the claim on Countrywide on 14 August 1992.
The reasons for the Court taking that view are, first, because $114,009.47 of the judgment in their favour was for what they called excess interest paid in the period up to 23 October 1990 as a result of Countrywide's failure to switch their loan from CHF to USD. Secondly, the Court takes the view, in common with the Court of Appeal's view on delay and commencement, that it was reasonable for Mr and Mrs Eadie to await crystallisation of quantum. It would not be reasonable to order Countrywide to pay interest until it was aware of the amount of the claim and, indeed, aware that there was to be a claim. In that latter regard, the diary note cited in the Court's earlier judgment gives some indication of Mr and Mrs Eadie's intention to sue Countrywide but it may be contrasted with the formal notification they gave their forex managers and the fact that they continued to deal with Countrywide for about five years after that notification before serving them with proceedings. Further, again as the Court of Appeal noted (para [14] p 6), issuing the proceedings when they did solely to avoid limitation problems and serving them on the last possible day not requiring extension of the period for service under R 128 cannot be justified by their wish to negotiate with Countrywide over the intervening period.
As perhaps something of a postscript concerning this period, even had the Court been prepared to award Mr and Mrs Eadie interest prior to the date they served the claim on Countrywide, it would not have been prepared to increase the rate of interest after that date above the justifiable rate simply to compensate Mr and Mrs Eadie for the fact that they could not receive more than the statutory maximum of 11% prior to that date. If Parliament has seen fit to impose a statutory maximum for interest awards, it would not be proper to circumvent it by awarding a higher than justifiable rate for another period so as to compensate for the lack of any higher maximum during a period of high interest charges.
It follows that, in the Court's view, the appropriate commencement date for payment of interest is 14 August 1992.
The next question therefore is whether the plaintiffs should be awarded interest for the whole of the period from that date to the date of judgment.
The only basis on which it was contended that interest should not run for the whole of that period was because the period had been attenuated by delays of the parties. Countrywide's delays are of no consequence in relation to interest since it is automatically penalized by an award of interest throughout the period of its own delay. The only relevant period of delay is therefore that of the plaintiffs.
In this Court's view, reductions in interest awards for delays on the part of plaintiffs should be approached on a broad front, not counting the issues on a day to day basis but striving to ensure the plaintiffs received proper compensation for being deprived of the use of the money to which the Court has found them entitled and looking at the position overall to endeavour to find a just and appropriate level and period of compensation.
Seen in that light, the only part of the period between 14 August 1992-12 December 2001 where little occurred in the conduct of the proceedings as a result of the plaintiffs' delays, was the period of approximately two years between about November 1993 and November 1995. The Court has not overlooked that during that period Mr and Mrs Eadie claimed they were engaged in private settlement
negotiations with Countrywide — an allegation Countrywide refutes — but, as the Court of Appeal noted ( para [14] p 6) "delays to negotiate are not sufficient justification". Progress was slow and spasmodic during other periods of the August 1992-December 2001 time span but not in ways wholly attributable to the plaintiffs or at least not in ways which should penalise them by not awarding interest for those periods.
In the light of that, in the Court's view Mr and Mrs Eadie should be entitled to an award of interest against Countrywide for the whole of the period 14 August 1992-12 December 2001 with the exception of the two years mentioned.
Turning to rate, in the Court's view the 90-day bill rate paid by banks to customers during the period in question is a guide, but only an approximate one, to the level of interest obtainable by investors for the use of their money in other investments. Accordingly, the average 90-day deposit rate, January 1993-December 2001 of 6.6% is somewhat lower than is appropriate. Having regard to the decisions earlier reviewed, in this Court's view the appropriate rate of interest to be awarded is 7.5%.
Result
In the light of all of that, the Court's formal orders are :
[a]That the plaintiffs are entitled to an award of interest from the defendant on the sum for which judgment has been entered, $334,424.47, for the whole of the period from 14 August 1992 down to the date of delivery of this Court's judgment on 12 December 2001 with the exception of two years during that period at the rate of 7.5% throughout and are further entitled to interest at that rate on that sum from the date of entry of judgment down to the date of payment.
[b]The plaintiffs are entitled to the costs of this application. Despite the Court's misgivings in its Minute of 11 February 2002 as to the appropriateness of the course agreed, the parties advised in their
memorandum filed three days earlier that Countrywide has appealed the decision of 12 December 2001 to the Court of Appeal and the parties have agreed to defer quantification of all issues of costs until the appeal is determined. Formal quantification of the costs of this application — whether on a Category 2B or other basis — is accordingly reserved until all questions of costs are to be determined.
WILLIAMS J.
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