Jones v WHK Sherwin Chan & Walshe HC Auckland CIV-2009-485-001324
[2011] NZHC 1539
•31 October 2011
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2009-485-001324
BETWEEN SIR ROBERT EDWARD JONES, YORGEN HOLDINGS LIMITED AND TIROHANGA FAMILY TRUST Plaintiffs
ANDWHK SHERWIN CHAN & WALSHE First Defendant
ANDSHERWIN CHAN & WALSHE LIMITED (IN LIQUIDATION)
Second Defendant
ANDWHK (NZ) LIMITED Third Defendant
Hearing: On the Papers
Counsel: M P Reed QC, M G Colson and B S Clarke for Plaintiffs
L J Taylor and P H V Cheng for Defendants
Judgment: 31 October 2011
JUDGMENT OF WHATA J AS TO COSTS AND INTEREST
This judgment was delivered by Justice Whata on
31 October 2011 at 3.00 p.m., pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date:
Solicitors:
Bell Gully, PO Box 291, Wellington
Minter Ellison Rudd Watts, PO Box 2793, Wellington
SIR ROBERT EDWARD JONES, YORGEN HOLDINGS LIMITED AND TIROHANGA FAMILY TRUST V WHK SHERWIN CHAN & WALSHE HC WN CIV-2009-485-001324 31 October 2011
[1] In my judgment on this matter, delivered on 25 July 2011, I ordered that the second and third defendants pay the sum set out at paragraph [211] of the judgment, together with interest and costs to be determined in accordance with paragraphs [214] – [216] of the same judgment. At paragraph [214] and [216] I intimated that a modal interest rate may be appropriate for the purposes of quantifying interest payable by the second and third defendant. I also indicated that I was minded to award costs to the plaintiffs on a Category 2B basis together with reasonable disbursements.
[2] I have now received memoranda of counsel dealing with both costs and interest, including reply submissions from the plaintiffs.
Summary of parties’ positions
[3] The parties are fundamentally at odds both as to the quantum of legal costs and interest. I now summarise their respective positions.
Plaintiffs’ claim
[4] The plaintiffs claim:
(a) Increased and indemnity costs; and
(b) Interest at the full Judicature Act interest rate, that is 8.4 per cent from
30 June 2011 and 5 per cent thereafter. [5] The total costs sought by the plaintiffs are:
(a) Uplift and indemnity basis:
(i) Increased costs up to the Calderbank offer in the sum of
$65,823.45;
(ii)Indemnity costs from the date of the Calderbank letter in the sum of $290,201.65; or
(b) Costs on a 3B scale: $119,679; and
(c) Witness costs: $390,761.05.
[6] The plaintiffs submit that there should be a substantial uplift in costs to
reflect the defendants’ conduct in this case including:
(a) A refusal to admit liability for negligence until after the plaintiffs’
briefs had been exchanged.
(b) A refusal to accept a Calderbank offer; and
(c) The pursuit of irrelevant or hopeless arguments which extended the duration of the trial, and significantly increased the plaintiffs’ costs.
[7] The plaintiffs elaborate on those arguments in the following terms:
(a) Citing Bradbury v Westpac Banking Corp,1 and r 14.6(3)(b)(ii) of the High Court Rules, increased costs may be ordered where there is a failure by the paying party to act reasonably.
(b) Indemnity costs are justified from the date of the Calderbank offer (8
March 2011), and increased costs are sought up to the date of that offer.
(c) The defendants forced the plaintiffs to bring proceedings in relation to what was clear liability, and despite an acknowledgement of negligence at a meeting as early as 5 February 2009.
(d)The defendants persisted with hopeless technical arguments, including that each entry in the inter company ledger was a separate loan and
1 Bradbury v Westpac Banking Corp [2009] 3 NZLR 400 (CA).
alternatively that entries for the year were aggregated into annual loans. They also raised novel and unmeritorious arguments as to benefits and costs setoffs and relied on an unrealistic counterfactual.
(e) As to indemnity costs, r 14.11 provides that subject to the Court’s overriding discretion, a party who makes a Calderbank offer will be entitled to costs on steps in the proceedings following the offer if it was for more money, or was more beneficial than the judgment obtained by the other party. In this case, the Calderbank offer constituted a significant concession and ought to have been accepted by the defendants in all of the circumstances (explained below).
(f) Other factors justifying indemnity costs include the defendants’
conduct escalating costs unnecessarily. Examples include:
(i)The need for detailed evidence addressing offsetting benefit arguments;
(ii)Detailed consideration of hopeless technical arguments in relation to intergroup lending;
(iii) Requirement of Professor van Zijl to specifically address the
defendants’ offsetting costs arguments.
[8] If the Court is not minded to grant indemnity or increased costs, the plaintiffs submit that the proper categorisation is category 3. The plaintiffs submit that the proceeding raises issues of complexity and significance requiring senior counsel. A
raft of preliminary matters needed attendance.2 The plaintiffs observe that
2 Including: whether the defendants should be allowed to plead and/or argue contributory negligence; whether evidence by the defendants’ experts supporting a contributory negligence claim was admissible; whether the defendants should be allowed to amend their pleadings at trial; ascertaining the scope of the duty of care owed by the defendants, and the nature of the breach of that duty; whether the resultant damage was causally connected to the breach and/or not (in law) too remote; whether the plaintiffs properly mitigated their losses, and in particular whether it was reasonable for the plaintiffs to rely on the Ernst & Young advice (which in turn involved an assessment of whether the Ernst & Young advice was wrong); and whether the plaintiff gained any benefits despite the negligent advice given by the defendants and whether the plaintiffs could have avoided taxation without incurring offsetting costs (these ―counterfactual‖ arguments were the focus of considerable
significant sums of money were at stake demanding the need for senior counsel and juniors. This is further reflected, they say, by detailed expert evidence required to address all of the issues.
[9] The plaintiffs further submit that Band B is the appropriate starting point.
Defendants’ position on costs
[10] The defendants consider that costs on a 2B scale are appropriate. The defendants submit that as liability was admitted, the sole issue was quantum of the plaintiffs’ losses. This was not a proceeding that, because of particular complexity or significance, required counsel to have special skill and experience in the High Court. A comparison is made to the decision of Calvert v Price Waterhouse Coopers.3
[11] The Band B time allocations as per the plaintiffs’ memorandum are accepted.
[12] In relation to the plaintiffs’ claim to increased costs, the defendants contend
that:
(a) The parties seeking increased costs bear the onus of establishing that an award is justified;
(b) It must be demonstrated that there is a failure to act reasonably;
(c) An uplift of more than 50 per cent above the applicable scale will not generally be appropriate.4
(d)There is no basis for awarding increased costs pursuant to r 14.6(a) of the High Court Rules as the plaintiffs accept that the band B time
allocations are appropriate;
pre-trial debate between the parties).
3 Calvert v Price Waterhouse Coopers (2004) 21 NZTC 18,792 (HC) (a negligent tax advisor case involving a four day hearing).
4 Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897.
(e) Rule 14.6.3(3)(b) requires that the plaintiffs must demonstrate that the defendants have contributed unnecessarily to the time or expense of a proceeding and in particular have pursued arguments that lacked merit and failed without reasonable justification to accept an offer of settlement.
[13] As to the substance of the plaintiffs’ claims, it is emphasised that the defendants accepted in open correspondence a preparedness to admit negligence for the purposes of settlement discussions. Arguments as to quantum were reasonably based and part of the problem lay in the plaintiffs’ refusal until as late as February
2011 to clearly articulate the plaintiffs’ position on the counterfactual.
[14] Dealing with the plaintiffs’ claim that the defendants’ arguments were irrelevant or hopeless, the defendants contend:
(a) Mr Lennard and Dr Harley’s evidence was admitted by me on the basis that it was both relevant and of assistance. (b)
There was nothing in my judgment to characterise the arguments as
hopeless or without evidential foundation or doomed to fail. (c)
By analogy to Commerce Commission v Bay of Plenty Electricity
Ltd,5 the evidence and arguments put forward by the defendants
required, and were given, proper consideration by the Court and that the defendants succeeded on the alternative argument, namely that the inter company lending matured within the five year period. (d)
Simply finding in favour of the plaintiffs does not mean that the
defendants’ arguments lacked merit. [15]
On
the question of indemnity costs, the defendants remind me of
circumstances in which indemnity costs have been ordered. The defendants further
contend that in order for the plaintiffs’ Calderbank offer to justify an award of
5 Commerce Commission v Bay of Plenty Electricity Ltd HC Wellington CIV-2001-485-917, 4
December 2008.
increased costs it must be shown that there was no reasonable justification for refusal of the offer.
[16] The defendants contend that their rejection of the Calderbank offer was reasonable with an offer of $3.3 million as at 23 December 2010 in full and final settlement. That reflected, essentially, the assessment of the plaintiffs’ true tax liability and use of money interest, with no deduction for either costs or benefits. The defendants also point to correspondence from Minter Ellison to Bell Gully setting out the basis for moving forward with that settlement offer.
[17] That offer was then increased to $3.7 million on 14 March 2011.
[18] The defendants contend, therefore, that indemnity costs should be reserved for cases of bad or very unreasonable behaviour, running arguments in disregard of known facts or clearly established law.
[19] On the question of disbursements the defendants dispute the following matters:
(a) Mr Blaikie’s fees should be limited to attendances in preparing his
brief of evidence, in particular they note the following:
(i)They should not have to pay for Ernst and Young’s advice in connection with the audit in the plaintiffs’ voluntary disclosure.
(ii)Mr Blaikie was not an independent expert witness and therefore should not be reimbursed on a time in attendance basis, and some of the fees relate to time spent reviewing pleadings and input into legal submissions and argument.
[20] The defendants also submit that the travel and accommodation costs for
Mr Reed QC are not reasonably recoverable and do not meet the criteria in r 14.2(2).
[21] Rule 14.1 confers a general discretion on the Court to award costs. That discretion is not unfettered and should be exercised in accordance with the general scheme of Part 14, particularly rr 14.2 to 14.10.6 When the discretion is exercised outside the general scheme of those Rules, then it must be undertaken in a considered and particularised way.7
[22] As set out in Holdfast New Zealand Ltd v Selleys Pty Ltd8 the following steps should be followed when assessing costs:
1. Categorise the proceedings under r 14.3.
2. Work out a reasonable time for each step under r 14.5.
3. Consider whether extra time is justified.
4.Step back and assess the overall entitlement to costs, including under r 14.6 dealing with increased and indemnity costs.
Increased costs
[23] Increased costs may be awarded where one party can show that the other party failed to act reasonably.9
[24] The Rules further specifically contemplate an increased costs award:
14.6 Increased costs and indemnity costs
…
(3) The court may order a party to pay increased costs if—
6 Refer Glaister v Amalgamated Dairies Ltd [2004] 2 NZLR 606 at [24].
7 At [28].
8 Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 8979 Bradbury v Westpac Banking Corp [2009] NZLR 400 (CA) at [27].
(a) the nature of the proceeding or the step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band C; or
(b) the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—
(i) failing to comply with these rules or with a direction of the court; or
(ii) taking or pursuing an unnecessary step or an argument that lacks merit; or
(iii) failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or
(iv) failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or
(v) failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; or
…
[25] The Court of Appeal further clarified in Holdfast NZ Ltd10 that any increase above 50 per cent on the costs produced by steps 1 and 2 is unlikely, given that the daily recovery rate is two-thirds of the daily rate considered reasonable in the particular proceedings.
Calderbank offers
[26] Of particular relevance under this heading is the approach taken to settlement and Calderbank offers. The plaintiffs accept that an offer does not by itself give rise to increased or indemnity costs. A party must be shown to have pursued a proceeding unreasonably following a settlement offer. The reasonableness of the rejection is assessed at the time of the offer, not just against the subsequent result. Ultimately however, the effect that Calderbank offers have on the question of costs is
at the discretion of the Court.11
10 At [46].
11 High Court Rules, r 14.11.
It has been repeatedly emphasised that the scarce resources of the Courts should not be burdened by litigants who chose to reject reasonable settlement offers, proceed with litigation and then fail to achieve any more than was previously offered. Where defendants have acted reasonably in such circumstances, they should not be further penalised by an award of costs in favour of the plaintiff in the absence of compelling countervaling factors.
[28] I would add further, by parity of reasoning, that where plaintiffs have acted reasonably in such circumstances, they ought to be entitled to expect a reasonable uplift in costs to better compensate for actual costs incurred in the absence of compelling countervailing factors.
Indemnity costs
[29] Rule 14.6(4) specifically contemplates an award of indemnity costs when a party has acted vexatiously, frivolously, improperly or unnecessarily13 or where a party has ignored or disobeyed an order14 or for some other reason which justifies the Court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.15
[30] In Bradbury the Court framed the relevant test as follows:16
Indemnity costs may be ordered where that party has behaved either badly or very unreasonably.
[31] The Court of Appeal also endorsed the following as an appropriate description of circumstances in which indemnity costs have been ordered:
[29] We therefore endorse Goddard J’s adoption in Hedley v Kiwi Co- operative Dairies Ltd (2002) 16 PRNZ 694 at para [11] of Sheppard J’s summary in Colgate-Palmolive Co v Cussons at pp 232 – 234. While recognising that the categories in respect of which the discretion may be exercised are not closed (see r 14.6(4)(f)), it listed the following circumstances in which indemnity costs have been ordered:
12 Bluestar Print Group (NZ) Ltd v Mitchell [2010] NZCA 385 at [20].
13 High Court Rules r 14.4(a).
14 Rule 14.4(b).
15 Rule r 14.4(f).16 Bradbury v Westpac Banking Corp at [29].
(a) the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud;
(b) particular misconduct that causes loss of time to the court and to other parties;
(c) commencing or continuing proceedings for some ulterior motive;
(d) doing so in wilful disregard of known facts or clearly established law; or
(e) making allegations which ought never to have been made or unduly prolonging a case by groundless contentions, summarised in French J’s ―hopeless case‖ test.
[32] What should not be lost in all of this is the principle also articulated by the
Court of Appeal that:17
… costs orders should allow a litigant with a real argument presented responsibly to approach the Court without apprehension that the predictable costs regime may be departed from if the case fails.
Assessment
[33] I propose to award costs on the following basis:
(a) Costs on a 3B basis up to the date of the Calderbank offer, dated
8 March 2011, adjusted to reflect applicable daily rates. (b) Increased costs of 25 per cent from the date of that offer.
[34] My reasons are as follows.
Band B/Rates
[35] There is no dispute about the Band B categorisation or time allocations. The defendants helpfully identify the daily recovery rates in the relevant periods. There
needs to be an adjustment to the plaintiffs’ assessment to properly reflect these rates.
17 Bradbury v Westpac Banking Corp at [94].
[36] I do not accept the defendants’ submission that there should be no allowance for preparation of the bundles. They would have consumed a substantial amount of time and were of significant assistance to the Court.
Pre Calderbank offer
[37] I agree with the plaintiffs that the proceedings were complex, necessitating detailed expert evidence and argument on a range of matters (refer judgment at paragraph [100]). Some of the arguments were novel (refer judgment at paragraphs [167] – [183]), and all matters were vigorously debated, including the framework for assessment (refer judgment at paragraph [95]).
[38] On reflection, therefore, my 2B indication did not properly account for this complexity, or the effort required by the parties. On that basis, category 3B is the proper starting point for analysis. But, given this complexity, I also consider that the conduct prior to the Calderbank offer cannot be described as unreasonable in the sense used by the Court of Appeal in Bradbury v Westpac Banking Corp.
[39] There is one aspect that has, however, caused me pause for thought. As the plaintiffs state, the defendants did not admit liability in a formal sense until after the defendants served their evidence. The plaintiffs therefore were forced, unnecessarily, to prepare evidence on that issue. I balance this against the submissions, well made on behalf of the defendants, that the specific evidence dealing with negligence and the scope of duty and breach was not voluminous. Furthermore, evidence as to liability tended to overlap with evidence as to quantum, particularly as one of the primary issues was whether voluntary disclosure was necessary or even required in all of the circumstances.
[40] Overall I consider that the conduct of the defendants, prior to the Calderbank offer, was not so unreasonable as to require an uplift in costs.
[41] I am not so sanguine about the defendants’ response to the Calderbank offer. By this stage the defendants had admitted liability, so the sole issue before the Court was quantum. The defendants must have known there was a real risk that having conceded liability, proceeding in the face of a Calderbank offer might lead to a substantial costs award in the event that they failed in their defence. The defendants also must have known that the onus of showing one of the key defences rested with the defendants (refer judgment at paragraph [154]) and that the defendants were obliged to provide a proper evidential basis for counterfactual costs (refer judgment at paragraph [198]). The risk of an adverse result was also accentuated by some of the novelty of the arguments presented by the defendants (refer judgment at paragraph [170]). The risk was further amplified given that a substantial plank of the defendants’ case rested on establishing a supervening act or belatedly, negligence (as per the judgment at paragraph [100](c)(iii) and paragraphs [143] – [150]). In combination these factors made the risk unreasonably high. For the sake of clarity, when I say unreasonable I do not mean irrational or without a basis. Rather, I consider the prospects of success were sufficiently low that the defendants then assumed the risk that if the defences failed, ordinary costs principles need not apply.
[42] Against that backdrop, I consider that the plaintiffs have a strong basis for arguing that there should be an uplift in costs following the Calderbank offer. However, the defendants’ refusal to make payment on the Calderbank offer was not so unreasonable that an order for indemnity costs should be made. Nor do I consider there is a sufficient basis to uplift by the maximum 50 per cent.
[43] I note the following in particular:
(a) While the lateness in formally admitting liability was an aggravating factor, the fact that liability had been conceded meant that the trial could proceed on a more focused basis;
(b)There was at the time of the offer a dispute about quantum supported by leading tax experts.
(c) The defendants correctly assessed that Ernst and Young provided incorrect tax advice, and therefore raised a legitimate (albeit risky) basis for seeking resolution on a less than full liability basis sought by the plaintiffs.
(d)The defendants’ other arguments were not completely without merit – novelty or lack of evidential foundation does not equate to hopeless. As the defendants say, there was at least a sound conceptual basis for the defendants’ position on benefits and costs on the counterfactual, but as I have said the defendants failed to fit the facts to the principles (refer judgment at paragraph [170] – [175], [181] – [183], [194], [199] and [206]).
(e) As I record at [207] of my judgment, I was initially troubled by the lack of evidence from the plaintiffs on the counterfactual and so it cannot be said that the defendants’ position was untenable at the time of the Calderbank offer.
[44] For these reasons, as I have foreshadowed, I do not consider that a full indemnity costs award would be proportionate to the defendants’ conduct. Nevertheless, I consider that some uplift is warranted given, as I have said, that the defendants clearly assumed a significant risk by proceeding further in the face of the Calderbank offer. This took the defendants outside the orthodox basis for fixing costs according to Schedule 3. A moderate uplift is also consistent in my view with the policy relating to Calderbank offers, namely that such offers provide an effective
incentive for parties to resolve their disputes.18
[45] For completeness, in terms of r 14.11, the offer provided a superior outcome for the defendants to that ultimately achieved through litigating the position.
[46] In those circumstances I consider that an uplift of 25 per cent following the
Calderbank offer is appropriate.
18 Refer Moore v McNabb (2005) 18 PRNZ 127 (CA) at [57].
[47] The only real points of contention regarding witness costs and disbursements relates to Mr Blaikie’s costs and the air travel for Mr Reed.
[48] On these matters I agree with the defendants. First, they should not have to pay for any of Ernst and Young’s advice in connection with the audit in the plaintiffs’ voluntary disclosure. It is not sufficiently clear to me that such costs are costs in the proceedings. Second, Mr Blaikie was not an independent expert witness. As I have found, his evidence was largely dealing with the facts and providing the frame for his assessment and the review of SCW. Third, to the extent that Mr Blaikies’ fees relate to time spent reviewing pleadings and providing input into legal submissions, they ought not to be included as a fee payable by the defendants.
[49] Accordingly, I direct that the plaintiffs resubmit a quantum relating to Mr Blaikie’s fees excluding any time associated with the matters identified at paragraph 70(a) and (b) of the defendants’ submissions.
[50] In relation to travel and accommodation costs, Fisher J stated, in Russell v Taxation Authority,19 that proceedings in the High Court ought not to attract a travel allowance without special justification. While these proceedings were complex, and notwithstanding the significant contribution made by Mr Reed QC to the proceedings, I do not consider that senior counsel’s presence is a special justification for payment of travel and accommodation expenses for out of town counsel.
Interest
[51] Section 87 of the Judicature Act 1908 provides that the High Court may, if it thinks fit, order interest at such rate not exceeding the prescribed rate 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.
19 Russell v Taxation Review Authority (2000) 14 PRNZ 515 at [24]-[25].
[52] The relevant prescribed rates (not contested) are 8.4 per cent prior to 30 June
2011 and 5 per cent after that date. The relevant periods are also not in dispute. They commence from the date of the tax payments to the date of the payment of the damages award.
[53] Any award is discretionary, but its primary purpose is to enable the Court to properly compensate a successful plaintiff.20
[54] Relevant to this case the learned authors of McGechan on Procedure
observe:21
In fixing an appropriate interest rate, the Court often considers one or both of the following: the interest rates that the judgment sum could have attracted had it been available for commercial investment (e.g. term deposit and bond rates and the 90 day bank bill rate), and the interest costs that would have been avoided had the plaintiff had the judgment sum available to reduce indebtedness.
Argument
[55] The plaintiffs’ position on interest can be succinctly stated. Essentially, it is that there is no good reason to depart from the Judicature Act 1908 of 8.4 per cent, as this would fairly compensate the plaintiffs’ for their loss in the particular circumstances of this case.
[56] In my judgment, I was not satisfied that the Judicature Act rate of 8.4 per cent should be used, particularly if that did not fairly reflect the actual costs incurred by the plaintiffs. I sought an indication of the modal interest rate, so that the matter was not addressed on a completely arbitrary basis. Regrettably, I did not identify the interest rate to which I was referring.
[57] Helpfully, the plaintiffs have reminded me that the overdraft facility available to the plaintiffs at the requisite time was subject to an interest rate of 8.18 per cent.
The plaintiffs refer to the Sir Robert Jones’ brief of evidence at paragraph 7.12. The
20 Andrew Beck and others McGechan on Procedure (on line ed) at J 87.01(3).
21 McGechan, at J 87.03(4).
plaintiffs add that as the plaintiff group is a successful business, it could have generated earnings well in excess of the Judicature Act rate.
[58] The defendants meet this argument with their calculation both of the modal interest rate for 90 day bank bill rates and the average for 90 day bank bill rates. Those figures are 2.7 per cent per annum, and 2.9 per cent per annum respectively.
[59] Counsel also refers to the work undertaken by Mr Graham and his assessment of the average costs of borrowings indicates rates of 6.69 per cent as at 31 March
2009 and 3.73 per cent as at 30 June 2010.
[60] I am grateful for the responses of counsel to my specific request.
Assessment
[61] The submissions of the parties aptly illustrate that there needs to be some care taken in properly quantifying interest rates on damages claims lest the result be an unfair one to the parties.
[62] Having had the benefit of detailed evidence on the operation of the group of
companies (―the Group‖), I proceed on the following basis:
(a) The Group would have organised its affairs on a rational basis and incurred cost of borrowing only when it was most efficient to do so;
(b)The Group would not have participated and does not participate in an investment strategy of placing funds in term deposits, bonds or 90 day bank bills;
(c) There is an insufficient basis for me to fairly determine with exactitude what alternative investment strategy the Group may have adopted and the return it would have achieved on such an investment strategy had the tax funds been available to it — though, as per my
judgment, I accept that the Group could have managed its affairs to avoid or offset the counterfactual loss asserted by Mr Graham; and
(d)I accept the defendants’ contentions that the plaintiffs should have been able to secure a far more favourable rate than 8.18 per cent, being the interest rate for the facility identified by Sir Robert Jones in his brief of evidence at 7.12. Reasonable mitigation requires such an outcome.
(e) The average of the Group’s cost of borrowings in the relevant periods
should provide the closest approximation of the actual loss suffered.
(f) It can be reasonably assumed that if given the opportunity, the Group would have reduced its borrowings through the relevant periods rather than make the tax payments.
[63] Given the foregoing, the interest rate should be calculated by reference to the average cost of borrowings incurred by the Group in the relevant periods from the first tax payment to 30 June 2011. That information should be readily available. The relevant periods are helpfully detailed at Appendix 3 of the plaintiffs’ submissions.
[64] On reflection, I consider that a modal rate unnecessarily complicates the assessment.
[65] If the parties cannot agree on this quantum, then I direct that Mr Graham and Professor van Zijl provide an agreed expert statement with the figures identified. If they cannot agree, then they should specify a range. If the average is higher than the statutory maximum of 8.4 per cent, then the statutory maximum shall apply.
[66] That deals with the interest rate until 30 June 2011. After 30 June 2011, the interest rate shall be five per cent until payment.
[67] I also note, consistent with the interpretation of my judgment taken by the defendants, it is my expectation that there would be some co-operation on the level
of costs and the interest payable. We have now reached a point where there should be little room for dispute in quantifying the final sums now payable. If there is to be any further dispute I direct that the parties are to advise the Registry and a judicial telephone conference can be arranged.
Orders
[68] There shall be costs in favour of the plaintiffs on the following basis: (a) 3B to the date of the Calderbank offer; and
(b) 25 per cent uplift on 3B costs thereafter.
[69] There shall be disbursements, with appropriate deductions to take into account the matters raised at paragraph [47] – [50].
[70] There shall be interest:
(a) Calculated by reference to the average cost of borrowing for the
Group in the relevant periods from the first tax payment to 30 June
2011 (refer paragraph [63]); and
(b) At the prescribed rate of 5 per cent from 30 June 2011.
[71] As directed at [65], if the parties cannot agree on the quantum of interest payable, then a joint expert statement is to be prepared with the figures agreed, or if they cannot be agreed, a range is to be specified.
[72] The plaintiffs are to liaise with the defendants and report to the Court within
14 working days with their assessment of quantum of costs and interest. If there is any serious dispute, the Registry is to be advised and a judicial telephone conference
will be arranged.
Whata J
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