FEDERAL COURT OF AUSTRALIA
Principal Strategic Options Pty Limited v Coshott [2003] FCA 736
PRACTICE AND PROCEDURE – undertaking as to damages – approach to assessment of compensation – distinction between damage caused by the making of the interlocutory order and damage cause by the fact of litigation.
Bankruptcy Act 1966 (Cth), s 50
Federal Court of Australia Act 1976 (Cth) s 51A(1)
Air Express Limited v Ansett Transport Industries (Operations) Proprietary Limited (1981) 146 CLR 249 applied
McCormick v Riverwood International (Australia) Pty Ltd [2000] FCA 32 applied
Principal Strategic Options Pty Ltd, in the matter of Coshott v Coshott [2001] FCA 664 referred to
PRINCIPAL STRATEGIC OPTIONS PTY LIMITED v ROBERT GILBERT COSHOTT
N 7559 of 2000
BRANSON J
21 JULY 2003
SYDNEY
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IN THE FEDERAL COURT OF AUSTRALIA |
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NEW SOUTH WALES DISTRICT REGISTRY |
N 7559 of 2000 |
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BETWEEN: |
PRINCIPAL STRATEGIC OPTIONS PTY LIMITED APPLICANT
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AND: |
ROBERT GILBERT COSHOTT RESPONDENT
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BRANSON J |
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DATE OF ORDER: |
21 JULY 2003 |
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WHERE MADE: |
SYDNEY |
THE COURT ORDERS THAT:
1. The proceedings be stood over to 9.30 am on 31 July 2003 for the purpose of making of orders giving effect to these reasons, including orders as to costs.
2. The parties provide to the Associate of the Hon Justice Branson by 12.00 noon on 30 July 2003 an agreed minute of the orders to be made (including the orders to be made as to costs) and if agreement has not by then been reached, the minutes of orders for which they will respectively contend and brief outlines of submissions in support of the orders.
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IN THE FEDERAL COURT OF AUSTRALIA |
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NEW SOUTH WALES DISTRICT REGISTRY |
N 7559 of 2000 |
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BETWEEN: |
PRINCIPAL STRATEGIC OPTIONS PTY LIMITED APPLICANT
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AND: |
ROBERT GILBERT COSHOTT RESPONDENT
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JUDGE: |
BRANSON J |
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DATE: |
21 JULY 2003 |
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PLACE: |
SYDNEY |
REASONS FOR JUDGMENT
introduction
1 On 28 June 2000 Principal Strategic Options Pty Limited (‘Strategic Options’) presented a creditor’s petition in relation to Robert Gilbert Coshott (‘Mr Coshott’). The following day a judge of the Court, upon noting that Strategic Options gave the usual undertaking as to damages, made an interlocutory order (‘the Interlocutory Order’) under s 50 of the Bankruptcy Act 1966 (Cth) (‘the Bankruptcy Act’) requiring a trustee (‘the Trustee’), in effect, to take control of the property of Mr Coshott.
2 The usual undertaking as to damages if given to the Court in relation to an interlocutory order made by it is an undertaking:
(a) to submit to such order (if any) as the Court may consider to be just for the payment of compensation, to be assessed by the Court or as it may direct, to any person, whether or not a party, adversely affected by the operation of the interlocutory order … or any continuation (with or without variation) thereof; and
(b) to pay the compensation referred to in (a) to the person therein referred to.’ (see Practice Note No 3 issued by the Chief Justice on 14 June 1999)
3 Strategic Options accepts that, as the judgment which gave rise to the debt upon which the petition was based has been overturned on appeal, both Mr Coshott and Ljiljana Coshott (‘Mrs Coshott’), his wife, are persons ‘adversely affected’ by the order of 29 June 2000 (‘the Interlocutory Order’). The dispute which it is necessary to determine on this application is as to the amount of compensation that the Court should consider it just to order Strategic Options to pay to Mr and Mrs Coshott respectively.
background facts
4 On 28 March 2000 Strategic Options obtained a judgment in the Supreme Court of New South Wales (‘the Supreme Court’) against Mr Coshott in the sum of $1 355 239.74. On 14 April 2000 Mr Coshott filed a notice of appeal against the judgment of the Supreme Court.
5 On 1 June 2000 Strategic Options caused a bankruptcy notice to be served on Mr Coshott. The bankruptcy notice required Mr Coshott within twenty-one days to pay the judgment debt or to make an arrangement satisfactory to Strategic Options for settlement of the judgment debt. Mr Coshott did not comply with the bankruptcy notice or apply to set it aside. As a consequence he committed an act of bankruptcy within the meaning of s 40 of the Bankruptcy Act.
6 On 28 June 2000 Strategic Options presented to the Court a creditor’s petition under s 43 of the Bankruptcy Act seeking the making of a sequestration order against the estate of Mr Coshott (‘the Creditor’s Petition’). On the same day Strategic Options filed an application seeking an order under s 50 of the Bankruptcy Act. On 29 June 2000 the application for an order under s 50 was heard. Mr Coshott did not appear at the hearing. As is mentioned above, upon Strategic Options giving the usual undertaking as to damages, the Court made the Interlocutory Order.
7 On 7 September 2000 Shipton Thoroughbreds Pty Limited (‘Shipton’) was substituted for Strategic Options as the petitioning creditor in the Creditor’s Petition.
8 Sometime during September 2000 Mr and Mrs Coshott ceased to live at 5 Gilliver Avenue, Vaucluse (‘the Vaucluse property’) as a consequence of orders for possession having been obtained against them by the mortgagee of the property, Citibank Limited. Contracts for the sale of the Vaucluse property were exchanged on 18 November 2000. On 21 December 2000, $1 195 394.73, being one half of the net proceeds of the Vaucluse property, was paid to the Trustee. On 29 December 2000, $1 020 257.77, being Mrs Coshott’s share of the proceeds of sale of the Vaucluse property was paid to Mrs Coshott.
9 On 24 April 2001 the New South Wales Court of Appeal allowed Mr Coshott’s appeal and the judgment of the Supreme Court of 28 March 2000 was set aside.
10 On 8 May 2001 I ordered that the Creditor’s Petition be dismissed. On the same day the consent orders referred to in [11] below were foreshadowed by the parties and I heard argument on the costs orders to be made in the bankruptcy proceeding and this proceeding. I reserved my judgment on the issues of costs.
11 On 10 May 2001 orders were made by consent which brought to an end the trusteeship which came into effect by reason of the Interlocutory Order. The Trustee was, however, authorised to retain the sum of $10 000 as security for the payment of his expenses and remuneration.
12 On 15 May 2001 Mr Coshott’s solicitors received a cheque in the sum of $1 195 718.19 from the Trustee.
13 On 28 May 2001 Mr Coshott filed a notice of motion in this proceeding seeking the taking of an account of the losses suffered by him as a consequence of the Interlocutory Order. Mrs Coshott did likewise on 5 September 2002.
14 On 6 June 2001 I published my reasons for judgment on the issue of the costs orders to be made in the bankruptcy proceeding and in this proceeding. With respect to the costs of this proceeding I observed at [35]-[36]:
‘It is plain that on 29 June 2000 the Court was satisfied, on the evidence then before it, that an order under s 50 of the Act was in the interests of the creditors of Mr Coshott generally. However, that evidence included evidence of the judgment debt. Indeed, the bankruptcy notice which founded the application for the order under s 50 of the Act was itself based on the judgment debt. Plainly enough, were it not for the existence of the judgment debt on 29 June 2000, the order under s 50 of the Act would not have been made. The judgment which gave rise to the judgment debt has now been set aside in the circumstances outlined above.
Moreover, the order under s 50 of the Court was made upon Strategic Options giving the usual undertaking as to damages. While the usual undertaking as to damages may not, by reason of its terms, have a direct relevance to the issue of costs, the fact that the Court required Strategic Options to give it as a condition of the making of the order placed Strategic Options on notice that it was to bear the risk of the order ultimately proving unsustainable. As the parties have now acknowledged, the order became unsustainable when the judgment which gave rise to the judgment debt was set aside by the Court of Appeal. In the circumstances, in my view, Strategic Options must bear its own costs of the s 50 proceeding and meet the trustee’s expenses and remuneration. Neither Mr Coshott nor Shipton Thoroughbreds sought an order for costs in his or its favour in the s 50 proceeding.’
I made the following costs orders in this proceeding:
‘1. There be no order as to costs; and
2. Principal Strategic Options Pty Limited pay the expenses and remuneration of the trustee.’
As the notices of motion which found this application had not been filed at the time that I heard the argument on costs, the above orders cannot be understood to reach to the costs of or incidental to the notices of motion.
15 On 15 August 2001, again by consent, I ordered the Trustee to pay to Mr Coshott’s solicitors the sum of $10 000 retained by him plus any interest earned on that sum.
the appropriate approach to the assessment of compensation
16 The appropriate approach to adopt on this application is, in my view, that dictated by the majority judgments in Air Express Limited v Ansett Transport Industries (Operations) Proprietary Limited (1981) 146 CLR 249. The relevant principles to be drawn from the majority judgments are as follows:
(a) the Court has a discretion not to enforce an undertaking as to damages, but unless the respondent has been guilty of conduct that would render it inequitable to enforce the undertaking it will be just, speaking generally, for an applicant who fails on the merits to recompense the respondent for the damage suffered by him or her as a result of the making of the interlocutory order (see Gibbs J at 311-312);
(b) it is necessary to draw a distinction between results which are caused by the making of the interlocutory order and those which flow from the fact of the litigation itself (see Barwick CJ at 310; Gibbs J at 312 and Stephen J at 315);
(c) generally speaking, the damages must be confined to loss which is the natural consequence of the interlocutory order under the circumstances of which the applicant for the order had notice (see Gibbs J at 312 and the authorities there cited and Stephen J at 319);
(d) the making of the interlocutory order must have been a cause without which the damage would not have been suffered (Gibbs J at 313 and Stephen J at 320); and
(e) the onus of proof in respect of the damage claimed lies on the respondent who asserts that he or she sustained damage by reason of the making of the interlocutory order (see Gibbs J at 313 and Stephen J at 316 and 320).
It is not suggested by Strategic Options that either Mr or Mrs Coshott has been guilty of conduct that would render it inequitable to enforce the undertaking as to damages in his or her case.
the claims of mr coshott
17 Mr Coshott claims an entitlement to compensation pursuant to the undertaking as to damages under eight heads. I shall deal with each head of claim separately.
1. Loss of increase on the capital value of a home which would otherwise have been purchased.
18 Mr Coshott gave affidavit evidence as follows:
‘14. In the period up to late December, 2000, I discussed with my wife the options available to us to acquire a new home. At that time, my wife and I were aware of the following:
a) The Vaucluse Property had been sold for $6,000,000.00 on 18the [sic] November, 2000.
b) Settlement of the sale was due in December, 2000.
c) The net proceeds of the sale would be in excess of $2,400,000.00.
d) One half of the net proceeds of sale were to be accounted for to my wife by Citibank and the other half would be paid to Mr. Thomas pursuant to the orders of Beaumont J. dated 29th June, 2000.
e) My appeal against the judgment of Mr. Justice Hunter in favour of Principal Strategic Options Pty Limited was heard on 29th November, 2000 and judgment reserved.
f) I had been advised by my solicitors, CKB Partners, and my counsel, Mr. Michael Cashion S.C., that I had reasonable prospects of success in the appeal.
g) If the appeal was allowed and the judgment of Hunter J. set aside, then I would be solvent and the creditor’s petition against me in N7558 of 2000 ought be dismissed and that any monies held by Mr. Thomas would be accounted for to me following the dismissal of the creditor’s petition.
h) That if my appeal was successful, then after payment of my acknowledged debts, I would have a surplus of over $550,000.00.
i) That my wife and I would be able to borrow any additional funds required from Fewin Pty Limited and that we would be able to purchase a house for around $2,000,000.00.
15. Had my share of the net proceeds of sale of the Vaucluse Property been released to me on or about 21st December, 2000, my wife and I would have been able to purchase a 4 or 5 bedroom house in Vaucluse in early January, 2001 for around $2,000,000.00.
16. It was our intention to purchase a new home in joint names provided the Creditor’s Petition against me, originally presented by Principal Strategic Options Pty Limited in this proceeding was dismissed.’
Mr Coshott did not relevantly modify the above evidence when giving oral evidence at the hearing.
19 Mr Coshott’s brother, Ronald Michael Coshott (‘Mr Ronald Coshott’), is the Managing Director of Fewin Pty Limited. He gave affidavit evidence as follows:
‘3. My companies have previously lent my brother substantial sums of money. After the sale of 5 Gilliver Avenue, Vaucluse in November, 2000, I discussed with my brother and his wife lending them any additional monies they may require to complete a purchase of a new house in Vaucluse. I told them I was prepared, provided the bankruptcy petition against my brother was dismissed, to lend them, through family companies, any additional monies they may require to complete the purchase of a house in Vaucluse at a price of around $2,000,000.00. This remains the position.’
Under cross-examination Mr Ronald Coshott confirmed that he was willing to lend money to Mr and Mrs Coshott, or either of them, but that he did not want to lend money to Mr Coshott before the bankruptcy petition was dismissed as he did not want to ‘get caught up in the bankruptcy’.
20 Mrs Coshott gave affidavit evidence as follows:
‘7. In the period from 18th November, 2000 to late December, 2000, I discussed with my husband the options available to us to buy a new home. Our preference was to purchase a 4 or 5 bedroom house in Vaucluse for around $2,000,000.00.
8. Had my husband’s share of the net proceeds of sale of the Vaucluse Property been released to him on settlement we would have been able to purchase a 4 or 5 bedroom house in Vaucluse in January, 2001 for around $2,000,000.00.
9. It was our intention to purchase a new home in joint names provided the Creditor’s Petition against my husband, originally presented by Principal Strategic Options Pty Limited in this proceeding, was dismissed.’
Mrs Coshott did not relevantly modify her affidavit evidence when giving oral evidence at the hearing.
21 On the basis of the evidence referred to above I find that:
(a) the only intention formed by Mr Coshott between 29 June 2000 and 10 May 2001 with respect to the purchase of a home, whether jointly with Mrs Coshott or alone, was to purchase a four to five bedroom home in Vaucluse, or perhaps in a comparable nearby suburb, at a price of around $2 000 000;
(b) to settle on the purchase of a home for around $2 000 000 at any time between 29 June 2000 and 10 May 2001, Mr Coshott would have needed to buy the property together with Mrs Coshott, or otherwise to have gained access to funds belonging to Mrs Coshott, and to have obtained additional funds from Fewin Pty Limited; and
(c) Fewin Pty Limited would not have lent any significant sum to Mr Coshott to assist him in purchasing a home at any time earlier than the date on which the creditor’s petition against Mr Coshott was dismissed.
22 As is mentioned above, the Creditor’s Petition was dismissed on 8 May 2001. On 10 May 2001 I made orders by consent which brought to an end the trusteeship which came into effect by reason of the Interlocutory Order. The two day difference between the dismissal of the Creditor’s Petition and the effective termination of the Interlocutory Order is of no significance so far as this head of claim is concerned.
23 In view of the findings set out in [21] above, Mr Coshott has not established that, were it not for the Interlocutory Order, he would have been in a position to purchase a home of the kind that he intended to purchase earlier than 8 May 2001. Fewin Pty Limited would not have provided him with financial assistance to purchase a home before 8 May 2001.
24 I conclude that any loss suffered by Mr Coshott as a result of an inability to purchase a home between December 2000 and early May 2001 has not been shown to have been caused by the making of the Interlocutory Order. Any such loss flowed from the fact of the bankruptcy proceeding against Mr Coshott which was not brought to an end until the Creditor’s Petition was dismissed on 8 May 2001.
2. Financial Institutions Duty on bank deposits
25 When Mr Coshott’s share of the proceeds of the sale of the Vaucluse property was paid to the Trustee, Financial Institutions Duty (‘FID’) totalling $717.23 was incurred. Further FID in the sum of $9.39 was subsequently incurred in respect of interest which was paid on the deposited funds. As a consequence of the order of 10 May 2001, the funds in the account of the Trustee were paid into the trust account of Mr Coshott’s solicitors. The FID payable on that deposit was $717.48. Mr Coshott’s solicitors rendered to Mr Coshott a bill which included a claim for the FID of $717.48 plus GST thereon of $71.74. It was not suggested by Strategic Options that this course was inappropriate. The same course was adopted by Mr Coshott’s solicitors in respect of FID of $6.24 which was incurred when $10 374.64 was paid into their trust account in accordance with the order of 15 August 2001. The total claim for GST is thus:
$717.23
9.39
717.48
71.74
6.24
0.62
___________
Total: $1,522.70
26 Strategic Options contended that FID falls within the concept of ‘costs’ and is thus covered by the order made by me on 6 June 2001. I reject this contention. In my view the FID incurred in respect of the payments into the account which was opened in the joint names of Mr Coshott and the Trustee pursuant to the Interlocutory Order was an expense of the Trustee. That is, it fell within paragraph 2 of my order of 6 June 2001. As Mr Coshott has in fact met that expense I consider it just that he now receive recompense from Strategic Options.
27 I regard the issue of the FID incurred in respect of the deposit into the account of Mr Coshott’s solicitors as more troubling. As is mentioned above, the order requiring the payment by the Trustee of the funds held by him on trust for Mr Coshott to Mr Coshott’s solicitor rather than to Mr Coshott was made by consent on 10 May 2001. The consent order was, in my view, both sensible and appropriate. It was negotiated in the context of an application for an order for the dismissal of the Creditor’s Petition. In the event the making of that order was not opposed. Shipton, which had been substituted for Strategic Options as the petitioning creditor in the Creditor’s Petition, was an admitted creditor of Mr Coshott as at 8 May 2001 in the amount of $29 486.95. Shipton also asserted at that time that Mr Coshott owed it an additional amount of $28 000. The order made by consent on 10 May 2001 required Mr Coshott’s solicitors to pay from the funds received from the Trustee Mr Coshott’s admitted debts and to establish a security fund in respect of Mr Coshott’s alleged liabilities. Mr Coshott’s admitted debts as at that date totalled $543 336.74 and his alleged liabilities totalled $152 595.02.
28 I note incidentally that the payment by Mr Coshott’s solicitors of his debts from the funds received from the Trustee meant that the FID ultimately paid by Mr Coshott when he received the balance of the funds due to him was approximately half of the amount that would otherwise have been payable by him.
29 In all of the circumstances I do not consider that Strategic Options should be required to compensate Mr Coshott for the FID incurred in respect of the payment from the Trustee to Mr Coshott’s solicitors. The incurring of that FID was not the natural consequence of the making of the Interlocutory Order but rather the consequence of the terms of the order of 10 May 2001 which the parties invited the Court to make.
30 I conclude that Mr Coshott is entitled to compensation in the sum of $726.62 under this head.
3. Cost of copying documents produced to the Trustee
31 Paragraph 7 of the Interlocutory Order is in the following terms:
‘The Respondent [i.e. Mr Coshott] deliver to the Trustee within 7 days all books, documents, papers and writings in his or her [sic] possession or power relating to his dealings, property or affairs.’
32 On 18 July 2000 the Interlocutory Order was varied on the application of Mr Coshott although not in the manner sought by him. Relevantly, the following paragraph was added to the Interlocutory Order:
‘that, the Trustee be authorised to redeliver to the respondent debtor such of the books, documents, papers and writings delivered by the respondent debtor to the trustee pursuant to Order 7 if reasonably satisfied that the respondent debtor requires such books, documents, papers and writings for the purpose of the prosecution of his appeal in the Supreme Court of New South Wales.’
33 Mr Coshott’s affidavit evidence in respect of this head of claim is as follows:
‘3. At 18 July 2000 I had four large cardboard shipping containers containing some of my personal, financial and business records. These records included bank statements, cheque butts, records of dealings with my former solicitor, Mr Vardas, dealings with the Commonwealth Bank of Australia, dealings with the Woollahra Municipal Council and also dealings with the applicant in this proceeding.
4. At 18 July 2000 I was involved in litigation including:
a) an appeal against the decision of Justice Hunter of the Supreme Court of New South Wales upon which the applicant based its bankruptcy notice and this proceeding;
b) proceedings against the Commonwealth Bank of Australia in the District Court of New South Wales plaint no 1643 of 1996 alleging breach of contract, interest and fee overcharges and other relief involving transactions from 1986;
c) proceedings against my former solicitor, Mr Vardas in the District Court of New South Wales plaint number 4389 of 2000 respect of allegations of professional negligence, breach of contract and failure to account involving over 100 matters. This matter has since been transferred to the Supreme Court of New South Wales;
d) issued proceedings against the Woollahra Municipal Council in the District Court of New South Wales. The District Court proceeding against the Woollahra Municipal Council followed on litigation in the Land & Environment Court of New South Wales with a nine-day hearing, an appeal to the New South Wales Court of Appeal, proceeding in this Court and an appeal to the full Federal Court plus the District Court documentation.
5. The records in the shipping containers included documents relating to those litigious matters. I required access to copies of the documents to prosecute the litigation.
6. I estimate that the material relating to the appeal from Justice Hunter’s decision comprised approximately 10% of the material photocopied at my request.
7. The charge of $3,475.00 to Bay Pacific Management Pty Limited for the cost of sorting and photocopying the contents of the four large cartons was calculated at the rate of $0.10 per page inclusive of GST.’
34 Under cross-examination Mr Coshott agreed that he did not ask the Trustee to allow him to take possession of the documents which he required to prosecute his appeal in the Supreme Court. Rather he said that he had all of his records photocopied before he delivered them to the Trustee. For this reason, as his evidence established, he did not deliver his documents to the Trustee within the time frame required by the Interlocutory Order, namely within seven days. Mr Coshott did not deliver his documents to the Trustee until approximately four months later in mid‑November 2000.
35 The tax invoice received by Mr Coshott in respect of the sorting and photocopying of his documents is in the following terms:
‘Re: Photocopying of Files
Sorting and photocopying of four large cartons of Documents on 12th, 13th and 14th November 2000.
Total cost labour & materials: $3,159.10
Plus 10% GST $ 315.90
$3,475.00
Payment terms: C.O.D.’
36 It was argued on behalf of Strategic Options, in effect, that in view of the amendment made to the Interlocutory Order on 18 July 2000 it was unnecessary for Mr Coshott’s documents to be copied at all. It was further argued that the evidence of Mr Coshott about the nature of the documents copied and the necessity for copying the four boxes of documents was so vague and unsatisfactory that the Court should not be satisfied that the expenses flowed from the making of the Interlocutory Order.
37 There is much to be said for the above arguments. Additionally, I do not consider that Mr Coshott is entitled to be compensated by Strategic Options for the cost of having four large cartons of documents sorted. If, as he claims, Mr Coshott required access to the documents in the cartons to prosecute litigation, he would have needed to sort the documents irrespective of the Interlocutory Order. There is no evidence to suggest that Mr Coshott could not have arranged for the documents to be copied without additionally engaging a commercial enterprise to sort them. It seems likely, although there is no direct evidence to this effect, that Mr Coshott adopted the expedient of sorting and copying his documents before providing them to the Trustee because they were not, prior to being sorted and copied, in a state such that he could sensibly have approached the Trustee to gain access to such of them as were relevant to the litigation which he wished to prosecute.
38 More importantly, as it seems to me, Mr Coshott in reality seeks under this head to be compensated in respect of a course of conduct adopted by him in disregard of the requirements of the Interlocutory Order. The compensation to which he is entitled is compensation for having been adversely affected by the operation of the Interlocutory Order.
39 I conclude that Mr Coshott has not established the necessary connection between the costs incurred by him for the sorting and photocopying of his documents and the operation of the Interlocutory Order. In the circumstances it is irrelevant, in my view, that it might be inferred that had Mr Coshott complied with the Interlocutory Order he might as a consequence have legitimately incurred photocopying costs in respect of some, and possibly many, documents redelivered to him by the Trustee.
4. Additional interest paid to creditors
40 The dispute between the parties as to this head of claim is as to the amount of additional interest for which Mr Coshott should be compensated. Mr Coshott claims the amount of $7 280.18 while Strategic Options concedes that it should compensate him in the amount of $4 543.04.
41 The difference between these two amounts appears to arise from the different methods adopted by the parties for calculating the interest received by Mr Coshott on the funds held by the Trustee. It is agreed that interest received on the funds should be offset against the additional interest payable by Mr Coshott to his creditors. The method of calculation adopted by Mr Coshott involves deducting from the actual interest paid both the FID and the withholding tax charged to the account. The issue of the FID payable on the deposits into the account is dealt with above. I accept the argument of Strategic Options that the withholding tax was charged to the account because Mr Coshott failed to give his tax file number to the Trustee. It may be that Mr Coshott may even now recover the withholding tax from the Australian Taxation Officer.
42 The appropriate compensation to be paid to Mr Coshott under this head is the amount conceded by Strategic Options, namely $4 543.04.
5. Difference between NSW Court interest rates and interest earned on funds in the trust account
43 This claim was advanced by Mr Coshott as an alternative claim to claim 1. As I have rejected claim 1 it is appropriate to give consideration to this claim.
44 Mr Coshott argued, in effect, that as it was the practice of this Court sitting in Sydney to adopt the interest rates of the Supreme Court, he was entitled to be placed in the position that he would have been in had he received interest at New South Wales Court rates on the sum of $1 195 394.73 from 21 December 2000, when that sum was paid to the Trustee, until 15 May 2001, when Mr Coshott’s solicitors received a cheque in the sum of $1 195 718.19 from the Trustee.
45 I reject the above contention. There is no evidence to suggest that but for the Interlocutory Order Mr Coshott would have received interest on his funds at New South Wales Court rates. The only evidence given by Mr Coshott as to what he would have done with the sum of $1 195 394.73 had it not been paid to the Trustee is that he would have paid his creditors and then, had the Creditor’s Petition been dismissed, put the remaining money towards the purchase of a home. The Creditor’s Petition was not in fact dismissed until 8 May 2001. Mr Coshott’s solicitors received the amount of $1 195 718.19 from the Trustee one week later.
46 In the absence of evidence from Mr Coshott that he would have taken another course, I consider it appropriate to proceed on the basis that had the Interlocutory Order not been made Mr Coshott would have invested the amount in fact paid to the Trustee on term deposit with a major Australian bank. The evidence of Mrs Coshott was that she placed her share of the proceeds of the sale of the Vaucluse property on deposit with Westpac Banking Corporation (‘Westpac’). She gave evidence that the interest rate that she thereby received was the best rate that she could get at the time. That interest rate was the rate payable on deposits of $1 000 000 and over deposited for a term between seven days and one month. I consider it appropriate to conclude that if Mr Coshott were at that time aware of a major Australian bank that was paying a higher rate of interest at that time he would have so advised Mrs Coshott.
47 Having regard to the evidence of Mr Coshott that had his funds been available to him he would have paid his creditors, which evidence is the foundation of claim 4 above, I do not consider it appropriate to proceed on the basis that Mr Coshott would have placed the entire sum of $1 195 718.19 on term deposit. I consider that I should proceed on the basis that had the Interlocutory Order not been made Mr Coshott would have made a term deposit with Westpac of approximately $633 458. It is open to debate whether the amount deposited might for a period have been increased by an amount of $18 500 reflecting disputed debts of Mr Coshott later accepted by him to be payable.
48 The evidence discloses that the interest rates paid by Westpac on deposits of $1 000 000 and over for a term between seven days and one month varied during the relevant period from 6.05% at the commencement of the period to 4.80% at the end of the period. No evidence was placed before me as to the interest rates paid by a major Australian bank on term deposits of under $1 000 000 during the relevant period or of interest rates paid in respect of terms longer or shorter than between seven days and one month. Evidence was placed before me as to the value at the end of 15 May 2001 of an investment of $651 958 at the beginning of 29 December 2000 in a typical Cash Management Trust. That value was $664 609.51; that is, an increase in value over the period of $12 651.51.
49 On the whole of the evidence, it seems likely that had Mr Coshott deposited approximately $633 458 with Westpac he would have earned slightly more interest on his deposit than would have been payable on the same funds in a typical Cash Management Trust but less than that paid by Westpac on deposits of $1 000 000 or more for a term of between seven days and one month.
50 To be deducted from any amount payable to Mr Coshott under this head is the interest actually received by him on the funds held in the Trustee’s account, other than the funds which were ultimately paid to creditors. Compensation in respect of the loss of access to the funds eventually paid to creditors is calculated under head 4.
51 The funds in the trust account accrued interest at an average rate of 4.89% over the period that the funds were held by the Trustee. The gross interest earned over the whole life of the trust account was $21 453.68.
52 In my view, it would be unrealistic to attempt a precise calculation of the compensation to which Mr Coshott is entitled under this head; the factual tools necessary for this calculation are not available to me. Doing the best I can with the evidence available, I propose to award Mr Coshott compensation of $850 under this head.
6. Storage Charges relating to personal items and furniture
53 It is conceded that all charges of this kind were paid by Mrs Coshott. Mr Coshott has no claim for compensation under this head.
7. Solicitors’ fees for administering the fund
54 Mr Coshott claims under this head the professional costs and disbursements of his solicitors in complying with the consent order of 10 May 2001. Strategic Options contends that the costs of complying with the order of 10 May 2001 were Mr Coshott’s costs in the proceeding and covered by the order as to costs made by me on 6 June 2001.
55 I accept the contention of Strategic Options. Mr Coshott did not seek an order that Strategic Options pay his costs of what were described as ‘the s 50 proceedings’. Although the consent order of 10 May 2001 had not formally been made at the time that I heard argument on the issue of the costs of this proceeding, broad agreement had been reached as to its terms. The costs of complying with it were, in my view, part of the costs of the proceeding as at the date of my order of 6 June 2001. I do not consider that it would now be appropriate to provide to Mr Coshott, under the undertaking as to damages, that which it was open to him to seek directly in the proceeding under an order for costs.
8. Solicitor/client costs in proceeding No. N 7558 of 2000 from 7 September 2000
56 Mr Coshott’s written submissions with respect to this head of claim are as follows:
‘31. Proceeding N 7558 of 2000 related to the creditor’s petition issued against Mr Coshott by the applicant in this proceeding. On 7 September 2000, an order was made substituting another creditor, Shipton Thoroughbreds Pty Ltd. Shipton had a judgment debt against Mr Coshott. Had the orders made on 29 June 2000 not been made, Mr Coshott would have been able to deal with his other creditors and make alternate financial arrangements with them either by borrowing funds to pay them or by negotiating terms of payment.
32. Mr Coshott’s inability to deal with his creditors led to the prolongation of proceeding N 7558 of 2000 until Mr Coshott’s successful appeal from the judgment in favour of the Applicant in the Supreme Court of New South Wales. At the conclusion of that appeal, Mr Coshott demonstrated solvency. The claim for $12,758.00 represents the costs and disbursements relating to proceeding N7558 of 2000 from 7 September 2000 until the dismissal of the petition on 8 May 2001, after a credit for costs allowed and recovered from Strategic Options on a party/party basis.’
57 On 6 June 2001 I made the following orders as to costs in the bankruptcy proceeding:
‘1. Principal Strategic Options Pty Limited pay Mr Coshott’s costs of the proceeding up to and including 7 September 2000.
2. Mr Coshott pay Shipton Thoroughbreds’ costs of and incidental to its obtaining the order that it be substituted as the petitioning creditor.’
58 In my reasons for judgment of 6 June 2001 at [28]-[32] I said:
‘28 The appropriate order between Strategic Options and Mr Coshott in the bankruptcy proceedings is, in my view, that Strategic Options pay Mr Coshott’s costs of the proceeding up to and including 7 September 2000, the date upon which Shipton Thoroughbreds was substituted as the petitioning creditor. I reject the submission of Mr Coshott that, by reason of the undertaking as to damages given by Strategic Options in the s 50 proceeding, Strategic Options should pay all of Mr Coshott’s costs of the bankruptcy proceeding. Mr Coshott’s costs of the bankruptcy proceeding are not in my view attributable to the actions of Strategic Options in seeking and obtaining the order under s 50 of the Act.
29. I turn to consider the position of Shipton Thoroughbreds so far as the costs of the bankruptcy proceeding are concerned. As is mentioned above, the amended creditor’s petition filed by Shipton Thoroughbreds relied upon a final judgment obtained on 7 July 1999. By an affidavit filed on 9 April 2001 in the bankruptcy proceeding, Mr Coshott acknowledged his indebtedness to Shipton Thoroughbreds.
30. Mr Coshott’s failure to make payments to his creditor after the date upon which Strategic Options obtained judgment against him in the Supreme Court is understandable in the context of his being insolvent while the judgment remained in force. There was a risk that the payment in full of any creditor would have resulted in that creditor being unduly advantaged over other of Mr Coshott’s creditors. However, Mr Coshott’s earlier failure to pay, or to make satisfactory arrangements for settlement of, his admitted debt to Shipton Thoroughbreds has not been explained.
31. However, had Strategic Options not obtained judgment against Mr Coshott in the Supreme Court, it seems that Mr Coshott would at all relevant times have been able to establish his solvency. That is, in the circumstance hypothesised, had Shipton Thoroughbreds presented a creditor’s petition against Mr Coshott his solvency would, in all likelihood, have rapidly become apparent.
32. In all of the circumstances I consider that the appropriate order to be made as between Mr Coshott and Shipton Thoroughbreds with respect to the costs of the bankruptcy proceeding is that Mr Coshott pay Shipton Thoroughbreds’ costs of and incidental to its obtaining the order that it be substituted as the petitioning creditor in the bankruptcy proceeding. In my view, no other order ought, in the circumstances, be made as between Mr Coshott and Shipton Thoroughbreds with respect to the costs of the bankruptcy proceeding. Mr Coshott is not, in my view, entitled to an order requiring Strategic Options to indemnify him in respect of the costs payable by him to Shipton Thoroughbreds. As is mentioned above, I do not regard the undertaking as to damages given by Strategic Options in the s 50 proceeding as having any relevance to the costs of the bankruptcy proceeding.’
I remain of the view which I expressed in [28] of my judgment of 6 June 2001. I reject the contention that Mr Coshott’s inability to deal with his creditors led to the prolongation of the bankruptcy proceeding until Mr Coshott’s successful appeal from the judgment of the Supreme Court. It was the existence of the judgment debt until the date on which that appeal succeeded that prevented earlier resolution of the Creditor’s Petition. To the extent, if any, that the substitution of Shipton for Strategic Options as the petitioning creditor had any relevance to the prolongation of the bankruptcy proceeding, that was attributable, as I implicitly found on 6 June 2001, to Mr Coshott’s unexplained failure to pay his admitted debts in a timely manner.
59 In my view, no compensation is justly payable to Mr Coshott under this head.
9. Interest on compensation payable
60 Section 51A(1) of the Federal Court of Australia Act 1976 (Cth) (‘the Federal Court Act’) provides:
‘(1) In any proceedings, for the recovery of any money (including any debt or damages or the value of any goods) in respect of a cause of action that arises after the commencement of this section, the Court or a Judge shall, upon application, unless good cause is shown to the contrary, either:
(a) order that there be included in the sum for which judgment is given interest at such rate as the Court or the Judge, as the case may be, thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date as of which judgment is entered; or
(b) without proceeding to calculate interest in accordance with paragraph (a), order that there be included in the sum for which judgment is given a lump sum in lieu of any such interest.’
61 Section 51A(2)(a) makes it clear that the above subsection does not ‘authorize the giving of interest upon interest or of a sum in lieu of such interest’.
62 It was agreed by Strategic Options that to order interest on the amount of compensation that the Court should consider it just for Strategic Options to pay to Mr Coshott would, because of the nature of Mr Coshott’s claims, be to order the giving of interest upon interest. I reject that contention. Although I have had reference to rates of interest in giving consideration to the amount of compensation that Strategic Options should be ordered to pay to Mr Coshott under its undertaking as to damages, that does not give the compensation ultimately determined to be payable the character of interest.
63 It was not contended that s 51A of the Federal Court Act has no application in the context of an undertaking as to damages. Nor was any good cause shown why I should not order the payment of interest under s 51A(1) of the Federal Court Act. It is the practice of the Court to adopt the interest rate that would be applied by State courts in litigation in the State in which the litigation is heard (see McCormick v Riverwood International (Australia) Pty Ltd [2000] FCA 32 per Weinberg J at [9]-[17] and the authorities there cited). It was not argued by Strategic Options that, should I consider it appropriate to award interest, I should depart from this practice.
64 It will be ordered that there be included in the sum by which Mr Coshott is to be compensated under the undertaking as to damages interest at the interest rate that would be applied in the Supreme Court of New South Wales for the period between 10 May 2001 and the date of judgment.
the claims of Mrs coshott
1. Loss of increase on the capital value of a home which would otherwise have been purchased
65 Mrs Coshott’s evidence as to her intention with respect to the purchase of a home is set out in [20] above.
66 It was contended on Mrs Coshott’s behalf that I should proceed on the basis that Mr Ronald Coshott would have been willing, notwithstanding the existence of the Creditor’s Petition, to cause Fewin Pty Limited to lend money to Mrs Coshott to allow her to purchase a home jointly with her husband and that, but for the Interlocutory Order, Mrs Coshott would have proceeded to do so. I take the view that I should proceed on the assumption that if Mrs Coshott had any intention of borrowing money herself from Fewin Pty Limited to purchase a home jointly with her husband during the life of the Creditor’s Petition she would have given evidence to that effect. In any event, I am not satisfied that Fewin Pty Limited would have agreed to lend money to Mrs Coshott in the circumstances envisaged by this contention. Mr Ronald Coshott gave evidence that Fewin Pty Limited would have secured the repayment of any amount lent by it to enable Mr and Mrs Coshott to purchase a home by taking a mortgage over that home. In the absence of evidence from Mr Ronald Coshott to the contrary, I conclude that he would have considered that, by taking a security over a property jointly owned by Mr and Mrs Coshott, Fewin Pty Limited would have risked getting caught up in Mr Coshott’s possible bankruptcy (see [19] above).
67 I conclude that Mrs Coshott’s intentions with respect to the purchase of a home during the period 29 June 2000 and 10 May 2001 were essentially the same as her husband’s intentions (see [21] above). Any loss suffered by Mrs Coshott as a result of inability to purchase a home in that period was not caused by the Interlocutory Order.
68 I reject Mrs Coshott’s claim under this head.
2. Storage charges relating to personal items and furniture
69 The claim under this head is expressed in the written submissions of Mr and Mrs Coshott as follows:
‘27. The Coshotts would have purchased another home following the mortgagee sale, however, they were unable to do so because one half of the net proceeds of sale was paid to Mr Thomas pursuant to the orders made on 29 June 2000 (Mr Coshott’s Affidavit of 7 November 2001 – paragraphs 14 to 16 and Mrs Coshott’s Affidavit 7 November 2001).
28. Such a home would have permitted storage of their personal items and furniture. The consequence of the orders made on 29 June 2000 was that they were unable to purchase such a home from January 2001 until at least May 2001. The claim is made to 30 June 2001 on the basis that it is the earliest time at which they would likely have been able to move in following release of the funds. The storage charges were paid by them as their rented accommodation was unsuitable for storing the items.’
In my view, this claim falls with the assertions of Mr and Mrs Coshott that but for the Interlocutory Order they would have purchased a new home for approximately $2 000 000. Mrs Coshott is not entitled to compensation under this head.
conclusion
70 Having regard to my above findings, Mr Coshott is entitled to an order that Strategic Options pay to him compensation assessed at $6,119.66 plus interest from 10 May 2001 to date at the rate that would be applied by the Supreme Court of New South Wales.
71 Mrs Coshott’s application for an order that Strategic Options pay her compensation will be dismissed.
72 The parties should seek to agree short minutes of the orders that should be made, including the order or orders, if any, as to costs, having regard to these reasons for judgment.
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I certify that the preceding seventy-two (72) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Branson. |
Associate:
Dated: 21 July 2003
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Counsel for the Applicant: |
Mr D Francis |
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Solicitor for the Applicant: |
Watkins Tapsell |
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Counsel for the Respondent: |
Mr M Cashion SC |
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Solicitor for the Respondent: |
CKB Partners |
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Date of Hearing: |
4 June 2003 |
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Date of Judgment: |
21 July 2003 |
