Federal Court of Australia

Carter v Chubb Insurance Australia Ltd (No 2) [2024] FCA 1464

ORDERS

THE COURT ORDERS THAT:

1.    The plaintiff’s claims against the second defendant be dismissed.

2.    The plaintiff is to pay $893,880.90 (inclusive of $170,875.78 in pre-judgment interest) to the second defendant.

3.    The plaintiff is to pay post-judgment interest to the second defendant on and from 15 November 2024 pursuant to s 52A of the Federal Court of Australia Act 1976 (Cth) and r 39.06 of the Federal Court Rules 2011 (Cth) until payment is made by the plaintiff to the second defendant pursuant to Order 2 of these orders.

4.    The plaintiff is to pay the costs of the second defendant as taxed if not agreed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

HALLEY J:

1    On 14 November 2024, I delivered reasons for judgment in this proceeding and in proceeding NSD 448 of 2022: Carter v Chubb Insurance Australia Ltd [2024] FCA 1312.

2    In proceeding NSD 448 of 2022, I made orders dismissing Mr Carter’s cross claim and that he pay the costs of the second cross-defendant, Chubb Insurance Australia Ltd (Chubb).

3    In this proceeding, I concluded that Mr Carter’s claims for indemnity under a directors and officers liability insurance policy with Chubb are to be dismissed and Chubb had established that it was entitled to recover amounts that it had advanced to Mr Carter as defence costs under the insurance policy (Advanced Sum). I made orders that the parties confer and provide draft orders in this proceeding to give effect to my reasons for judgment.

4    The only remaining issue in dispute in this proceeding is the period in which pre-judgment interest should be paid. Draft orders have otherwise been agreed between the parties providing for the payment of costs and post-judgment interest.

5    The parties have provided competing submissions on the period for which pre-judgment interest should be paid.

6    Chubb submits that pre-judgment interest should be paid pursuant to s 51A(1)(a) of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act) from 13 April 2017, being the date Chubb first demanded repayment of the Advanced Sum, to the date of judgment in an amount of $309,413.98 or alternatively, from 17 December 2020, being the date Chubb first filed its cross claim against Mr Carter seeking repayment of the Advanced Sum (Chubb’s cross claim), to the date of judgment in an amount of $170,875.78.

7    Mr Carter submits that pre-judgment interest should only be paid pursuant to s 51A(1)(a) of the Federal Court Act from 17 December 2020, being the date Chubb first filed its cross claim against Mr Carter seeking repayment of the Advanced Sum, to the date of judgment in an amount of $170,875.78.

8    Section 51A(1)(a) of the Federal Court Act relevantly provides that the Court shall, on application, unless good cause is shown to the contrary, order that there be included in the sum for which judgment is given interest at such rate as the Court thinks fit on the whole or any part of the judgment sum for the whole or any part of the period between when the cause of action arose and the date at which judgment is entered.

9    In Golden West Refining Corp Ltd v Daly Laboratories Pty Ltd (Federal Court of Australia, 16 February 1995, unreported) an unexplained delay of some 18 months in the commencement of proceedings following a demand for payment of compensation for loss of gold and damage to gold refining equipment was accepted to constitute good cause to the contrary and pre-judgment interest was not awarded for that period.

10    The decision in Golden West was subsequently considered by the Full Court in Forwood Products Pty Ltd v Gibbett [2002] FCAFC 69 but was distinguished by Tamberlin J at [33] (Hill J agreeing) on the basis that there had been no delay in the commencement of proceedings. Rather, the delays were in the matter being brought to hearing after the commencement of proceedings, for which Tamberlin J stated both parties were responsible as each had an active duty to bring to the attention of the Court any failure by the other to proceed in a timely manner: Forwood Products at [34].

11    In this proceeding there was an unexplained delay of more than three and a half years between the first demand for the payment of the Advanced Sum and the filing of Chubb’s cross claim which sought to recover the Advanced Sum and then only following the commencement of proceedings by Mr Carter seeking indemnity under the Policy. I am satisfied that the substantial delay in the “commencement of proceedings” by Chubb, by the filing of its cross claim, constitutes “good cause” as to why it should not be entitled to an award of pre-judgment interest prior to the filing of the cross claim. In addition, and less significantly, although it is now agreed that the Advanced Sum is $723,005.12 (inclusive of GST), the demand for repayment of the Advanced Sum on 13 April 2017 was only in the amount of $657,277.38. No demand was originally made for GST.

12    I am satisfied that these considerations are sufficient to constitute a good cause to the contrary for the purposes of s 51A(1)(a) of the Federal Court Act and that pre-judgment interest should only be payable from the date of the filing of Chubb’s cross claim on 17 December 2020 until the date of judgment calculated in accordance with the Court’s Practice Note “Interest on Judgments” (GPN-INT) dated 18 September 2017.

13    As stated above, the parties have otherwise agreed on the relevant calculation of pre-judgment interest from 17 December 2020, that post-judgment interest is payable and Mr Carter should pay Chubb’s costs as taxed or agreed. Orders will be made to this effect.

Associate:

Dated:    17 December 2024