Stroud v O’Connor

1. [1]

   This is a claim by the defendant for interest on costs. Its jurisdictional basis is Section 101(4) of the Civil Procedure Act 2005 (NSW). That provision was significantly amended as from 24 November 2015. It formerly provided that the court may make an order for interest on costs. It now provides that interest is payable on costs unless the court otherwise orders. In both cases, obviously, the court retains a discretion.

2. [2]

   The defendant’s claim for interest arises in the following circumstances. On 19 November 2012 this court ordered that the plaintiff pay the defendant’s costs on an indemnity basis. On 3 June 2013 the parties compromised the claim and reached an agreement that the plaintiff would pay $96,000 to the defendant by 30 June 2013 in full satisfaction of the claim. Payment was not made by the due date but was eventually paid on 22 January 2016. The ‘claim’ that was compromised by the agreement was the defendant’s entitlement pursuant to the original order for payment of indemnity costs. That claim carried with it a discretionary right to interest pursuant to Section 101(4).

3. [3]

   The discretionary right to interest attaches to an ‘order’ of the court. It does not attach to the personal obligation of a party pursuant to an agreement to pay a specified sum for costs, unless they have specifically agreed that it should do so. In this case, the parties’ agreement operated in substitution for the order of the court made on 19 November 2012.

Accord and Satisfaction

1. [4]

   The plaintiff resists the defendant’s application and relies on the doctrine of accord and satisfaction. That doctrine involves two simple concepts. It means an agreement or consent (accord) to accept something in place of the full remedy to which the recipient is entitled (satisfaction): Gummow J in Thompson v Australian Capital Television Pty ltd [1996] 186 CLR 574 at 610.

2. [5]

   The principle was exhaustively discussed in El-Mir v Risk [2005] at [48] – [54] and pithily explained in Osborn & Benotti v McDermott [1998] 3 VR 1 at 8. In the latter case, Phillips JA said, in a passage that received the apparent approval of Gummow and Hayne JJ in Baxter v Obacelo Pty Ltd [2001] HCA 66; (2001) 205 CLR 653 at [56]:

3. [6]

   And as Dixon J explained in McDermott v Black [1940] HCA 4; (1940) 63 CLR 161 at 183-184:

4. [7]

   In this case, I am satisfied, as a matter of fact, that the agreement made on 3 June 2013 operated, and was intended by the parties to operate, as an accord and satisfaction. The defendant’s previous cause of action, embodied in the court order made on 19 November 2012, including his related discretionary statutory entitlement to interest on costs, has ‘gone’. It was satisfied by the making of the compromise agreement and the plaintiff’s acceptance of the defendant’s ‘promise’, which took effect in substitution for his entitlement to enforce the order of the court for indemnity costs.

5. [8]

   The defendant’s discretionary statutory entitlement to interest on costs cannot survive independently. It only takes effect in respect of an ‘amount payable under an order for the payment of costs’. But there is no longer any amount payable pursuant to a court order. The effect of the accord and satisfaction is that the court order ceased to be enforceable when the defendant accepted and agreed to the compromise agreement.

6. [9]

   The defendant’s remedy, when the plaintiff failed to pay the sum of $96,000 by the due date, was for breach of contract. Having eventually received full payment on 22 January 2016, it was not open to the defendant to invoke the discretionary statutory entitlement to interest. That right did not survive the accord and satisfaction.

Discretion

1. [10]

   In any event, it is unfair of the defendant to raise a claim for interest on costs almost three years after the compromise agreement. The parties agreed on a fixed sum. There was no mention of interest at the time of the negotiations and no mention of it prior to the payment of $96,000 on 22 January 2016. The delay has obviously caused prejudice to the estate of which the plaintiff is the executor; there is no explanation for the delay; and I am unwilling to cause any further depletion to the assets of the estate.

2. [11]

   I therefore dismiss the notice of motion with costs.