Deloitte Touche Tohmatsu Trustee Company Ltd v Christchurch Pavilion Partnership (No 1) [2002] NZCA 127; [2002] 3 NZLR 215; (2002) 16 PRNZ 337 (10 June 2002)

Last Updated: 16 December 2011

IN THE COURT OF APPEAL OF NEW ZEALAND

CA206/99

	BETWEEN	DELOITTE TOUCHE TOHMATSU TRUSTEE COMPANY LIMITED
		Appellant

	AND	CHRISTCHURCH PAVILION PARTNERSHIP NO.1 AND OTHERS
		First Respondents

	AND	COONEY LEES AND MORGAN
		Second Respondent

	AND	KPMG PEAT MARWICK
		Third Respondent

Hearing:	23 May 2002
Coram:	Keith J Fisher J Salmon J
Appearances:	A A Lusk QC and R B Lange for Appellant W M Wilson QC and RP Harley for Respondents
Judgment:	10 June 2002

JUDGMENT OF THE COURT DELIVERED BY SALMON J

[1] This appeal is the final stage in proceedings which commenced in 1993. The proceedings were brought by the first respondent, Christchurch Pavilion Partnership and others (Pavilion) against the appellant (Deloitte) and the second and third respondents.
[2] Five partnerships, comprising 73 partners, claimed $4.5 million relating to a failed investment. Cartwright J gave judgment in relation to liability on 8 July 1998. Pavilion succeeded against Deloittes but not against the second and third respondents.
[3] The parties agreed that the appropriate quantum figure in terms of the liability judgment was $4,229,500. There were further judgments as to interest and costs. Deloittes appealed against the judgment as to liability and made an application for stay of execution pending the hearing of that appeal. On 6 August 1999 Cartwright J delivered a judgment relating to costs, post judgment interest rate and the stay of execution. The stay was granted subject to conditions. There was a further appeal by Deloittes against that judgment in so far as it related to costs and post judgment interest rate and against certain of the conditions imposed on the grant of the stay of execution. Deloittes were successful in their appeal to this Court on the liability issue and that judgment was upheld on an appeal by Pavilion to the Judicial Committee of the Privy Council.
[4] The judgment of the Court of Appeal set aside the judgment entered in the High Court and entered judgment for Deloittes with costs in its favour to be fixed by the Court if the parties could not agree. The parties were unable to agree and the matter came before Anderson J. He was also required to consider matters relating to post judgment interest. In a judgment dated 13 December 2000 he made a ruling as to costs. Because the appeal to the Privy Council had not at that stage been heard, he declined to determine the question of entitlement to post judgment interest. He did, however, make orders in a form agreed between the parties as to the disbursement of the original judgment sum which, as required by the stay order, had been paid to the Registrar of the Court to be held in trust pending the outcome of the appeal. A balance, relating to matters the subject of this appeal, remains held on trust.
[5] In relation to the appeal on costs and interest only two matters remain to be determined.

1. Cartwright J made costs orders in favour of the second and third respondents. There is no issue remaining in relation to the costs paid to the third respondent. As to the second respondent Cartwright J ordered that the costs awarded in that party’s favour would be born by Pavilion and Deloittes equally. As required by that order Deloittes paid to the second respondent $69,554.34 being half of the total amount awarded in favour of the second respondent.

Deloittes now seek by this appeal an order that Pavilion reimburse it for that amount together with interest.

2. There is an argument as to entitlement to the interest earned on the moneys held by the Registrar pursuant to the conditions of the stay application. Deloittes say that having been successful on their appeal that interest should be paid to them. Pavilion contends that on a proper interpretation of the conditions pertaining to the grant of the stay they are entitled to the post judgment interest.

This judgment is directed to those two issues.

Costs awarded to Cooney Lees & Morgan

[6] Mr Wilson QC for Pavilion, notes that Deloitte’s payment of 50 per cent of the second respondent’s costs was a condition of Deloitte’s grant of a stay. He further notes that the costs judgment records:

Deloittes have agreed to contribute 50 per cent of such reasonable sum fixed by way of costs in favour of the [second respondent].

Mr Wilson submits that we should not interfere with the exercise of the Judge’s discretion.

[7] For the appellant, Mr Lusk QC, submits that the agreement to pay half of the second respondent’s costs was made in the context of a judgment against Deloittes, and in the face of a situation where the second respondent was clearly entitled to an award of costs. He submits that Deloittes having been successful on appeal are now entitled to have the costs issue revisited in the light of that outcome. He submits that had Deloittes been successful at first instance there would have been no question of their consenting to an order being made against them for payment of a portion of the second respondent’s costs.
[8] We accept this submission. In our view, Deloittes are entitled to reimbursement of this sum. In the event of that being our decision Mr Wilson acknowledged that it would be appropriate to make the order against Pavilion rather than against the second respondent.
[9] Accordingly, we order that Pavilion pay to Deloittes the sum of $69,554.53 representing the half share of costs paid by it to the second respondent.
[10] Deloittes also seek interest on those costs. They rely on Rule 22 of the Court of Appeal (Civil) Rules 1985 which provides:

22. Repayment of judgment sum and interest – (1) If an appellant has, in accordance with a judgment of a Court below, paid a judgment debt and any interest payable on that debt, and the appellant successfully appeals from that judgment, the Court of Appeal may make the orders referred to in subclause (2).

(2) The Court may make such orders, as may seem just in its discretion, concerning –

(a) The repayment of the amount paid by the appellant; and

(b) The payment of interest to the appellant on the amount paid by the appellant under the judgment during the period commencing on the date of the payment and ending with the date of the repayment.

[11] Mr Wilson argues that the judgment debt does not include costs. He also notes that the investors have never had the second respondent’s costs, so have never been in a position to earn any interest on those costs.
[12] It is certainly the case, as Mr Lusk submitted, that the order of Cartwright J distinguished between judgment sum and costs and so too did the judgment of Anderson J. The question is whether the term “judgment sum” should be equated with the term “judgment debt”.
[13] Mr Lusk submits that costs are part of the judgment debt and that Deloittes having been out of pocket should receive interest at the rate of 11 per cent.
[14] The object of Rule 22 would appear to be the financial restoration of the successful appellant to the position it would have occupied had the appellate outcome been adopted from the beginning. It is difficult to think of any reason for distinguishing between different classes of judgment payment in that respect. Arguably in that context “judgment debt” was intended to include all principal payments made in compliance with the judgment as distinct from any interest thereon required by the judgment. On that approach costs required by the judgment would be included. But in any event by Rule 19(5) the Court may make such further or other orders as the case may require. It is pursuant to that power that the Court, for example, refers issues such as costs back to the High Court for determination when an appeal is allowed. The rule provides the Court with jurisdiction to consider whether interest should be awarded on the costs paid in this case. It is true, as Mr Wilson says, that the investors have never had the second respondent’s costs. But they are in the position of having had the benefit of the payment by Deloittes of half those costs.
[15] Accordingly, we think it is appropriate to make an award of interest in Deloittes’ favour. Mr Lusk sought the Judicature Act rate of 11 per cent. We consider that interest should be seven per cent per annum, which is in accordance with the affidavit evidence presented by Deloittes at the time of the argument as to the appropriate rate for post judgment interest.

Interest earned on funds held by Registrar

[16] Mr Wilson submits that on a proper construction of the judgment of Cartwright J of 6 August 1999, Pavilion is entitled to the interest earned on the funds held by the Registrar. He relies on paragraph (5)(iii) of the orders at page 9 of that judgment. That order provides:

(iii) the judgment sum, interest and the balance costs payable by the first defendant will be stayed on the following conditions: either (a) the first defendant will pay a sum representing the judgment sum, balance costs payable and post judgment interest accrued to the date of payment to the Registrar to be paid in his or her discretion to an interest bearing account. In the event of the first defendant succeeding wholly or partially on appeal the proportion of interest so earned will be applied towards the post judgment interest order in favour of the plaintiffs, or (b) the first defendants will provide a letter of credit to the satisfaction of the plaintiffs.

[17] Deloittes elected to follow the first of the two options set out in that order. Mr Wilson submits that the effect of the sentence commencing “In the event of ...”, when read in the context of the order, entitles Pavilion to the whole of the interest earned while the funds are held by the Registrar. The use of the word “proportion” included in that sentence is, he submits, intended to distinguish the interest so earned from that which had accrued prior to the date of payment to the Registrar. He submits that the intention of the Judge was that Pavilion should have that interest regardless of Deloittes success either wholly or partially on its appeal. He noted that in granting a stay the Judge was exercising a discretion and could impose any reasonable condition on the grant of a stay. He said that the agreement in question was reasonable because had the proceeds of the judgment been paid to Pavilion the investors would have had the use of that money and any interest earned on it, up to the time of the judgment in the Court of Appeal.
[18] He noted that in submissions before Cartwright J the investors had proposed that:

...justice would be done by permitting the plaintiffs (irrespective of the outcome of the appeals) to retain interest at the rate allowed by the Court from the date of judgment ... until the date of payment.

[19] He submits that the order made represents an acceptance, at least in part, of that submission.
[20] We note the judgments referred to by Mr Wilson which illustrate the variety of conditions imposed on successful applications for stay. We do not find any of those judgments of particular assistance in this case. The discretion, of course, is a broad one and we accept that the widely varying circumstances which confront a Judge faced with such an application will result in conditions tailored to those circumstances. Mr Wilson also referred to what he described as the general principle that a plaintiff should not be deprived of the proceeds of a judgment pending appeal.
[21] For Deloittes, Mr Lusk submits that there is no authority to suggest that an unsuccessful party should retain post judgment interest. He submits that there is nothing in the judgment of Cartwright J to suggest that such was her intention. He says that the Judge’s concern was to protect Deloittes, not to give the plaintiff post judgment interest.
[22] We agree that, leaving aside for the moment the words of the order itself, there is nothing in the judgment which suggests that the Judge intended to follow the unusual course of denying a successful party part of the interest earned on the judgment sum. Indeed it is clear that the reason for making order 5(iii) was to protect Deloittes against the possibility that in the event of its appeal succeeding it would not receive payment of the entire sum due. The Judge specifically referred to the danger that Deloittes might not receive repayment of the judgment interest and costs.
[23] We do not accept the interpretation of order 5(iii) urged upon us on behalf of Pavilion. In our view the intention of the order was to make it clear that in the event of a partial success by the Deloittes, the interest would be divided proportionately. Had she intended that Pavilion would have retained the interest regardless of the outcome of the appeal some reference to that, and the reasons for it, would have been made in the body of the judgment. We say this because it would be a most unusual order to make.
[24] We would add, that even if we had accepted Mr Wilson’s submission as to the interpretation of the provision, we would have allowed the appeal and ordered that the interest be paid to Deloittes. When the matter was before Cartwright J there was, of course, no certainty as to the ultimate outcome of the litigation. That circumstance has changed significantly with the success of Deloittes. We consider that it is appropriate for this Court to take that changed circumstance into account in reviewing the exercise of the discretion in the High Court. We consider that it would be unjust to deny Deloittes the interest that the money has earned post judgment. The Courts have held that they were under no liability to Pavilion. In those circumstances Deloittes would be unjustly penalised if they were denied the interest earned on the money paid into Court by them. Had we found that the order had the meaning contended for by Pavilion, a further reason for reviewing the exercise of discretion would be the absence of any reasons given in the judgment for making such an order.
[25] However, we have held that the order does not entitle Pavilion to the interest so that there is no reason to do any more than confirm that finding.

Result

[26] The appeal in relation to the costs order is allowed. Pavilion is required to pay Deloittes the sum of $69,554.53 together with interest at seven per cent per annum calculated from the date of payment, to the second respondent. We declare that on its proper construction order 5(iii) does not entitle Pavilion to any post judgment interest. The total fund held by the Court pursuant to the judgment of Anderson J is to be paid to Deloittes.
[27] Deloittes are entitled to costs on this appeal. The first respondent is to pay Deloittes the sum of $3,500 together with disbursements, including reasonable travel and accommodation expenses for two counsel, to be fixed by the Registrar if the parties are unable to agree.

Solicitors:
Simpson Grierson, Auckland for Appellant
Izard Weston, Auckland for First Respondent
Bell Gully Buddle Weir, Auckland for Second Respondent
Sharp Tudehope, Auckland for Third Respondent