His honour then reduced the sum to allow for the

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Unformatted text preview: 978, the amounts overpaid were able to be recovered. For the prior years, however, the recovery was statute barred. The plaintiffs, now Walker Stores, sued the accountants, Hungerfords, alleging negligence and breach of contract, seeking recovery of damages for the loss of the amount of income tax overpaid in the relevant years, totalling $47,469.62. In addition, they sought compound interest at market rates upon that amount and upon the increased provisional tax required to be paid during the relevant period. Alternatively, they claimed damages for the loss of the use of the sums overpaid. At first instance Bollen J., in the South Australian Supreme Court, found the accountan liable for the negligent discharge of their duties. He held that the clients were not e to interest by way of damages on the overpaid amounts except under s. 30C of the Supreme Court Act 1935 (S.A.), but that they could recover for the loss of the use of the 171 C.L.R. 125,125-7. 313 overpaid amounts. In calculating the amount, he accepted that the clients would have put most of the overpaid tax into the business and assessed the damages for the loss of the use of the money by reference to an interest rate of 10 % per annum. His Honour then reduced the sum to allow for the possibility that part of the funds would not have been used in the business, consistent with the probabilistic decision model examined in Chapter Six. Damages, therefore, were assessed at $145, 378.71.2 The defendants had sought to limit the interest component to that found under Section 30C of the Supreme Court Act 1935 (S.A.) which reads as follows: 30C. (1) Unless good cause is shown to the contrary, the court shall, upon the application of a party in favour of w h o m a judgment for the payment of d amages, compensation or any other pecuniary amount has been, or is to be, pronounced, include in the judgment an award of interest in favour of the judgment creditor in accordance with the provisions of this section. (2) T he interest— (a) will be calculated at a ratefixedb y the court; and (b) will be calculated in respect of a period fixed by the court (which must, h owever, in the case of a judgment given on a liquidated claim, be the period running from when the liability to pay the amount of the claim fell d ue to the date ofjudgment unless the court otherwise determines); and (c) is payable, in accordance with the court's determination, in respect of the w hole or part of the amount for which judgment is given. (3) W here a party to any proceedings before the court is entitled to an award of interest under this section, the court may, in the exercise of its discretion, and without proceeding to calculate the interest to which that party m a y be entitled in accordance with subsection (2) of this section, award a lump sum in lieu of that interest. (4) This section does n o t — (a) authorise the award of interest u pon interest; or (ab) authorise the award of interest u pon exemplary or punitive d amages; or (b) apply in relation to any sum upon which interest is recoverable as ofrightb y virtue of an agreement or otherwise; or (c) affect the damages recoverable upon the dishonour of a negotiable instrument; or 2 (1987)44S.A.S.R. 5 32. 314 (d) authorise the award of any interest otherwise than by consent upon any sum for which judgment is pronounced by consent; or (e) limit the operation of any other enactment or rule of law providing for the award of interest. Walker appealed the award of damages, and Hungerfords cross appealed. The full South Australian Supreme Court (King C.J., Millhouse and Jacobs JJ.) allowed the appeal, increased the total award amount to $330,382.38, and dismissed the cross appeal. The court held that the damage suffered, resulting from the loss of the use of the money, was within the reasonable contemplation of the parties under the second limb of the rule in Hadley v Baxendale and should be included in the damages award. They found that the money would have been used to pay off the loans bearing the highest interest and that some of the money might have been used in the business in other ways. With this in mind, the court concluded that "their loss ... could not be less than the rate of interest which they were paying on the [highest interest] loans"4 which, at that time, was 20%. Because there was a probability that not all of the funds would have been used in the business, the court reduced the additional amount awarded to $270,000. This additional amount was held to be recoverable under the second limb of Hadley v Baxendale on the view that the accountants had significant knowledge of the partnership business and the circumstances were such that it was within their reasonable contemplation that this loss would result from the negligent preparation of the tax returns. The accounting firm, Hungerfords, appealed to the High Court of Australia over the award on the loss of the use of money, and Walker Stores cross appealed the ruling that not all of the sums would have been used in the business. 3 4...
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This note was uploaded on 09/03/2012 for the course LAW 1501 taught by Professor Garva during the Three '12 term at University of Adelaide.

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