Arnoldus-Lewis v Murphy

Civil Procedure Act 2005 Contracts Review Act 1980 Legal Profession Act 1987 Legal Profession Act 2004 LEGISLATION CITED : Legal Profession Regulation 2005 Local Courts Act 1982 Local Courts (Civil Claims) Act 1970 Local Courts (Civil Procedure) Rules 2005 Uniform Civil Procedure Rules 2005

ASIC v Edensor Nominees Pty Limited [2001] 204 CLR 559 Cachia v Hanes (1993) 179 CLR 403 Craig v South Australia (1995) 184 CLR 163 CASES CITED : Harris v Caladine (1991) 172 CLR 84 John Fairfax & Sons v Police Tribunal (1986) 5 NSWLR 465 John Fairfax Publications Pty Ltd v Ryde Local Court (2005) 62 NSWLR 512 Kells v Waters [2007] NSWSC 885

Lynette Arnoldus-Lewis (1st plaintiff) PARTIES : Aaldrick Arnoldus (2nd plaintiff) Partick F. Murphy trading as North Coast Investigations (Defendant)

COUNSEL : Mr T Mehigan (Plaintiffs) In person (Defendant)

SOLICITORS : Somerville Laundry Lomax (Plaintiffs)

• 11 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

10752/08 Lynette Arnoldus-Lewis & Anor v Patrick F. Murphy t/as North Coast Investigations

JUDGMENT 1 HER HONOUR: Mr Murphy successfully sued Dr Arnoldus-Lewis and her husband, Mr Arnoldus, in the Small Claims Division of the Local Court. His claim was for unpaid fees for services provided by him as a commercial agent. The Magistrate ordered judgment in his favour in the sum of $3204 together with interest in the sum of $136.06. Mr Murphy was not represented by a lawyer in the proceedings and accordingly was not awarded legal costs. However, the Magistrate awarded him $4313 by way of "expenses". 2 Most of the expenses awarded were Mr Murphy's costs of travelling to Court after the proceedings were transferred to Casino and the time he spent attending that Court on 5 occasions. Mr Murphy had commenced the proceedings in Bellingen but they were transferred to Casino over his objection. 3 Dr Arnoldus-Lewis and Mr Arnoldus have appealed against the judgment under s73(2) of the Local Courts Act 1982 (since amended to provide that such appeals lie to the District Court). Under that section, the grounds for an appeal from the Small Claims Division are confined to lack of jurisdiction and denial of natural justice. Although they are plaintiffs in the appeal, it is less confusing if I refer to Dr Arnoldus-Lewis and Mr Arnoldus as the appellants. 4 The appellants do not take issue with the judgment against them on the substantive claim, but contend that the Local Court lacked jurisdiction to order them to pay Mr Murphy's expenses. A separate ground of appeal based on an alleged denial of natural justice was abandoned at the outset of the hearing. The issue raised for determination in the appeal is whether the Local Court sitting in its Small Claims Division has power to order a party to pay for the travel expenses and lost time of another party.

Is there power to award expenses in the Small Claims Division? 5 The starting point is to observe that the Local Court is a statutory court. Its powers are confined to those conferred expressly or necessarily to be implied from those conferred expressly: John Fairfax Publications Pty Ltd v Ryde Local Court (2005) 62 NSWLR 512 at [38]. 6 No power is expressly conferred on the Local Court to order the payment of "expenses" of a party, whether for travel, lost time or otherwise. There is a power conferred expressly to make an order for the payment of "costs" in the Small Claims Division. However, that power is plainly confined to legal professional costs. The power is contained in r 14 of the Local Courts (Civil Procedure) Rules 2005 which provides: "Costs (1) Subject to this rule, the Court may make orders for the payment of costs in any proceedings, including proceedings that are adjourned, discontinued or dismissed. (2) The only matters for which the Court may award costs are those for which fixed costs are prescribed under Part 11 of the Legal Profession Act 1987. (3) The amounts that the Court may award for such costs include not only the fixed costs so prescribed but also any disbursements properly incurred in relation to the matters for which those costs are prescribed. (4) Despite subrules (2) and (3), the maximum costs that may be awarded to a party: (a) if proceedings are discontinued or dismissed, or a defence is struck out, at a pre-trial review or at a hearing, or (b) if proceedings are adjourned as a consequence of a party's default or neglect, including a party's failure to comply with a direction of the Court, or (c) if proceedings on a motion are heard by the Court, or (d) if judgment is given after a trial of proceedings, are the costs allowable on entry of default judgment."

7 It is clear that the power under r 14 to order the payment of "costs" does not extend to ordering the payment of expenses of the kind ordered in the Court below. That appears from the fact that the matters for which the Court may award such costs are confined to "those for which fixed costs are prescribed" under the legislation governing legal professional costs: see r 14(2). Curiously, that rule still refers to Part 11 of the Legal Profession Act 1987, which has now been repealed and replaced by the Legal Profession Act 2004. In any event, under either the repealed Act or the regime that has replaced it, the only fixed costs prescribed are legal professional costs. 8 The relevant regulation under the current legislation is clause 112 of the Legal Profession Regulation 2005. The costs payable for the enforcement of certain debts and judgments under that regulation are specified in schedule 2. They are all legal professional costs. No costs are specified for the travel or lost time of the litigant. 9 Mr Mehigan, who appeared for the appellants, also relied on the fact that the costs that may be awarded under clause 112 are capped. There are three separate items in schedule 2 for which costs may be payable and they are alternatives. The highest allowance is $759. If the amount at issue in the proceedings is between $1000 and $5000 (as it was in the present case), the costs that may be awarded are 60% of that amount, that is, $455.40. Accordingly, even if the expenses of a party could properly be awarded as "costs" in the Small Claims Division under r 14 of the Local Courts (Civil Procedure) Rules 2005, they would be capped in this case at $455.40. However, in my view, Mr Murphy's travel expenses and lost time are not properly characterised as "costs" within r 14 and the Magistrate's order was not within the power conferred under that rule. Accordingly, the question of the cap does not arise. 10 There is no other express power in the Small Claims Division to order the payment of costs. The powers conferred on courts as to costs under s98 of the Civil Procedure Act 2005 do not apply to such proceedings: see s 4 of the Civil Procedure Act; r 1.6 and Schedule 1 of the Uniform Civil Procedure Rules 2005. 11 It follows that there is no express power that could be construed to authorise an order for the payment of expenses. 12 The next question is whether such a power is to be implied from those conferred expressly. As noted in John Fairfax Publications Pty Ltd v Ryde Local Court at [38], the test for the implication of powers in a statutory court is the test of necessity. The principle as stated in John Fairfax Publications is that a grant of power "carries with it everything necessary for its exercise".

13 In my view, it could not be said to be necessary for a court expressly constrained in its power to award legal professional costs to have a power to award expenses to a party. Indeed, a power to order such expenses would be inconsistent with the express powers of the Small Claims Division. The establishment of that Division was intended to provide litigants in small civil actions with a fast, cheap, informal and final resolution of their disputes. 14 Those objects are promoted by the rules that constrain the award of costs. In the second reading speech for the Bill that first introduced the Small Claims Division, the then Attorney General stated that a proposal aimed at assisting parties to conduct their own litigation could not succeed without a prohibition on the award of costs. The Attorney referred in that context to the disadvantage faced by "the poor litigant" when awards of costs are available, and the risk of parties of being blackmailed out of pursuing their claims (New South Wales, Parliamentary Debates, Legislative Assembly, 22 November 1990, 10415 (Mr Dowd, Attorney General) at 10416. 15 In my view, a power to order travel expenses and compensation for the time spent by a litigant attending the hearing of the proceedings would equally undermine the objects of the small claims system. It would expose unfunded litigants to the very risk sought to be obviated by the constraints imposed on the award of legal professional costs. 16 Regrettably, the resolution of the dispute in the present case was not fast or cheap (or, as it turns out, final). The Magistrate found that the appellants had been attempting "to obfuscate and delay and have endeavoured to wear down [Mr Murphy] by these tactics". Documents in evidence in the appeal suggest that there was a strong basis for the Magistrate's view. However, those matters are not relevant to the disposition of the appeal (except as to costs).

17 Mr Murphy, who continued to represent himself in the appeal, did not dispute the applicability of r 14 of the Local Courts (Civil Procedure) Rules 2005 but submitted that the learned Magistrate had power under s 14 of the Civil Procedure Act to award expenses in the extraordinary circumstances of this case. 18 I accept that there were features of the case that took it outside the ordinary. One was the application made by the appellants for a change of venue from Bellingen to Casino, ostensibly on the basis that Mr Arnoldus, who was described as a mute quadriplegic, was entitled to attend the hearing and was unable to make the journey from Casino to Bellingen (some 3 hours' drive). At the time the application was made, the amount claimed in an amended pleading that had been filed without leave was within the jurisdictional limit of the Small Claims Division, which does not usually permit witness to be called. However, rather than consenting to the amendment and proceeding on the basis that the attendance of Mr Arnoldus would therefore not be necessary, the appellants proceeded with their application to change the venue, which was successful. 19 The appellants then insisted that Mr Murphy should proceed by way of notice of motion for leave to file the amended statement of claim. It is difficult to understand why they did so. The principal amendment was to reduce the claim, in response to a suggestion made by the appellants solicitor to Mr Murphy. The original claim included unpaid fees for building repair work at rental properties owned by the appellants. Mr Murphy says the appellants' solicitor told him that the Local Court could not hear a claim for building repair work, so he amended his claim to exclude it. The amendment reduced the amount claimed from $14,283.55 to $3,204 which, as I have noted, brought the proceedings within the jurisdiction of the Small Claims Division. 20 Nonetheless, and although they had not then filed a defence, the appellants opposed the application for leave, apparently simply on the basis that the time within which an amendment could be made without leave or consent had passed. The Court, predictably, granted leave to amend but ordered Mr Murphy to pay the appellants' legal costs of $730, notwithstanding the very cap on such costs relied on by the appellants in these proceedings. Mr Murphy has paid that amount. 21 Those were undoubtedly among the events that moved the Magistrate to award Mr Murphy his expenses of 5 appearances in Casino. However, s 14 of the Civil Procedure Act does not assist Mr Murphy. That section provides: "in relation to particular civil proceedings the court may, by order, dispense with any requirement imposed by rules of court if satisfied that it is appropriate to do so in the circumstances of the case" 22 In the present case, it was not a question of the Magistrate dispensing with any requirement imposed by the rules of court, but rather whether his Honour had any power to make the award at all. 23 Mr Murphy also relied on the decision of the High Court in Cachia v Hanes (1993) 179 CLR 403. However, as submitted by Mr Mehigan, that decision rather supported the appellants' contention that the term "costs" in r 14 does not refer to travel expenses and time lost. In Cachia, it was stated in the majority judgment that costs are awarded by way of partial indemnity for professional legal costs actually incurred in the conduct of litigation (at 410.9) and were never intended to be comprehensive compensation for any loss suffered by a litigant such as the expenses of travel and loss of time (at 411.1). 24 Accordingly, in my view the Local Court sitting in its Small Claims Division has no power to order the payment of a party's expenses of travel and loss of time.

"Lack of Jurisdiction" 25 I note that the appellants' argument presupposed, without developing the proposition, that an absence of power is the same as a "lack of jurisdiction" within the meaning of s 73(2). Mr Murphy took no issue with that proposition. The point not having been taken or argued, it is probably not appropriate for me to reject that assumption. I do, however, have some doubt as to its correctness. 26 The relationship between "jurisdiction" and "power" was considered by the High Court in ASIC v Edensor Nominees Pty Limited [2001] 204 CLR 559 and is helpfully analysed in the joint judgment of Gleeson CJ, Gaudron and Gummow JJ and the separate judgment of Kirby J. The joint judgment explains that the word "jurisdiction" is a generic term "generally signifying authority to adjudicate": at [2]. Their Honours said that "jurisdiction" and "power" are not discrete concepts and noted that the term "inherent jurisdiction", for example, may be used to describe what is in truth a power to make orders of a particular description, citing the following passage from the judgment of Toohey J in Harris v Caladine (1991) 172 CLR 84 at 136: "the distinction between jurisdiction and power is often blurred, particularly in the context of 'inherent jurisdiction'. But the distinction may at times be important. Jurisdiction is the authority which a court has to decide the range of matters that can be litigated before it; in the exercise of that jurisdiction a court has powers expressly or impliedly conferred by the legislation governing the court and 'such powers as are incidental and necessary to the exercise of the jurisdiction or the powers so conferred' ". 27 The Local Courts are inferior courts of record created by statute. It has long been acknowledged that such courts "can have no powers, jurisdictions or authorities other than those authorised by [the Act establishing them]": John Fairfax & Sons v Police Tribunal (1986) 5 NSWLR 465 at 476C per McHugh JA. That decision was concerned with the inherent powers of a Tribunal to act effectively within its jurisdiction. 28 In the present case, the Local Court had jurisdiction, in the sense that it was authorised by statute to adjudicate Mr Murphy's claim. The claim was a money claim where the amount claimed was less than the jurisdictional limit of the Court when sitting in the Small Claims Division. Jurisdiction to adjudicate that claim was expressly conferred by s 65(2) of the Local Courts Act 1982. 29 In the exercise of its authority to adjudicate the claim, the Court had power to make an order for the payment of costs in accordance with r 14 but no power to make an order for the payment of expenses. The difficult question is whether an order made without power in the determination of a claim in respect of which the Court has jurisdiction is within the ground of appeal of "lack of jurisdiction" in s 73(2) of the Act. 30 That question does not appear to have been considered by this Court. Almost all of the appeals brought under s 73(2) of the Local Courts Act 1982 and its predecessor, s 69(2A) of the Local Courts (Civil Claims) Act 1970, have relied exclusively on the ground of denial of natural justice rather than the ground of lack of jurisdiction: but see Kells v Waters [2007] NSWSC 885 where an argument based on lack of jurisdiction was dismissed. 31 The jurisdiction of the Local Courts is identified in Part 7 of the Local Courts Act. Some of the provisions of that Part identify specific matters in respect of which the Local Courts have jurisdiction. Other provisions specifically identify matters in respect of which those Courts do not have jurisdiction. For example, s 65 says that the Court has jurisdiction to hear and determine various money claims; s 67 says that the Court does not have jurisdiction in identified matters including proceedings concerning the validity of a will, proceedings for passing off, wrongful arrest, false imprisonment and so on; s 68 says that in relation to a contract the Court has the same jurisdiction as the Supreme Court to grant relief under s 7(1)(a) of the Contracts Review Act 1980 and s 69 says that the Court has jurisdiction to hear and determine proceedings with respect to a cause of action even if part of the cause of action arose outside New South Wales. 32 Section 72 of the Act states that, subject to the provisions concerning appeals, "all judgments and orders of a court exercising jurisdiction under this part are final and conclusive". 33 There is no reference in Part 7 of the Act to "powers". The power to make an order for the payment of costs arises under the rules. 34 In that statutory context, it might be argued that the ground of lack of jurisdiction in s 73(2) is confined to an absence of any authority to adjudicate the claim, and does not include an absence of power to make an order in the exercise of authority expressly conferred under Part 7.

35 In Craig v South Australia (1995) 184 CLR 163, the High Court stated at 177 that an inferior Court falls into jurisdictional error "if it mistakenly asserts or denies the existence of jurisdiction or if it misapprehends or disregards the nature or limits of its functions or powers in a case where it correctly recognises that jurisdiction does exist". The Court stated at 178, however, that when an inferior Court misconceives the extent of its powers, "the line between jurisdictional error and mere error in the exercise of jurisdiction may be particularly difficult to discern". 36 I have no doubt that the Small Claims Division lacks power to make an order for the payment of expenses but there may be some doubt as to whether that is an error going to lack of jurisdiction or "mere error in the exercise of jurisdiction". 37 However, as the point was not taken by Mr Murphy or argued before me, I have concluded that I should proceed on the basis that the absence of power to make the order amounted to a lack of jurisdiction within the meaning of s 73(2) and, on that basis, that I should vary the judgment to exclude the provision for expenses. 38 I note that part of the expenses ordered was $221 for issue and service fees. The appellants did not dispute the Magistrate's power to award that amount.

39 The order is: Pursuant to s 75(1)(a) of the Local Court Act, the terms of the judgment given 24 January 2008 are varied to delete the provision for payment of expenses in the sum of $4313 and substitute provision for the payment of issue and service fees of $221 so that the varied order is judgment for the plaintiff in the total sum of $3561.06. 40 I will hear the parties as to costs.

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