BARING v RUSSELL EDWARDS DESIGN SERVICES PTY LTD [2008] NSWCA 58 | Case summary

9 April 2008 Anne Crerar BARING v RUSSELL EDWARDS DESIGN SERVICES PTY LTD Judgment 1 BEAZLEY JA: I agree with Basten JA. 2 BASTEN JA: This matter commenced in a Local Court before Magistrate Lulham, in substance as a claim by the respondent for moneys owing to it pursuant to an contract for services entered into with the present applicant (Ms Baring) and a company operated by her known as Crerar Baring Interiors Pty Ltd. The respondent, Russell Edwards Design Services Pty Ltd ("Russell Edwards"), claimed an amount outstanding of a little over $69,000. The claim related to building works carried out at the applicant's home in Point Piper. The agreement between the parties dated from October 1999 and was only partly in writing. 3 The proceedings had a tortuous history below. They were commenced in the Fair Trading Tribunal by the applicant but, Russell Edwards having filed a defence indicating an intention to cross-claim, they were transferred to the District Court and then to a Local Court. Although the claim presented on behalf of Russell Edwards involved an amount of some $69,000, the amount recoverable could not have exceeded $40,000, that being the jurisdictional limit of the Local Court prior to 1 January 2004: see Local Courts (Civil Claims) Act 1970 (NSW), s 12 (since repealed). The increased jurisdictional limit which operated from 1 January 2004 did not apply to proceedings commenced before that date: Courts Legislation Amendment Act 2003 (NSW), Schedule 6 [3]. It does not appear from the material before this Court when the proceedings relevantly commenced, but the parties accepted (as they did below) that the lower jurisdictional limit applied. 4 The proceedings in the Local Court took six days for reasons which were explained by the Magistrate in his judgment of 23 September 2005 and which did little credit either to the parties or to the practitioners appearing for them. 5 In the course of the hearing Ms Baring filed a statement of claim seeking to recover the sum of $44,000 which she alleged had been overpaid to Russell Edwards. 6 The matter was heard in the Local Court on days in August 2004, November 2004 and March 2005. Judgment was delivered on 23 September 2005. His Honour dismissed the claim by Russell Edwards for moneys owing and also dismissed the claim by Ms Baring for recovery of amounts overpaid. On 5 October 2005, the following order was made in respect of the costs of the Local Court proceedings: "Defendant Russell Edwards Design Services Pty Ltd to pay plaintiff costs and disbursement [sic] of action on basis of a 3 day hearing but excluding the costs of preparation of Mrs Baring [sic] statement. Costs to be cclculated [sic] on days 4, 5 & 6 of hearing. In relation to other costs each party pay own costs." 7 The explicit restrictions on the costs order followed from remarks made by the Magistrate in the course of his primary judgment of 23 September 2005. In relation to Ms Baring's statement, he noted that it was entirely responsive to that of Mr Edwards and largely incomprehensible when read alone: Judgment at [5]. He also noted that it was full of hearsay, not in proper form and contained comments and conclusions: at [6]. Much of the hearing on the first three days, the costs of which were also disallowed, involved cross-examination of Mr Edwards by counsel. The Magistrate complained that much of the questioning was "imprecise" and gave rise to argumentative debate with the witness: at [7]. After the third day, counsel was instructed by Mr Beazley of Beazley Singleton Lawyers, after which the standard of the presentation improved: at [9]. 8 Russell Edwards sought to appeal to the Supreme Court in the Common Law Division, either as of right in relation to a point of law or by leave in relation to a question of mixed law and fact, pursuant to the Local Courts Act 1982, ss 73(1) and 74(1). (The process was not contained in the materials in this Court, but is adequately set out by the primary judge, Harrison J, in Russell Edwards Design Services Pty Ltd v Baring [2007] NSWSC 140 at [4]-[7]. Leave appears to have been thought necessary on the basis that, although the summons alleged a denial of natural justice and in the alternative an error of law, the complaints particularised challenged findings of fact, arguably on a basis which went beyond errors of law and procedural unfairness. In any event, leave was not opposed and was granted: at [6]. 9 The claim presented by Russell Edwards before the Magistrate involved some six different items, as identified by the Magistrate, the validity of each of which was considered separately and disallowed (with the exception of one amount which was withdrawn): Local Court judgment, at [52]. Of the other items, much turned on the assessment of Mr Edwards' credit. Of both Mr Edwards and Ms Baring, the Magistrate said he was unimpressed with their evidence, and treated it as largely a matter of reconstruction, which was of little assistance to him. However, he dealt with specific concerns in relation to Mr Edwards' evidence. In the course of cross-examination Mr Edwards admitted that he had sought and received a payment of $9,000 from the builder. He agreed that he did not tell Ms Baring that he had received such an amount: Local Court judgment, at [169]-[170]. The builder gave evidence that such payments had been made and had been included in the amount of his quote. Mr Edwards gave evidence that the amount was a "fee" paid by the builder "for assisting him": at [169]. Of this evidence, the Magistrate said: "172 Such evidence disclosed at the very least disgraceful and dishonest conduct on behalf of Edwards. At the very same time that he was charging Baring considerable fees for negotiating the contracts on her behalf with the builder he was obtaining from the builder without her knowledge and consent, money in consideration of his arranging for the builder to enter into the contract. 173 In my view the amount claimed by Edwards will have to be reduced by $9,000 to reflect the payment improperly received by him and paid, in effect, by Baring. Moreover, Edwards' behaviour reflected extremely poorly on his credit and honesty. It is a matter which I took into account generally when assessing his credit and when considering his other claims." 10 In relation to this material, the primary judge in this Court made the following comments, [2007] NSWSC 140 at [18]: "[The Magistrate] appears to have formed the view that each of the payments amounted, in effect, to a secret commission. It is certainly true that the precise nature of the payments appears never to have been accurately or adequately revealed in the evidence. However, Mr Edwards was never cross-examined in a way that confronted him with the allegation that the payments were illicit or wrongful. The plaintiff submitted, and I accept, that in the conduct of the case before the learned Magistrate Mr Edwards was given no opportunity to confront allegations of impropriety arising out of these payments. … If, as his Honour indicated, these matters influenced the views that he formed about Mr Edwards' credit, this was procedurally unfair." 11 After deducting the amounts which had been separately identified as making up the bulk of the claim, there was a remainder of $8,058. Of that, the Magistrate stated at [244]: "Although the above calculations show an amount as still outstanding to Edwards, I have come to the view that he has not satisfied me, on the balance of probabilities, that Edwards Design was entitled to any payment at all. I rely on the findings which I made as to his credibility and honesty, particularly in relation to the [design and implementation fee] dishonestly charged to the builder, the overcharge dishonestly charged in relation to payments to [other contractors]. … I have doubts whether he did as much work as he claimed, particularly towards the end of his work on the site. I believe he exaggerated the work he did. As a result of my findings in relation to the credibility and honesty of Edwards, I have no faith at all in the accuracy [of] the accounts. I believe that if his accounts were properly scrutinised in cross-examination in the proceedings more discrepancies would have been disclosed. … In my view Edwards Design has not discharged the onus on it, and for all of the above reasons I am not … prepared to find for Edwards Design for any sum at all under this basis." 12 The challenge made by the applicant in this Court is not directed against the primary judge's conclusion that the Magistrate failed to accord Russell Edwards procedural fairness, but rather against the next step which his Honour took which was to assess the claims in dispute on the basis that they could not properly have been dismissed in reliance on the disgraceful and dishonest conduct of Mr Edwards. The applicant says that Harrison J rectified the procedural unfairness in the Local Court only by inappropriately substituting his own factual findings for those of the Magistrate. She asserts that the only proper order which could have been made in the Common Law Division was to set aside the judgment against Russell Edwards and remit the matter to the Local Court for further hearing of his claims: compare Hadid v Redpath [2001] NSWCA 416 at [58] (Heydon JA, Stein JA and Grove J agreeing). 13 In an abstract sense, there is substance to this complaint. Russell Edwards bore the onus of proving each element of its claim on the balance of probabilities. If one basis for rejecting part of the claim were itself unsound, the rejection should fall, but the validity of the claim remained to be determined. Mr Edwards might have been disbelieved, but on different grounds. 14 Because questions of credibility were in issue, in a hearing undertaken almost four years ago, it would not be practical to remit the matter to the same Magistrate to be determined on the evidence, properly assessed. However, to return the matter to another magistrate would require that the whole of the evidence be reheard. Indeed, that appears to have been an integral part of the applicant's case. Mr Beazley, who appeared for the applicant in this Court, stated that Harrison J should have had the evidence "retested": Tcpt, CA 01/02/08, p 11. However, if the applicant wished to conduct further cross-examination, to provide a proper basis for the findings which the Magistrate inappropriately made, it is doubtful whether justice could be done to Russell Edwards unless the applicant were prepared to pay its costs of the first hearing in the Local Court, which miscarried through no fault of Russell Edwards. That was not part of the applicant's proposal, and not surprisingly, because a summons for leave to cross-appeal had been filed by Russell Edwards in relation to its failure to obtain its costs in the Local Court, which it estimated as being recoverable in an amount of $50,000. 15 The second difficulty with the applicant's proposition is that once the inappropriate basis for rejecting the evidence of Mr Edwards is removed, no other basis was to be found in the Magistrate's reasons, nor in any material available to this Court to reject his evidence. On the other hand, there was evidence, at least from Mr Edwards himself, which would be sufficient to support his claims, if accepted. 16 Nevertheless, there is substance in the applicant's contention that, except in the most unusual circumstances, once the judgment of the Magistrate was set aside, it would be appropriate to remit the matter for a retrial under s 75(c) of the Local Courts Act because it would not be appropriate to attempt to decide on the papers matters which might well be affected by findings as to credit: see Mastronardi v State of New South Wales [2007] NSWCA 54 at [72]-[87], albeit in the context of a different statutory regime. However, the circumstances of the present case strongly militated against such a course as his Honour clearly recognised in the course of argument: Tcpt, CLDiv, 20/02/07, pp 39-40 in discussion with counsel for Russell Edwards. The matter was also explored with counsel for Ms Baring, both in the context of her cross-claim (which has been abandoned) and in the context of the claim by Russell Edwards: Tcpt, CLDiv, 21/02/07, pp 91-93. Shortly thereafter, Mr Beazley took over from counsel and a similar exploration occurred with him as to the possibility of there being a finding on the cross-claim in favour of Ms Baring: Tcpt, pp 94-96. 17 In responding on the cross-appeal, counsel for Russell Edwards stated (Tcpt, CLDiv, p 98): "… your Honour asked me about remitting part and determining part, I indicated to your Honour that at a practical level, it would be our submission that your Honour would not even have to consider that. Because even if your Honour found that our learned friend's notice of appeal raised sufficient grounds of appeal, your Honour would look at the appeal and be able to determine, because of absence of evidence, that even if the Magistrate had determined it properly, he wouldn't have found in favour of our learned friends and that, of course, involves discretionary issues on behalf of your Honour. And your Honour would take into account in exercising that discretion, the value of the claim, the amount of time and money that has been expended to date and the utility of the remitter." 18 Shortly thereafter, Mr Beazley withdrew the cross-appeal: Tcpt, CLDiv, p 99. The comments made by counsel for Russell Edwards might, however, have counted against a remittal in respect of his claim on the basis that it could also have been dismissed. However, he sought to support his claim on the evidence to a total of approximately $45,000 which was less than the full amount of the claim, but beyond the jurisdiction of the Local Court, to which he was confined. 19 While there is substance to the applicant's contentions that this was an inappropriate case to be determined by the primary judge on appeal, it is not necessary to decide whether that contention should be upheld. That is because, on discretionary grounds, leave to appeal and leave to cross-appeal should both be refused. 20 Before identifying the grounds for such orders, it is necessary to refer to the application for leave to cross-appeal. Although Harrison J gave judgment in favour of Russell Edwards in the amount of $40,000, he made no order as to the costs of the lengthy hearing in the Local Court. As noted above, Russell Edwards claims that it should properly have received its costs in the Local Court and that they would amount to some $50,000, or 25% more than the judgment debt. (His Honour did order that Russell Edwards should have its costs of the appeal to the Common Law Division.) 21 His Honour gave a reasoned judgment with respect to costs on 8 March 2007. The question sought to be raised by Russell Edwards on the cross-appeal is whether his Honour's reasons for refusing to award costs in the Local Court were an acceptable exercise of the discretion which, in the absence of an order to the contrary, would generally have resulted in costs following the event pursuant to the Uniform Civil Procedure Rules 2005 (NSW), r 42.1. 22 While there are serious arguments in favour of that challenge, it is not necessary to address them, because leave to cross-appeal should be refused on a discretionary basis. It is convenient to turn to the reasons why both applications should be refused. 23 First, although the sum of $40,000 would be a significant sum for most people, including no doubt the present parties, it is well below the amount entitling a party to appeal as of right to this Court, namely $100,000. Secondly, this is the second appeal from a judgment of a magistrate in the Local Court. Thirdly, at least in relation to the application for leave to cross-appeal, it is rare that this Court will grant leave in relation to matters of costs. 24 Fourthly, neither the proposed appeal nor the cross-appeal involve any issue of principle or nor do they affect third parties. Whether or not moneys were outstanding was almost entirely a factual question for the Magistrate. Similarly, the question of the appropriate costs order in the Local Court involved no more than the proper application of well-established principles. 25 Fifthly, while each of the parties has an undoubted sense of grievance in relation to the course of proceedings so far, in financial terms their respective complaints tend to cancel each other out. 26 Sixthly, it seems inevitable that the result of granting leave to appeal and upholding the appeal would be an order for a further hearing in the Local Court. That will in turn involve a significant addition to the legal costs already incurred in these proceedings. Although it may well be that a further hearing would not take six days, this Court could not be confident that the hearing would take less than three days, a period which would involve considerable further legal costs. 27 For these reasons, I would dismiss the summons for leave to appeal and the summons for leave to cross-appeal. 28 As each party has been unsuccessful in this Court in their respective applications, there should be no order for costs in this Court. 29 The only remaining question is whether the defendant in the proceedings before Harrison J (Ms Baring) should have received a certificate under the Suitors' Fund Act 1951 (NSW) in relation to the costs of the appeal to that Court. Although the grant of a certificate depends upon "application" it is common practice for such an application to be implied in circumstances where an appeal is successful and certificates are commonly granted without an express application, following judgment on the appeal. It is long since established that an appeal from the Local Court falls within the terms of s 6 of the Suitors' Fund Act and accordingly this Court should grant a certificate in respect of the costs of the appeal to the Common Law Division. 30 Accordingly, I would propose the following orders:

BARING v RUSSELL EDWARDS DESIGN SERVICES PTY LTD

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