Brown v IJM Group Pty Ltd trading as Cove Agency

Supreme Court of NSW|2024-05-15|Before: Basten AJ

Solicitors: The Firm Law Group (Applicant) D'Agostino Solicitors (Respondent) File Number(s): 2023/361878

JUDGMENT

BASTEN AJ: The plaintiff, Nathan Brown, seeks to have proceedings in the Local Court removed to the Equity Division of this Court. It is curious that the application comes to the Common Law Division. The circumstances of the application are also curious.
The power for this Court to remove a matter pending in the Local Court to the Supreme Court is found in s 140 of the Civil Procedure Act 2005 (NSW). That course can be taken if there is "sufficient reason" to do so: s 140(4). There is no reason to give a confined scope to this broadly stated criterion. As s 140(3), (not applicable in its terms in this case) demonstrates, factors such as "complex legal issues or issues of general public importance" are material. Further, the power should be exercised in such a way as to "facilitate the just, quick and cheap resolution of the real issues in the proceedings": Civil Procedure Act, s 56. That test should usually be applied having regard to the actual circumstances at the date of exercising a power and not by reference to past events, although the history of the proceedings cannot be ignored.

Procedural background

On 24 October 2022, IJM Group Pty Ltd (IJM) commenced proceedings in the Local Court at Liverpool against Mr Brown for unpaid fees due pursuant to an agreement (referred to as a "player contract") whereby IJM agreed to act as agent for Mr Brown, a professional rugby league player. The claim was for an amount of some $75,000, a claim within the jurisdiction of the Local Court. The statement of claim contains 20 paragraphs. All except par 19 relate to a breach of contract claim. Paragraph 19 purported to add a claim for "unjust enrichment", the particulars of which were said to be "a total failure of consideration", further claiming an order by way of "restitution". Paragraph 19 appears to have raised a claim in equity and not within the jurisdiction of the Local Court, although the basis of the claim was obscure.
IJM conducts a sports management player agency business. In the course of 2019/2020 a dispute arose between the partners who established the business. Proceedings were commenced in the Equity Division. Those proceedings were, however, settled by way of a Deed of Settlement and Release (Deed), following a mediation on 27 February 2020, the Deed being executed on 5 March 2020. On 5 March 2020, Hammerschlag J made orders by consent dismissing the proceedings.
The Deed provided for payments between the parties, including as to the distribution of moneys due under various player agency contracts, one of which involved Mr Brown. On 20 July 2023, Mr Brown filed an amended defence and cross-claim in the Local Court asserting that the Deed provided a bar to any proceedings brought against him by IJM. The cross-claim sought various declarations, including a claim in estoppel, and also a claim for an injunction restraining IJM from commencing or continuing proceedings against Mr Brown. Further orders sought (in the alternative) damages under the Australian Consumer Law based on the failure of IJM to exercise due care and skill in providing services to Mr Brown under the Player Contract. The claim for damages under s 236 of the Australian Consumer Law relied upon alleged breaches of s 60, being the guarantee to render services to a consumer "with due care and skill".
It is necessary to explain the aspects of the Deed relied on by Mr Brown. Clause 2.1(c) provided that the third defendant (IJM) would allow each of the "players" the option to terminate their respective player contracts in accordance with cl 5. The term "players" was defined to mean the players listed at annexure D to the Deed, which, on the copy in evidence, listed only Mr Brown. Clause 5 provided detail of the election being offered to the players pursuant to cl 2.1(c). Clause 13 provided for a bar to further proceedings between the parties and, in addition, for a person "intended to be a beneficiary of the releases contained in this Deed" to become a Party by executing a copy of the Deed.
The cross-claim asserted that a listed player was intended to be a beneficiary of the Deed, pursuant to cl 2.1(c) and cl 5, so that Mr Brown could plead the Deed as a bar to a claim made by him by IJM.
It appears that Mr Brown accepts that if his resistance to the claim by IJM, based on the Deed succeeds, he would not himself be entitled to make a claim against IJM for breach of contract. Accordingly, his claims under the Australian Consumer Law, and for breach of contract on the part IJM, are by way of an "alternative" cross-claim; the rest of the cross-claim is a restatement of the defence.

Jurisdictional confusion

There was a degree of jurisdictional confusion immediately the cross-claim was filed in the Local Court on 20 July 2023. The following day, the solicitors for IJM wrote to the solicitor for Mr Brown stating: "In the cross-claim, your client seeks equitable relief. The Local Court does not enjoy jurisdiction to decide or make the orders you have sought. In our view, respectfully, the cross-claim is incompetent, and we invite you to withdraw it. If you are instructed to pursue the orders, please file the cross-claim in a competent jurisdiction. This may require a transfer of proceedings by way of notice of motion; and our client will seek that the costs of the transfer be borne by your client."
Although it was true to say that part of the relief sought in the cross-claim could not be obtained in the Local Court, it was not correct to say that the cross-claim was incompetent. Nevertheless, Mr Brown should have been put on notice that further consideration should be given to the terms of the relief sought.
Steps were then taken promptly, it would seem, to take out a summons in the District Court. The solicitors for IJM wrote again on 25 October 2023 stating that "your cross-claim does not meet any of the exhaustive criteria [in the sections of the District Court Act providing for a limited equitable jurisdiction], and is liable to be struck out with attendant cost consequences". Mr Brown was invited to "redraft" the summons which it was said "as a matter of form, ought be a motion" for transfer to the Equity Division.
That procedural advice was also partly wrong, as there were no proceedings in which a motion could be filed. Although it may have been correct that the relief sought by way of declarations and injunction could not have been granted in the District Court, the present application to the Supreme Court was in part invited by IJM, although, as counsel for IJM correctly submitted, Mr Brown was at all stages legally represented and he should not have treated the emails from his opponent as legal advice.
The original proposal was to transfer the matter to the District Court. That was apparently abandoned on the basis that the cross-claim involved a claim in equity which did not fall within the jurisdiction of the District Court. The basis for that contention was not explored on this application. The District Court has a limited jurisdiction in equity proceedings conferred by ss 44 and 46 and s 134(1) of the District Court Act 1973 (NSW), including a claim for equitable compensation pursuant to s 134(1)(h). There are also equitable defences available under the Law Reform (Law and Equity) Act 1972 (NSW), s 6. However, there was no submission that the District Court had jurisdiction to grant relief by way of declaration in relation to what were in essence contractual defences.
There was reliance placed by Mr Brown on the limited monetary jurisdiction of the Local Court. There is no doubt that the amount of $75,000 was in dispute. However, there was no evidence before this Court as to the value of the alternative cross-claim. It may readily be assumed that it would not exceed the jurisdiction of the District Court (which is $1,250,000), even if it were to exceed the financial ceiling on the jurisdiction of the Local Court, which is $100,000.
There are cases in which related claims arising out of the same proceeding may properly be accumulated in order to determine whether a statutory threshold has been exceeded: see Chen v State of New South Wales [2016] NSWCA 177 at [11]-[14] (Leeming JA). It is possible that Mr Brown could resist IJM's claim on the construction of the player contract set out in the amended defence and not the Deed. In that case the cross-claims under the Australian Consumer Law, and for breach of contract on the part IJM, might remain available. Success on that basis would likely exceed the monetary jurisdiction of the Local Court.
In this Court, counsel for Mr Brown submitted that the Deed constituted a "settlement" for the purposes of s 33(1)(a) of the Local Court Act 2007 (NSW), and accordingly the Local Court had no jurisdiction with respect Mr Brown's defence or cross-claim. However, that submission should not be accepted. Section 33 relevantly provides: 33 Certain jurisdiction excluded (1) The Court does not have jurisdiction under this Part to hear or determine any of the following kinds of proceedings - (a) proceedings in which the validity or effect of any devise, bequest or limitation under any will or settlement, or under any document in the nature of a settlement, is disputed….
The "Part" referred to in the chapeau to subs (1) is Part 3, titled "Civil jurisdiction". Read in context, the term "settlement" is a reference to settlement of land or an estate of the kind referred to in the Conveyancing and Law of Property Act 1898 (NSW). It has a long history in relation to sequential estates in land, both under the general law and under statute, and is the meaning of the term in s 33(1)(a).
In so far as the present application is based on the proposition that only the Equity Division can grant the relief sought in the cross-claim, the application should be rejected. As has been stated, the cross-claim was in two parts: the first part, which claimed relief by way of declarations simply identified findings upon which the defence was based, namely that the Deed applied, and provided a bar to the proceedings brought by IJM. These declarations were entirely otiose and cannot provide a basis for the transfer of the proceedings.
The application for an injunction should also be disregarded. In the absence of evidence that IJM contemplated any other proceedings in the event that the Deed was held to provide a bar, there was no basis for granting an injunction against the hypothetical possibility of such proceedings. That claim for relief cannot provide a basis for the transfer of the proceedings. It follows that the primary basis upon which it appears that IJM persuaded Mr Brown to make the application to this Court (before opposing it) is without substance.

What order should be made?

To the extent that there is a reasonable possibility that the monetary jurisdiction of the Local Court could be exceeded, there is a question as to whether the proceedings should be in the District Court. This Court does not have power to transfer proceedings directly from the Local Court to the District Court: in theory it might be open to transfer the proceedings to this Court and then transfer them to the District Court pursuant to s 146 of the Civil Procedure Act. Whether or not the power to transfer to this Court could be exercised for the purpose of then transferring to another Court need not be determined: neither party sought such an order and without proper consideration as to its validity, it should not be made.
Should the matter nevertheless be left in the Local Court? The only basis for removing it, was the requirement to deal with the operation of the Deed and its relevance to the claim against Mr Brown. There are three factors which support a transfer to the Equity Division.
First, without impugning the capacity of the Local Court to correctly construe the Deed, the Deed is a document with unusual features, of a kind with which a magistrate is most unlikely to be familiar, and which would benefit from consideration by an experienced commercial law judge.
Secondly, the Deed was the product of a mediation of proceedings in the Equity Division: it is therefore not inappropriate that the proper construction of the Deed would come back to the Division. The only reason for not considering these to be appropriate circumstances is the small amount of money involved.
Thirdly, although the claim falls within the jurisdiction of the Local Court, the confined issues raised by the defence should be determined expeditiously in accordance with Pt 6 of the Civil Procedure Act. If the matter were to be left in the Local Court, there is at least a significant possibility that either party if unsuccessful might appeal the conclusions reached by the magistrate as to the proper construction of the Deed. Although the costs regime in the Local Court might make it cheaper to proceed in that Court, the possibility of an appeal to this Court militates against giving much weight to that factor. Rather, the fact that these proceedings have already been on foot for two years without the pleadings being completed, suggests that there are unusual circumstances which would warrant the matter being dealt with in the Equity Division.
Counsel for IJM raised a possible prejudice which might flow to his client if the matter were dealt with in the Equity Division as any success for the IJM would be in an amount of less than $500,000. Success for IJM in its claim would be a judgment for $75,000. The constraints found in the Uniform Civil Procedure Rules 2005 (NSW), r 42.34, with respect to "small judgments" would then be engaged. According to r 42.34(2), a costs order would not ordinarily be made in favour of the plaintiff. However, an order for costs can be made if the Court is satisfied that, although the proceedings could have been commenced in the District Court, their continuation in the Supreme Court was warranted. Where the continuation of the proceedings follows an order for their transfer to the Court the possibility of prejudice appears to be remote.
Counsel for IJM also submitted that his client's claim was being delayed by the various steps taken to accommodate Mr Brown's cross-claim. That is undoubtedly true, but the question is what steps should be taken now to resolve the matter expeditiously. For the reasons set out above, there is merit to the matter being resolved in the Equity Division and there is no reason to suppose that, now the parties are in the Supreme Court, that will not occur with expedition.
The principal factor militating against a transfer is that, while the claim and the defence involve the construction of the Deed and the Player Contract, with no substantial factual issues for determination, the cross-claim (to which no defence has been filed) could give rise to significant factual disputes. There is no doubt that a claim for a limited amount under s 236 of the Australian Consumer Law could be dealt with in the Local Court. If that possibility were to arise, which it may not, it could be dealt with by directions in the Equity Division. If Mr Brown's primary defence (based on the Deed) is upheld, the cross-claim will fall away.
It may well be appropriate to deal with the claim and the defence separately from any matter raised by the cross-claim. If the cross-claim remains available and Mr Brown seeks to pursue it, after the issue of the Deed has been addressed, it will be a matter for a judge in the Equity Division to determine whether the proceedings should remain in that Division or, because the outstanding issues raise factual issues, but no significant likelihood of a substantial judgment, the cross-claim proper should be transferred back to the Local Court.
In these circumstances, it would be possible either to transfer the claim and the defence, but not the cross-claim, or to transfer the whole of the proceedings and allow the forum for the cross-claim to be addressed in due course.
The most convenient course is not to divide the proceedings now, but to transfer them to the Equity Division so that at least the primary claims can be disposed of expeditiously and by a judge with commercial experience.

IJM's notice of motion

One further procedural matter should be noted. On 2 February 2024, IJM filed a notice of motion in the Equity Division (where this proceeding was commenced) with orders sought under four separate headings. The first heading was "Opposition to summons". To seek an order that the summons be dismissed was probably otiose, but it was followed by an order seeking costs on an indemnity basis, not only of the summons, but of "the proceedings in the Local Court thrown away by reason of the plaintiff's failed summons". In the alternative, costs were sought on the ordinary basis, though presumably in relation to both the summons and the Local Court proceedings. The basis for such an order with respect to the proceedings in the Local Court was unclear.
In the alternative, if the transfer were to be granted, the motion sought three sets of orders. First, that the costs of the summons be the defendant's costs in the cause and that the plaintiff pay the defendant's costs of the proceedings in the Local Court. Secondly, an order for security for costs of the transferred cross-claim in the sum of $100,000, an order properly abandoned in written submissions. Thirdly, IJM sought leave "to file and serve requests for disclosure" to be served on various third parties, an order also not pressed. Apart from the question of the costs of the summons, none of the proposed orders should be made.
On 14 May 2024, IJM sent an email to the Court stating that it had "circulated consent orders to the applicant setting out that the notice of motion filed by the respondent on 2 February 2024 is not pressed and that there be no order as to costs". The proposed orders, order 1 of which was not in a form which could be made by the Court, were as follows: "1. The defendant does not press the notice of motion filed on 2 February 2024 opposing the summons filed by the plaintiff on 14 November 2023. 2. No order as to costs."
The Court, seeking to make sense of the proposed orders, then formulated orders which assumed, in accordance with order 1 that the opposition to the summons seeking transfer of the proceedings was not pressed. In response, the solicitor for IJM replied: "The orders circulated in draft were orders which only attempted to resolve the security for costs motion brought by the respondent. The respondent maintains its opposition to the transfer of the proceedings. Apologies to the Court for any confusion."
It may be noted that the short minutes of order made no reference to security for costs, but did refer to opposition to the summons. This was not just the creation of confusion; the response to the Court's draft orders was self-evidently a reversal of IJM's position as expressed in its proposed order 1 and could have led to the vacation of the hearing today by a misleading communication to the Court.

Costs

There remains a question as to costs. As has been noted, the proposed orders sought by Mr Brown's cross-claim were not appropriate, would not have been made in any court, and were a source of delay and expense. On the other hand, IJM has on more than one occasion behaved in a manner which stimulated further unnecessary steps. In these circumstances, the appropriate order is that IJM's costs of the summons be its costs in the proceedings in the Equity Division.
Accordingly, I make the following orders: (1) Order that proceedings in the Local Court titled IJM Group Pty Ltd v Nathan Brown, case No 2022/317468 be transferred to the Supreme Court, Equity Division, pursuant to s 140(2) of the Civil Procedure Act 2005 (NSW). (2) Note that the transferred proceedings will be titled as in the Local Court proceedings, namely with IJM Group Pty Ltd as the plaintiff/cross-defendant and Nathan Brown as the defendant/cross-claimant. (3) Direct that the pleadings in the Local Court be the pleadings in the Equity Division. (4) Direct that the transferred proceedings be listed before the Equity Registrar for further directions. (5) Order that IJM's costs of the proceedings seeking the transfer of the matter from the Local Court be its costs in the transferred proceedings. (6) Dismiss the respondent's notice of motion filed on 2 February 2024. (7) The amended summons in matter 2023/361878 in the Common Law Division is otherwise dismissed.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 15 May 2024

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