Burdel Investments Pty Ltd v Burchett

Supreme Court of NSW|2000-11-10|Before: Hamilton J, Bryson J

CITATION : Burdel Investments Pty Ltd v Burchett [2001] NSWSC 600 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 5097/98 HEARING DATE(S) : 10 November 2000 & 20 February 2001 JUDGMENT DATE : 18 July 2001

PARTIES : Burdel Investments Pty Limited (P) Simon Burchett (D) JUDGMENT OF : Hamilton J

COUNSEL : P T Taylor & D R Stack (P) A J Bannon SC (D) SOLICITORS : Hickson Wisewoulds (P) Allen Allen & Hemsley (D) CATCHWORDS : PROCEDURE [117] - Practice under Supreme Court Rules - Reference by Court to referee - Powers of Court in relation to report - Whether report ought be adopted when subject matter of proceedings resolved between delivery of report and hearing of motion for adoption - PROCEDURE [553] - Costs - Costs of whole action - Generally - Where action settled - Usual rule - Whether usual rule should be departed from - Whether plaintiff should be regarded as successful. LEGISLATION CITED : Fair Trading Act 1987 ss 42 & 68 Supreme Court Rules 1970 Part 72 rr 2(1), 11 & 13 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 DCT v Bowen [1999] NSWSC 881 CASES CITED : Nine Network Pty Ltd v Kennedy Miller Television Pty Ltd NSWCA 8 June 1994 unreported Plimer v Roberts (1997) 80 FCR 303 Re The Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549 DECISION : Application for adoption of referee's report refused. Order that there be no order as to the costs of the proceedings.

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

5097/98 BURDEL INVESTMENTS PTY LIMITED v SIMON BURCHETT

1 Two matters are before me. The first is a motion by the plaintiff for an order for the adoption of the report of a referee, the Hon John Brownie QC. The second is an application by the plaintiff for an order that the defendant pay its costs of the proceedings, whether or not it obtains an order for the adoption of the referee's report. The applications arise as follows. 2 The plaintiff is a company controlled by Richard Burbidge QC which owned shares ("the shares") in Counsels Chambers Limited ("CCL") by virtue of which he had occupied rooms on the 2nd floor of Selborne Chambers, 174 Phillip Street, Sydney ("the rooms"). The statement of claim alleges that the defendant is a barrister who was at material times acting floor secretary of an unincorporated association which controlled the chambers on the second floor. That association I shall refer to as "the floor". The statement of claim continues to allege that he was guilty of conduct in trade or commerce that was misleading or deceptive or was likely to mislead or deceive contrary to s 42 of the Fair Trading Act 1987 ("the FTA"). The conduct complained of was that, as acting floor secretary, he made representations to Paul Glissan and Mark Daley, barristers who in 1988 were interested in purchasing the rooms. The representations alleged were that the plaintiff owed the floor $30,000 ("the fees"); and that the floor would not give its consent to the registration by CCL of the transfer of the shares until that indebtedness was met. The representations made carried implicitly representations that the floor was entitled to maintain a representation of indebtedness and that CCL would not approve the sales in the face of a representation of indebtedness. It is to be noted that Mr Burchett was sued as defendant only in his personal capacity and not as a representative of the floor and that the floor and CCL were not parties to the proceedings. The relief claimed, and claimed I have just said, against Mr Burchett alone, was damages under s 68 of the FTA said to arise from the failure of the sale to Mr Glissan; an injunction to restrain the conduct; and a declaration that the plaintiff is not indebted to the floor. 3 The matter came before Bryson J on a motion for expedition and his Honour on 16 April 1999 delivered a judgment whereby he granted an expedited hearing but expressed the view that the proceedings as constituted were not entirely apt to solve the real problem as it existed, or at least not the whole of it. The real problem was that the continuing objection by the floor (which was not, as noted, a party to the proceedings) prevented the plaintiff from effecting a sale of the rooms. In the event, Bryson J on 23 July 1999 ordered that the whole of the proceedings be referred to the Hon John Brownie QC for inquiry and report to the Court pursuant to Part 72 r 2(1) of the Supreme Court Rules 1970 ("the SCR"). After conducting a formal hearing, Mr Brownie made a report to the Court under Part 72 r 11 on 11 April 2000. 4 The fees were in respect of a period when the rooms were not occupied by Mr Burbidge QC or by any licensee of his, but were vacant. Furthermore, at the time Mr Burbidge QC had ceased to be a member of the floor. Mr Brownie found that the plaintiff was not bound by any contract express or implied to pay floor fees during that period. He found therefore that the representation that the plaintiff was indebted to the floor was incorrect and that the defendant's conduct in making the representation that it was so indebted was conduct in trade or commerce which was likely to mislead or deceive. By the time of the hearing before Mr Brownie the claim for damages was no longer pressed, apparently because it was conceded that no damage had been suffered "by" the conduct; and no claim for an injunction was pressed, because there was no threat to repeat the conduct. Mr Brownie found, however, that the plaintiff was entitled to a declaration essentially as sought in the statement of claim. The notice of motion now before me was then brought by the plaintiff for the adoption of the report. 5 A further event of great significance occurred after the report was promulgated. This was the transfer of the shares to a Mr Segal by the plaintiff, which was registered by CCL without any opposition from the floor. Bearing in mind the earlier abandonment of the claims for damages and injunction, this meant that there was no longer any subject matter for the proceedings. The only question of any reality that remained outstanding was as to costs. It is in effect in assistance of its claim for costs that the plaintiff claims that the Court should still proceed to adopt the report of the referee. 6 This course is opposed by the defendant. The plaintiff contends that there is no reason for the report not to be adopted and that, as it in reality determined the issue between the parties, as demonstrated by the subsequent action of the floor in withdrawing any objection to the registration of a transfer of the shares, it ought to be adopted. It is said that, because the case for its adoption is clear, the order of adoption ought be made, so that it may be taken into consideration in assessing the situation as to costs. Even if the Court declines to do that, it ought regard the referee's report as in effect determinative of the proceedings, the plaintiff therefore victorious, and the proceedings removed from the category of a suit which did not proceed to finality, for the purposes of dealing with costs. 7 The manner in which the Court may deal with a report by a referee is governed by the provisions of Part 72 r 13 of the SCR as follows: "13. Proceedings on the report

(1) Where a report is made, the Court may, of its own motion, after notice to the parties, or on application by any party, on a matter of fact or law or both: (a) adopt, vary or reject the report in whole or in part; (b) require an explanation by way of report from the referee; (c) on any ground, remit for further consideration by the referee the whole or any part of the matter referred for a further report; (d) decide any matter on the evidence taken before the referee, with or without additional evidence, and shall give such judgment or make such order as the Court thinks fit." 8 The way in which the Court should proceed upon an application to adopt a report was dealt with by the Court of Appeal in Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549. In that case Gleeson CJ said at 562 - 563: "I am unable to accept, either as an absolute rule, or as a prima facie rule subject to defined or definable exceptions, that a party who is dissatisfied with a referee's report is entitled as of right to require the judge acting under Pt 72, r 13, to reconsider and determine afresh all issues, whether of fact or law, which that party desires to contest before the judge. ……… What is involved in an application under Pt 72, r 13 is not an appeal, whether by way of a hearing de novo or a more limited re-hearing. This is consistent with the right of the referee to conduct the reference as the referee thinks fit and unconstrained by the rules of evidence. Rather, the judge, in reviewing the report and deciding whether to adopt, vary or reject it, has a judicial discretion to exercise in a manner that is consistent both with the object and purpose of the rules and with the wider setting in which they take their place.

That wider setting is a system for the administration of justice according to law. In so far as the subject matter of dissatisfaction with a referee's report is a question of law, or the application of legal standards to established facts, then a proper exercise of discretion would require a judge to consider and determine that matter afresh. That was decided by this Court in Homebush Abattoir Corporation v Bermria Pty Ltd (1991) 22 NSWLR 605: see also, Cape v Maidment (1991) 98 ACTR 1 at 4. That conclusion is entirely consistent with the history of the rules and the reasoning of the High Court in Buckley which, although the case related to different provisions is also instructive as to the present provisions."

See also Nine Network Pty Ltd v Kennedy Miller Television Pty Ltd NSWCA 8 June 1994 unreported. It is quite apparent from these references that whilst on the one hand a party does not have a right to a full review of the facts and law dealt with by the referee by a Judge of the Court on an application under Part 72 r 13(1), on the other hand the Judge must on such an application exercise a judicial discretion taking into account a number of considerations. Furthermore, the Judge must proceed in accordance with law, so that in general terms he or she must review findings of law in the report if the referee is asserted to have proceeded on a wrong legal principle. 9 The principles relating to costs in a case which is not pursued to finality were stated as follows by McHugh J in Re The Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 at 624 - 625: "In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action Australian Securities Commission v Aust-Home Investments Ltd supra. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation. Thus, for example, in R v Gold Coast City Council; Ex parte Raysun Pty Ltd [1971] QWN 13, the Full Court of the Supreme Court of Queensland gave a prosecutor seeking mandamus the costs of the proceedings up to the date when the respondent Council notified the prosecutor that it would give the prosecutor the relief that it sought. The Full Court said that the prosecutor had reasonable ground for complaint in respect of the attitude taken by the respondent in failing to consider the application by the prosecutor for approval of road and drainage plans. Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. This is perhaps the best explanation of the unreported decision of Pincus J in South East Queensland Electricity Board v Australian Telecommunications Commission, unreported, Federal Court of Australia, 10 February 1989, where his Honour ordered the respondent to pay 80 per cent of the applicant's taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare. If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases. See, eg, Australian Securities Commission v Aust-Home Investments Ltd supra; Seventh Mingcourt Pty Ltd v Lawrence (unreported; Federal Court of Australia; 1 August 1996), per Branson J; Coleman v City of Melville (unreported; Supreme Court of WA; 22 September 1994), per Scott J; Compadres Australia Pty Ltd v Waterfront Place No 2 Pty Ltd (unreported; Supreme Court of Q; 15 August 1995), per MacKenzie J; Inprint Ltd v K & D Media Pty Ltd (unreported; Federal Court of Australia; 22 December 1995), per Einfeld J; Australian Securities Commission v Berona Investments Pty Ltd (1995) 18 ACSR 772."

And see my judgment in DCT v Bowen [1999] NSWSC 881. 10 I am far from certain that, even if there were no realistic challenge to the adoption of the referee's report, the Court would proceed to adopt it once the further prosecution of the proceedings was in effect abandoned as a result of the evaporation of the subject matter after the report was delivered. However, here I do not think that it could be said that it is clear that the report would be adopted if the application for its adoption proceeded to finality. Once there is no further purpose in the conduct of the litigation the Court will certainly not engage its time in hearing a contested application for the adoption of the report any more than, in a case in which there was no referee's report, it will try the issues between the parties simply for the sake of determining the appropriate result as to costs when the proceedings are not otherwise pursued. It is clear that the objection to the adoption of the report involves a number of questions of law. These include the appropriateness in the circumstances of the making of the declaration claimed in the statement of claim and referred to in the report, even if all the other propositions in the report are fit for adoption. But in relation to these also, there is challenge which is not on the face of it plainly without substance as to matters which may involve matters of law, for instance, the question of whether or not in the circumstances a term should be implied in the agreement which undoubtedly once existed between the floor and the plaintiff (see Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337) and the question of whether or not the conduct was in trade and commerce (see Plimer v Roberts (1997) 80 FCR 303). Despite the defendant's submission to the contrary, it may in many circumstances be appropriate to determine as between the parties to a suit an issue which involves a finding concerning a third party, even though that third party is not a party to the proceedings. But there are still serious issues in my view to be argued as to the appropriateness of the making of the declaration in the circumstances of this case. If the adoption of the report were still necessary for purposes other than purposes of costs, the appropriateness of the adoption would require argument and consideration by the Court. That consideration the Court will not give, now that the proceedings are in effect without subject matter. The application for adoption of the report will therefore be refused and no order will be made in relation to the report. 11 There remains the question of the costs of the proceedings. The plaintiff argues that, even if the report be not adopted, it was in effect successful in the proceedings as demonstrated by the fact that the referee's decision was apparently acted upon by all concerned, even without adoption by the Court, and that the plaintiff had in effect been successful upon the issues agitated as a result of the findings in the report. However, in the absence of the adoption of the report, because there is a real issue as to whether or not it ought be adopted, the plaintiff cannot realistically in my view be regarded as successful in the proceedings, nor can the defendant's action in continuing to resist the proceedings up to the time of their effective abandonment in the circumstances be regarded as unreasonable. It is not the defendant who altered course leading to the abandonment of the proceedings, but the floor and/or CCL. In those circumstances it appears to me that these proceedings fall within the general rule enunciated by McHugh J in the Lai Qin case. In relation to the costs of the proceedings the order of the Court will be that there be no order as to those costs.

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