COSTS - personal injury - settlement - effect of whether Magistrates Court had jurisdiction and power to hear proceedings - whether under rule 1725 Court Procedures Rules 2006 a Court can make a costs order after final orders have been entered

Court Procedures Rules 2006 (ACT) rr 1605-6, 1613, 1725

Magistrates Court Act 1930 (ACT) s 268

Ditton v Gallagher (1992) 110 ACTR 12

Kosev v GIO General Limited (unreported, Supreme Court of the ACT, 18 November 1997)

Mareva Building Consultants v Zevon (No 2) [2012] ACTSC 24

Symes v Commonwealth (1987) 89 FLR 356

Yogini v Eveille [2006] ACTSC 23

1. Proceedings SC 475 of 2011 were commenced on 19 July 2011. They involved a claim in negligence relating to personal injury suffered by the plaintiff in a motor vehicle accident on 9 August 2008.

2. When the proceedings were commenced the jurisdiction of the Magistrates Court was limited to $50,000. On 25 July 2011 the jurisdiction of the Magistrates Court was increased from $50,000 to $250,000. This was done by the Courts Legislation Amendment Act 2011. Consequent upon the increase in the jurisdiction of the Magistrates Court, r 1725 of the Court Procedures Rules 2006 (ACT) (Rules) was, on 1 January 2012, amended so as to provide a rule as to costs applicable in circumstances where the amount recovered by a plaintiff in Supreme Court proceedings was less than $175,000.

3. Proceedings SC 475 of 2011 were listed for hearing on 17 February 2014. On that date the proceedings settled and the parties agreed that the following orders should be made.

1. Judgment for the plaintiff in the sum of $65,000.

2. The defendant is to pay the plaintiff's costs.

3. Usual orders as to interest.

4. Order 3 picks up the terms of the order described in Practice Direction No 3 of 1999.

5. After the settlement of the proceedings, the parties were unable to agree on the effect of r 1725 on the award of costs made in order 2 set out above. The defendant then filed an application in proceedings seeking a declaration as to whether r 1725(2)(c) applied to the assessment of the plaintiff's costs in the proceedings. The defendant also sought, in the alternative, an order under r 1725(3) limiting the plaintiff's entitlement to costs.

6. It was only after this application was made that the plaintiff filed, and on 20 May 2014 the registrar entered, the final orders of the Court. Whether the filing of orders in the circumstances amounted to an abuse of the Court's processes was not an issue raised by the defendant on this application.

7. Ultimately, because of uncertainty as to whether the declaration being sought could be sought by interlocutory application, the defendant sought, by originating application, a declaration as to whether r 1725(2)(c) of the Rules applied to the assessment of the plaintiff's costs and disbursements in SC 475 of 2011. That originating application commenced proceedings SC 277 of 2014.

8. In these reasons I will refer to the parties by their titles in the substantive negligence proceedings, SC 475 of 2011, being Mr Carew as the plaintiff and Mr Heitanen as the defendant.

Rule 1725

9. The explanatory statement for the Court Procedures Amendment Rules 2011 (No 4), which inserted the new version of r 1725, provided:

In response to the recent changes to the civil jurisdiction of the Magistrates Court, the rules relating to costs penalties have been amended. Rule 1725 provides for a costs penalty when the judgment entered for the plaintiff in a proceeding in the Supreme Court, is for an amount of less than $175,000.

10. The amendment came into effect on 1 January 2012.

1. Solicitors' costs and determined fees - Supreme Court judgment within Magistrates Court jurisdiction

(1) This rule applies to a proceeding in the Supreme Court if -

(i) would have had jurisdiction and power to hear and decide the proceeding; or

(ii) would, apart from the amount claimed, have had jurisdiction and power to hear and decide the proceeding; and

(b) the plaintiff is entitled to the costs of the proceeding; and

(c) judgment (including judgment by consent) is entered for the plaintiff in the proceeding for an amount (excluding costs) of less than $175 000.

(2) The plaintiff is entitled to the following determined fee and costs only -

(a) the amount of any Magistrates Court determined fee that the plaintiff would have been entitled to recover had the proceeding been started in the Magistrates Court;

(c) if the plaintiff is awarded an amount (excluding costs) of $50 000 or more, but less than $100 000 - 50% of the costs and disbursements that the plaintiff would have been entitled to recover in the Supreme Court had the judgment been more than $250 000;

(3) Despite subrule (2), the court may order that the plaintiff is entitled to a different amount for the costs and disbursements (including the amount of any determined fee).

Note Pt 6.2 (Applications in proceedings) applies to an application for an order under this subrule.

determined fee means the relevant determined fee under the Court Procedures Act 2004, part 3 (Court and tribunal fees) in relation to a proceeding in the Magistrates Court or the Supreme Court (and includes a fee determined under any other territory law that applied to a proceeding in that court before the commencement of that part).

12. Prior to the introduction of r 1725 in this form, r 1725(1) had been in similar terms except that the threshold for its application was a judgment of not more than $40,000. Under the Supreme Court Rules 1937, prior to their repeal, Order 65 r 7A included r 7A(1) in terms similar to r 1725(1)(a) as it is above.

13. The defendant submitted that r 1725 applied to the costs order that had been made and that because the plaintiff recovered $65,000, paragraph (2)(c) applied, limiting the plaintiff to 50% of the costs and disbursements that would otherwise be recoverable.

14. The plaintiff put forward two arguments. The first was that r 1725 should not be interpreted as applying in the present case because to do so would give the provision retrospective effect. Counsel for the plaintiff pointed to the provisions of ss 75B and 76 of the Legislation Act 2001 (ACT). Those provisions impose limitations on laws generally (s 75B) and statutory instruments (s 76) commencing retrospectively. However, the difficulty with the plaintiff's argument is that the concept of commencing retrospectively is defined by s 75A, which provides that an Act or legislative instrument "commences retrospectively if it commences on a day or at a time earlier than the day after its notification date". That did not occur in the present case as the amendment to the rule was notified on 15 December 2011 and it commenced on 1 January 2012. It therefore did not commence retrospectively and ss 75B and 76 of the Legislation Act have no application. I therefore reject the plaintiff's first argument.

15. The second argument put forward by the plaintiff was based on the proposition that when the proceedings were commenced they were properly commenced in the Supreme Court because at that date (19 July 2011) the jurisdiction of the Magistrates Court was limited to $50,000. Even though that amount was subsequently increased to $250,000 the plaintiff submits that there was no mechanism by which proceedings in the Supreme Court could be transferred to the Magistrates Court and hence it would not be appropriate to interpret r 1725 in a way that imposed a cost penalty on the plaintiff in those circumstances. This argument depends upon the proper interpretation of s 268 of the Magistrates Court Act 1930 (ACT), which provides the power to transfer proceedings from the Supreme Court to the Magistrates Court, and then upon the proper interpretation of r 1725 itself.

Scope of s 268

16. At all relevant times up to 2 April 2014 s 268 of the Magistrates Court Act 1930 provided:

(1) This section applies if a proceeding in relation to the cause of action on which a prescribed action pending in the Supreme Court is founded could properly have been begun in the Magistrates Court.

(2) The Supreme Court may, on the application of a party to the action or its own initiative, order that the action be transferred to the Magistrates Court if it considers it just to do so.

prescribed action means an action in which the amount claimed (whether initially or as reduced by payment, admitted set-off or otherwise) is not more than the amount for which the Magistrates Court has jurisdiction under this chapter.

17. The section has subsequently been amended by the insertion of an additional paragraph after paragraph (2) (originally numbered (2A) and now renumbered (3)) as follows:

(2A) The Supreme Court may make an order under subsection (2) if, when the application for transfer is made, the cause of action could have been properly begun in the Magistrates Court.

18. Dealing with the section as it was prior to the April 2014 amendment, the section had the following elements:

(a) there must be a cause of action in relation to which there is a pending proceeding in the Supreme Court;

(b) the proceeding in the Supreme Court must be an action in which the amount claimed is not more than the amount for which the Magistrates Court has jurisdiction under Chapter 4 of the Magistrates Court Act; and

(c) the proceeding in relation to that cause of action could properly have been commenced in the Magistrates Court.

19. It would have been easier if the legislature had simply said, in the place of subsections (1), (2) and what is shown above as (2A):

The Supreme Court may, on application by a party or on its own initiative, transfer proceedings pending in the Supreme Court to the Magistrates if it appears to the Supreme Court that the proceedings are within the jurisdiction of the Magistrates Court and it is appropriate to do so.

20. However, s 268 has a history which explains, even if it does not justify, the form of the provision during the pendency of these proceedings. Section 268 was introduced into the Magistrates Court Act by the Court Procedures (Consequential Amendments) Act 2004. The intention of that Act, as expressed in the explanatory statement for the relevant bill, was to bring across into the Magistrates Court Act substantive provisions that were in the Magistrates Court (Civil Jurisdiction) Act 1985 which was to be repealed by the Act. What became s 268 had previously been s 279 and then renumbered as s 381 of the Magistrates Court (Civil Jurisdiction) Act 1985. That section had remained unaltered since the commencement of that Act (as an ordinance) in 1982. Between 1 September 1982 and 2 January 1989 (see the Magistrates Court (Civil Jurisdiction) (Amendment) Ordinance 1988) the jurisdiction of the Magistrates Court under the Magistrates Court (Civil Jurisdiction) Act was $10,000. From 3 January 1989 to 24 July 2011 the jurisdiction was $50,000.

21. Section 268 is a section which is to be applied during the pendency of proceedings. Therefore the standpoint from which the section operates is that the proceedings are still on foot. From that point the section looks backwards the words "could properly have been begun" looking back to the time when the proceedings were commenced. They do not look to the situation that exists at the time when transfer is being considered. The result of looking backwards rather than considering the present position would be the same if there was no change in the law while the action was on foot. However, in circumstances where there has been a change in the law the wording of the section can make a difference. In my view effect should be given to the natural meaning of the words used, namely, a reference to the situation as it was when the proceedings were commenced, rather than the situation that existed at the point in time when transfer was being contemplated. That means that in the present case it is necessary to look at the position as at 19 July 2011 when the proceedings were commenced. At that point, while the proceedings could have been commenced in the Magistrates Court, the effect of doing so would have been to abandon the excess of the claim above $50,000 (see Magistrates Court Act s 257(1)(b)). Whatever may be the full scope of the meaning of "properly", in my view if the commencement of the claim would have involved the abandonment of an amount of damages that were, on a reasonable view of the case, available, then it could not be said that the claim could have been properly begun in the Magistrates Court.

22. The defendant submitted that s 268(2) is not qualified by s 268(1) and hence that the Supreme Court is vested with power to transfer any action to the Magistrates Court if it considers it just to do so. The defendant submitted that if s 268(1) was an overarching restriction on the application of the entire section then the recently inserted subsection (2A) (renumbered as (3)) would have no work to do because although it refers to the situation at the time of the application for transfer it would also be qualified by subsection (1) which refers to the situation at the time of commencement.

23. I do not accept the defendant's submission. That is fundamentally because the form of the Act to be considered is that in place during the pendency of the present action. That must be interpreted on its own terms not by reference to a subsequently amended version of the provision. The relevant version of the section has a clear structure which indicates that the section only applies in the circumstances identified in subsection (1) and hence the power in subsection (2) only exists when the pre-requisites identified in subjection (1) have been met.

24. No doubt the subsequently amended version of the provision will need to be interpreted by the Court at some stage. The interpreter will have to do their best with interpreting the section as a whole in its statutory context. There are clearly very significant problems with the drafting of the subsection inserted after subsection (2). First, how it is intended to relate to subsection (1) is completely mysterious having regard to the apparently contradictory indications in sub-section (1) and the new sub-section. Second, it is not clear why the section would only apply "when [an] application for transfer is made" rather than also if the action is transferred on the Court's own initiative. Third, the explanatory statement is unhelpful, apparently being drafted by somebody who had no understanding of the amendment being made. Fortunately because the section in its amended form was not in effect when judgment was given in this case I do not need to consider it further.

25. Therefore the position is that the plaintiff properly commenced the proceedings in the Supreme Court and could not have properly commenced them in the Magistrates Court.

26. The defendant then submits that the proceedings were only served upon him on 30 May 2012, some 10 months after the increase in the jurisdiction of the Magistrates Court and five months after the amendment to r 1725 and therefore that it was open to the plaintiff to simply discontinue the proceedings in the Supreme Court and commence proceedings in the Magistrates Court. Whatever might be otherwise made of this submission it cannot be persuasive in circumstances where the limitation period in relation to the accident expired at the end of 9 August 2011.

(a) the proceedings were reasonably commenced in the Supreme Court having regard to the respective jurisdictional limits in place at the time of the commencement of the proceedings;

(b) the plaintiff (or the Court) was not able to transfer the proceedings to the Magistrates Court following the increase in the jurisdiction of the Court; and

(c) it was not reasonable to expect the plaintiff, having commenced proceedings in the Supreme Court to discontinue them in the few days prior to the expiration of the limitation period and then recommence in the Magistrates Court or to do so after the expiry of the limitation period.

28. If r 1725 has the effect that the plaintiff in those circumstances can only recover 50% of his costs and disbursements then this would appear to be a consequence of significance. It is hard to know whether both parties recognised the significance of r 1725 when they agreed to the orders that were ultimately made. It is a matter which, had the parties not agreed on the orders to be made, could have been addressed at the point when judgment was given. Having regard to the unusual circumstances of the case and the authorities both in relation to r 1725 and its predecessor, Order 65 r 7A, there would, all other things being equal, be a good case for making an alternative order under r 1725(3): see Ditton v Gallagher (1992) 110 ACTR 12 at 16; Yogini v Eveille [2006] ACTSC 23 at [15-[16]; Mareva Building Consultants v Zevon (No 2) [2012] ACTSC 24 at [21]. However, because the parties agreed on the orders to be made, no application for such an order was made. As a consequence, the issue for the Court is not what order should have been made but, in the light of the order that has been made, what is the correct interpretation of r 1725.

29. The plaintiff submitted that the words in r 1725(1)(a)(i) "would have had jurisdiction and power to hear and decide the proceeding" or in (ii) "would, apart from the amount claimed, have had jurisdiction and power to hear and decide the proceeding" should be interpreted so that they do not apply to a case which, at the time when the proceedings were commenced, could only have been commenced in the Magistrates Court by abandoning part of the claim.

30. Paragraph (i) of r 1725(1)(a) deals with the situation where there is no question that the Magistrates Court had jurisdiction to hear the proceedings. An example would be a liquidated claim for $100,000. In those circumstances there is no doubt that that the requirement in r 1725(1)(a)(i) is satisfied. Paragraph (ii) deals with a situation where there was a claim where there was an identified claim for a sum greater than $250,000. In either case, where the provision applies there are costs consequences of the plaintiff not achieving a judgment of at least $175,000.

31. The rule speaks from a point after the proceedings have been concluded. That is made clear by the fact that paragraph (1)(c) requires that judgment (excluding costs) "is" entered for less than $175,000. Paragraphs (a)(i) and (a)(ii) look back to the point where the case was heard and decided "to hear and decide the proceedings" and asks whether the Magistrates Court would have had "jurisdiction and power" to do so. Depending upon whether the case has settled or been determined after a contested hearing that may involve looking at the situation when the orders were made or, in the case of a reserved decision, some time previously when it was in fact heard. The words "hear and decide" are consistent with an enquiry as to what the hypothetical situation was when the case was or would have been heard.

32. In my view r 1725(1) looks to the scope of the jurisdiction when the judgment is given for the plaintiff. It does not look to the point in time when the proceedings were commenced. Any transitional or other difficulties with the application of the rule are accommodated by the fact that there are two alternatives once the rule is applicable. The first is the regime under subrule (2), the second is potential for a different entitlement established by order of the Court under subrule (3). The potential unfairness of applying the default rule in r 1725 in the particular circumstances of a case can be accommodated by the making of an alternative order under r 1725(3): cf Mareva Building Consultants at [21]. In the present case no such order was made at the time or at any time prior to the filing and entry of orders.

33. Therefore, the prima facie the position is that r 1725(2) has effect in the present case. Because the plaintiff chose to have the orders filed and entered (after the differences as to the effect of the costs order had emerged), it is only in very limited circumstances that the costs order may be varied or set aside. It is to that possibility that I now turn.

Is it possible to make an order under r 1725(3) after entry of orders?

34. As a matter of general principle, it would appear unlikely that an order under r 1725(3) varying a costs entitlement could be made after the relevant costs order was made and then formally entered pursuant to the Rules.

35. Rule 1605 provides, relevantly, that an order of the Court is made when it is pronounced in court by the judicial officer making the order. Rule 1606 provides a process for filing and entry of the orders. Rule 1606(6) provides that a judgment or final order must be filed in the court. Filing of orders is a pre-requisite to enforcement or appeal: r 1606(7). However that does not prevent costs payable under an order being assessed without the order being filed in court: r 1606(8)(b). The other significant consequence of the filing of the order is that, under r 1613, it marks the point after which the order may only be amended or set aside in very limited circumstances. Rule 1613(1) provides that the Court may amend or set aside an order before the filing of the order. Rule 1613(2) provides a limited list of exceptions to that general rule, none of which are relevant in the present case.

36. If r 1725(3) does not empower the making of an order after the entry of a final costs order then any departure from the default rule in subrule (2) would, subject to the operation of the slip rule, have to be determined at the point when the costs order was made, or at least prior to that order being filed and entered. However, the language of the provision does provide some scope for an alternative view of its operation. That is because subrule (1)(c), a precondition for the operation of the rule, requires that judgment, including judgment by consent, is "entered" for the plaintiff. Strictly speaking the entry of judgment only occurs at the point when the orders are filed and then entered pursuant to r 1606(5). If that was the case then it would be a precondition to the operation of the rule that the judgment for less than $175,000 had already been filed and entered pursuant to r 1606. That would be a rather odd provision in that it would necessarily postpone the operation of subrules (2) and (3) until after the formal entry of the judgment even though costs may be assessed without the order being entered and there is no reference in paragraph (1)(b) that would require a costs order to have been entered as distinct from the judgment sum.

37. Prior to the amendment of r 1725 that came into effect on 1 January 2012, there was no reference to judgment being "entered". Instead the threshold was that the plaintiff was "awarded" an amount (excluding costs) of not more than $40,000. For reasons which are unexplained, the drafter "improved" the language of the pre-existing provision by making a reference to judgment being "entered". I am not satisfied that this unnecessary change in language had the substantive effect of shifting the moment when that threshold was met from the time when the order was made to the time when the order was entered. As a consequence I would read the reference in paragraph (c) to judgment being entered as if it read judgment was given (cf r 1605, Dictionary "made").

38. The other aspect of the rule which suggests the possibility of a departure from the approach I have outlined above is the reference in subrule (1)(b) that the plaintiff "is entitled" to the cost of the proceedings. Although the reference to an entitlement is not a legally precise term it does suggest that the question of costs has been determined. Upon the determination then, the default rule would operate unless there was an application made for an order under r 1725(3). That would be consistent with the power to make a different order after an order for costs has been made.

39. Further, the note to paragraph (3) provides "Part 6.2 (Applications in proceedings) applies to an application for an order under this sub-rule." That note does not form part of the instrument: s 127(3) Legislation Act 2001. It is, however, material which may be taken into account pursuant to s 142 of that Act because it is contained in an authorised version of the Act: see Legislation Act Table 142, item 1.

40. Notwithstanding these matters, I am not satisfied that r 1725(3) should be interpreted as permitting the variation of final orders after they have been entered. There are two reasons for this.

41. First, when the surrounding provisions relating to costs are considered, many of them, for example rules 1726, 1727, 1728 and 1729, contain provisions which permit the Court to alter what would otherwise be a default rule. Each of those contains notes referring to the application of Part 6.2 to applications for orders varying the default rule. Thus the reference to Part 6.2 in the note to r 1725(3) is not unusual and should not be taken as an indication in the rules that there is a departure from the finality otherwise given to orders that have been made and entered.

42. Second, the authorities addressing the predecessor of r 1725, Order 65 rule 7A have, when dealing with attempts to vary a costs order that had been made and entered, approached the application on the basis that it must fit within the scope of the slip rule or fail. In Symes v Commonwealth (1987) 89 FLR 356 Gallop J dealt with an application to vary an order that had been drawn up and entered so as to permit the plaintiff to have his costs at the full Supreme Court scale rather than in accordance with the default rule which would otherwise apply. His Honour repeated the principle that as a general rule the Court has no power to review, rehear, vary or set aside any judgment after it has been entered either on an application made in the original action or in a fresh action brought to review the judgment. In general, a judgment or order once finally recorded can only be discharged or varied on appeal. His Honour then referred to the slip rule in Order 32 rule 11 and held that it extended to circumstances where the Court failed to make an order because of an accidental omission by counsel to ask for it. Approaching the matter in this way his Honour ultimately did make an order under the slip rule varying the costs order made. This decision was applied by Cooper J in Kosev v GIO General Limited (unreported, Supreme Court of the ACT, 18 November 1997).

43. Order 65 rule 7A was also considered by Gallop J in Ditton. One aspect of the judgment in relation to the decision of the Registrar (dealt with at p 17 lines 29 to 35) might be consistent with the view that it was open to the Court to make an order varying a party's entitlement after the order was perfected. However, the reasons for the decision do not make the position clear. Having regard to his Honour's earlier decision in Symes it is unlikely that he adopted a different view of the operation of the rule in Ditton.

44. It is obvious that the precise form of Order 65 rule 7A has changed over time and that it is different to the form of r 1725, even if the underlying purpose of the provision remains the same. It is correct to point out that in its earlier form considered in Symes, the reference to the Court or a judge otherwise ordering was not contained within a separate paragraph but within the same paragraph that contained the default rule. By the time the Rules were repealed the power to otherwise order had been moved to a separately numbered subrule.

45. However, in my view, having regard to the antecedents of r 1725 and the approach taken to the operation of those provisions, it would not be appropriate to interpret r 1725(3) as incorporating a significant departure from the general rule as to finality of judgments in circumstances where the indications of such a departure are at best ambiguous. Further, it would be wrong to distort the proper operation of the rule to accommodate the unusual circumstances of this case when the inability to make an order under r 1725(3) to the benefit of the plaintiff arises, at least in part, from the plaintiff's own action in having the costs order entered when there was a dispute about its effect.

46. Therefore, I conclude that r 1725 does not incorporate within it a power to reopen the terms of a costs order which has been made by the Court and filed and entered in accordance with the Rules.

47. I further note that no party made any application under the slip rule and, in any event, there would have been significant difficulties with any such application, having regard to the fact that the terms of the orders that were made were consented to by the parties as a settlement of the proceedings rather than being orders of the Court made after a contested hearing.

48. The consequence is that in my view the default rule in r 1725 applies in the circumstances of the present case and it is not open, having regard to the circumstances in which the orders were made and the applications made by the defendant, to reopen the issue of what an appropriate order for costs would be if the Court were to consider that matter afresh with full information about the circumstances of the case and the manner in which it was conducted.

49. The defendant originally sought a declaration in the proceedings that r 1725(2)(c) applied to the assessment of the plaintiff's costs and disbursements in the proceedings. Although the Rules do contemplate that applications for final relief, in some circumstances, may be brought by application in existing proceedings (for example, r 3092(2)), I was not confident that such a course was appropriate in the present case. While it would have been possible for the parties to seek review of a registrar's decision on assessment of the costs, that would have required going through the process of assessment in circumstances where, if the issue of principle that divides the parties is resolved, agreement on the appropriate quantum of costs may be able to be reached without the need for assessment. As a consequence the parties agreed that it was appropriate for the Court to decide the issue of principle and the defendant filed an originating application seeking the same declaratory relief that it had sought in the substantive proceedings. In my view the making of a declaration is the appropriate means of resolving the matter. Therefore in proceedings SC 227 of 2014 I will declare that r 1725(2)(c) of the Court Procedures Rules applies to the assessment of the plaintiff's costs and disbursements in proceedings SC 475 of 2011.

50. The originating application did not seek an order for costs therefore I will make no order as to costs in SC 227 of 2014.

51. In relation to the application in proceedings in SC 475 of 2011, in the light of the declaration made in the other proceedings the appropriate order is that the application in proceedings dated 16 April 2014 is dismissed with no order as to costs.

52. The orders of the Court in proceedings SC 227 of 2014 are:

1. The Court declares that rule 1725(2)(c) of the Court Procedures Rules 2006 (ACT) applies to the assessment of the plaintiff's costs and disbursements in proceedings SC 475 of 2011.

53. The orders of the Court in proceedings SC 475 of 2011 are:

1. The application in proceedings dated 16 April 2014 is dismissed with no order as to costs.

I certify that the preceding fifty-three [53] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Master Mossop.