ATTACK ON THE EXERCISE OF DISCRETION
19 The remaining grounds of appeal attack the Magistrate's exercise of discretion. The appellant acknowledged the obstacles that lie in the way of such an attack. It must be shown that an error has been made in the exercise of the discretion. There is a strong presumption in favour of the correctness of the decision appealed from, which must be affirmed unless the court of appeal is satisfied that it is clearly wrong: Australian Coal and Shale Employees' Federation v Commonwealth (1953) 94 CLR 621 at 627.
20 The circumstance is which error may be established in connection with an exercise of discretion are described in House v The King 55 CLR at 504‑505:
"It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so."
21 In Norbis v Norbis (1986) 161 CLR 513 at 518 Mason and Deane JJ said:
"If the questions involved lend themselves to differences of opinion which, within a given range, are legitimate and reasonable answers to the questions, it would be wrong to allow a court of appeal to set aside a judgment at first instance merely because there exists just such a difference of opinion between the judges on appeal and the judge at first instance."
22 The above principles apply to an appeal against an order for costs: Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1987) 17 FCR 211 at 222. The starting point is that costs normally follow the event. In Oshlack v Richmond River Council (1998) 193 CLR 72 at 97‑98 McHugh J with whom Brennan CJ agreed, said:
"The traditional exceptions to the usual order as to costs focus on the conduct of the successful party which disentitles it to the beneficial exercise of the discretion …. 'Misconduct' in this context means misconduct relating to the litigation, or the circumstances leading up to the litigation. Thus, the court may properly depart from the usual order as to costs when the successful party by its lax conduct effectively invites the litigation; unnecessarily protracts the proceedings; succeeds on a point not argued before a lower court; prosecutes the matter solely for the purpose of increasing the costs recoverable; or obtains relief which the unsuccessful party had already offered in settlement of the dispute."
23 The first complaint about the exercise of the discretion to depart from the general rule and award costs against the appellant is that the Magistrate erred by failing to take into account, sufficiently or at all, the fact that the complaint in the State Court had been served on the respondent on 16 July 2004 and he had failed to take any steps to defend the claim. The appellant takes issue with the Magistrate's statement that "whether or not the complaint was served … was a matter in dispute". There was evidence that a process server had served the complaint on the respondent on 16 July 2004 by "leaving it with him personally". There was also evidence from the respondent's solicitor that he had filed an application in the State Court for leave to defend in which he set out the special circumstances upon which the respondent relied, including the fact that the complaint was never served on him. He exhibited an affidavit sworn in the State Court in which the respondent deposed that he was never served with the complaint. The respondent referred to the process server's affidavit and denied the correctness of its contents. He noted that the process server did not depose to having asked the identity of the person with whom he left the documents. In those circumstances the Magistrate was entitled to say that there was a dispute as to whether the respondent had been served with the complaint. She said:
"the affidavit of service … was inadequate as the person served was not properly identified. The defendant's son, Paul Mladenis, filed an affidavit in which he deposed that he was given documents by a process server at his father's house but that he put them in the bin, hoping to deal with the matter without involving his father."
There is no substance in this complaint, or in the related one that the Magistrate failed to take into account that the respondent failed to take steps to defend the claim. The Magistrate recorded the "issue in these proceedings" as the "tardiness or otherwise" of the steps taken by the respondent, and noted the two periods of alleged unreasonable delay on his part. Of course, if he was never served, he would not be expected to file a defence.
24 The appellant then claims that the Magistrate failed to take into account that the appellant had written to the respondent on 17 September 2004 advising him that default judgment had been entered against him. The Magistrate did not refer to this letter. She accepted the respondent's evidence that he only became aware of the fact that judgment had been entered against him when on 16 March 2005 he received a letter from Anthony Peterson & Co, a firm of solicitors unconnected with the parties. I will call this letter the Peterson letter. The respondent's account was verified by his daughter, whose affidavit in the State Court stated that her father had faxed the Peterson letter to her on that day. This led her to contact the appellant's associate, Mr Ferguson, to enquire what the judgment was about. She asked him for copies of the relevant documents, which she never received. The Magistrate appears to have accepted this evidence. I will return to this complaint at [32].
25 It is then said that the Magistrate placed "too much weight" on the respondent's evidence that he had no knowledge of the judgment until he received the Peterson letter. The appellant says that the Magistrate's finding, accepting the respondent's evidence, is contrary to his (the appellant's) evidence. He also draws attention to the fact that the Peterson letter is dated 27 November 2004, three and a half months before its alleged receipt. The Peterson letter appears to be a standard form letter sent to judgment debtors. It describes itself as a courtesy letter to inform the recipient that judgment has been entered against him, that the firm is not involved in the matter "other than to offer our services to you", and that it has vast experience in dealing with credit matters and providing services to those who have been affected by court judgments. I will return to this complaint at [32].
26 It is next asserted that the Magistrate relied "too heavily" on the actions and statements as to the possible future conduct of the respondent's former solicitors, GSM, and thereby failed to consider properly the actions and conduct of the appellant. On 13 April 2005 GSM wrote to the appellant advising that the respondent knew nothing about the debt. They requested a copy of the State Court summons and the affidavit of service. They said:
"In the circumstances, we suggest that you refrain from taking any further steps to enforce the judgment obtained, as it may be that our client will provide us with instructions to set aside the judgment that has been obtained against him. If you continue with bankruptcy proceedings despite our request, and an application is then made to set aside the judgment and set aside the bankruptcy proceedings, we will produce this letter on the question of costs. We trust this will not be necessary."
The appellant's response by letter of 14 April 2005 was that he would not refrain from taking steps to enforce the judgment. These matters are recorded at [64] and [66] of the Magistrate's reasons set out at [3].
27 The Magistrate relied on the GSM letter in answering the appellant's case on the respondent's delay between service of the bankruptcy notice (9 April 2005) and the application to set aside the default judgment (25 May 2005). What she said about the GSM letter is at [65] and [66] of her reasons set out at [3].
28 Whether someone has behaved unreasonably in particular circumstances involves a value judgment. It is a matter about which minds may well differ. In this case the appellant's conduct in response to the request in the GSM letter was relevant to the exercise of the Magistrate's discretion. The complaint that the Magistrate "relied too heavily" on that letter as opposed to other material does not demonstrate error in the exercise of the discretion. It simply argues about the end result of its exercise. See the passage from Norbis quoted at [21]. Nor does it mean, as the appellant submitted, that the Magistrate "thereby failed to consider properly the actions and conduct of the appellant".
29 The appellant claims the Magistrate erred by relying on two earlier decisions: Hogg v J Isherwood‑Hicks Pty Ltd (1992) 108 FLR 62 and Microsoft (International) Pty Ltd v Total Peripherals Pty Ltd [1998] VSC 50. It is said that they are distinguishable. In my view the appellant mistakes the use the Magistrate was making of these cases. She accepted that they were distinguishable. She was deprecating precipitate action on the part of the appellant, as were the judges in the two cases relied on. The Magistrate did not commit an appealable error by relying on what was said in those cases about precipitate action, as a relevant consideration, simply because the cases are distinguishable on their facts.
30 The appellant then assailed part of what the Magistrate said at [67] of her reasons set out at [3]. No exception is taken to the first two sentences. But it is said that the Magistrate erred in concluding that the appellant was too keen to prosecute the bankruptcy. That too is a value judgment about which minds may reasonably differ. No error has been shown.
31 It was submitted that the Magistrate had wrongly characterised the GSM letter as giving notice of a "bona fide intention to defend". It is true that the Magistrate thus overstates the import of the letter. Nevertheless it was a sensible letter drawing attention to the appellant's lack of awareness of the alleged debt, asking for copies of the summons and affidavit of service, and containing a reasonable request that the appellant stay his hand on continuing with bankruptcy proceedings. In my view the overstatement does not disclose an error such as to infect the overall exercise of discretion to award costs against the appellant.
32 I return now to the matters held over from [24] and [25]. They are related. As appears from [55] and [63] of the Magistrate's reasons set out at [2] and [3], she found, and attached importance to the finding, that the respondent became aware of the judgment on 16 March 2005 when he received the Peterson letter. The 17 September 2004 letter bears on the legitimacy of this finding. Mr Ferguson deposed to having sent the letter. It is addressed to the respondent's home address. The respondent does not advert to it in his affidavit. The Magistrate did not refer to it. A failure in reasons for decision to refer to a particular piece of evidence does not necessarily indicate that it has been overlooked. However, in the present case a central matter for decision was the time at which the respondent became aware of the judgment against him. The material directly bearing on that included the process server's affidavit, Mr Ferguson's evidence, the respondent's account of receipt of the Peterson letter, and the respondent's son's evidence (see [23]). The Magistrate referred to the first, third and fourth of these. She also referred to Mr Ferguson's affidavit, but not to the presently relevant part of it. The adequacy of the affidavit of service was in question. The content of Mr Ferguson's letter was clear. The respondent's account is questionable, both because he failed to address the 17 September letter and because he offered no explanation as to why the Peterson letter, dated 27 November 2004, did not reach him until 16 March 2005, or why such a form letter was hand‑delivered. Further, the status of his affidavit is uncertain. It was sworn for use in proceedings in the State Court, and was before the Magistrate only as an exhibit to his solicitor's affidavit in support of his application for costs.
33 In those circumstances, the 17 September letter cried out for consideration. The first of the periods of allegedly unreasonable delay noted by the Magistrate at [55] of her reasons set out at [2] was of three weeks duration. If the respondent became aware of the judgment soon after the 17 September letter was posted, the duration of the period was twenty eight weeks. I am compelled to the conclusion that the Magistrate overlooked the letter or did not appreciate its significance. Because it bore so directly on the duration of the first period of delay, when delay was the very matter relied on by the appellant as justifying the costs order he sought, the 17 September letter was a material consideration which she failed to take into account.
34 The notice of appeal contains grounds that did not feature in the appellant's 20 page Contentions or in counsel's oral argument, and I have treated them as not having been pursued. In any event, the orders in [35] make it unnecessary to deal with those grounds.
35 The appeal must be allowed. I will remit the matter to the Federal Magistrates Court for further hearing. This will be a resumption of the de novo hearing; as to which see rule 20.03(c), set out at [4]. Any orders the Magistrate may make should include orders dealing with the costs of this appeal and of the review before Federal Magistrate Hughes.
I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Sundberg.