CRANE DISTRIBUTION LIMITED v HUNTER

LOWER COURT Local Court JURISDICTION : LOWER COURT 120334/97 FILE NUMBER(S) : LOWER COURT Barkell LCM JUDICIAL OFFICER :

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

13825/01 CRANE DISTRIBUTION LIMITED v ROBERT JAMES HUNTER

JUDGMENT 1 HIS HONOUR: This is an appeal, by way of summons, from an order made by Barkell LCM on 26 November 2001 as to costs, in respect of a claim determined by her brought by the plaintiff. Crane Distribution Limited (formerly G E Crane & Sons Ltd) being the plaintiff in the proceedings below, seeks the following orders: i. An order vacating the order of Magistrate Barkell made 26 November 2001 whereby her Worship ordered the plaintiff to pay three-quarters of the defendant's costs from 26 May 1997, as agreed or assessed. ii. An order that the defendant pay the plaintiff's costs of both the Local Court proceedings and these proceedings as agreed within 28 days of the date hereof or as assessed. iii. Such further or other relief as the nature of the matter may require. 2 The defendant, Robert James Hunter, was the second defendant in the proceedings below, the first defendant being R J Hunter Plumbing and Drainage Pty Ltd. ("Hunter Plumbing"). 3 The original proceedings before the learned Magistrate were pursuant to an Amended Statement of Claim for the sum of $35,554.00, for goods sold and delivered to Hunter Plumbing and under two guarantees provided by the defendant to secure the debts of Hunter Plumbing for that same sum. Hunter Plumbing is in liquidation and did not defend the action. 4 The plaintiff is a wholesaler supplying plumbing equipment. Hunter Plumbing carried out plumbing work. The defendant and his wife were directors of and the defendant was the principal of Hunter Plumbing. 5 In her Worship's judgment on liability delivered on 13 September 2001, her Worship found there was no real dispute as to the debt on the pleadings, there being no defence from Hunter Plumbing and the defendant's defence stated that the goods were sold to Hunter Plumbing, but this statement did not remove the plaintiff's need to establish the quantum of goods sold to Hunter Plumbing. The hearing, in part, involved a dispute about the nature of the plaintiff's business records. 6 The plaintiff relied on the statement signed by the defendant which showed that he acknowledged some $23,000.00 of the amount that was owing by Hunter Plumbing. 7 Her Worship found, notwithstanding problems about the documentation, that Hunter Plumbing was indebted to the plaintiff for the amount of $23,183.06, being the amount shown as owing in the account of Hunter Plumbing. 8 The balance of the debt claimed was recorded as unofficial credit extended to Hunter Plumbing by the plaintiff's Penrith store manager, recording goods supplied, but described as being a "quotation" and on pieces of paper kept under the plaintiff's counter. As money was paid, the unofficial purchases were then entered on the plaintiff's computer and an invoice was generated. The manager of the Penrith store destroyed all documents, including his original list, and the only records of goods supplied to Hunter Plumbing were the "quotations". 9 Her Worship did not find the plaintiff could prove the quantum of the debt under the unofficial credit trading which the quotes purported to record and, therefore, her Worship found that Hunter Plumbing only owed the plaintiff $23,183.06 for goods sold and delivered. Her Worship then found that, for the reasons set out in her judgment, the guarantee by the defendant applied to the debt created by Hunter Plumbing. 10 There was an argument advanced by the defendant in the hearing that the defendant was incapable of understanding his actions in signing a guarantee in 1993, an issue which consumed a significant part of the hearing, her Worship finding that the medical issues and evidence adduced did not support the defendant's contention that he was suffering from unsoundness of mind and not capable of contracting, thus Her Worship found the defendant liable under the terms of the guarantee for the goods sold and delivered to Hunter Plumbing.

The Costs Judgment 11 In her judgment on costs, handed down on 26 November 2001, her Worship recited that the claim before her, which the plaintiff brought, was for $35,821.16, having originally commenced for $23,523.68 before amendment to the larger sum. The defendant, in the proceedings below, claimed that the defendant's costs should have been paid by the plaintiff since the defendant's solicitors wrote a letter dated 18 July 1997 in which was contained the statement that the defendant disputed the Hunter Plumbing indebtedness to the plaintiff for any more than the amount originally claimed being $23,523.68. That latter sum is in excess of three hundred dollars more than the amount, in fact, recovered by the plaintiff. 12 The letter of 18 July 1997 forwarded to the plaintiff's solicitors sought particulars of the original claim and the proposed increase but denied any recollection by the defendant of signing any form of guarantee. The letter of 18 July 1997 on behalf of the defendant disputes an indebtedness by Hunter Plumbing of more than $23,523.68 plus interest and costs. 13 Subsequently a default judgment was obtained by the plaintiff and entered on 8 September 1997 after the plaintiff amended the Statement of Claim and bankruptcy proceedings were commenced based on the judgment. 14 On 17 November 1997 the defendant had written to the plaintiff's solicitors in which letter there was a challenge to the guarantee and the defendant's capacity to enter into it and sought the setting aside of the judgment and withdrawal of the bankruptcy notice. 15 In the same letter the defendant endeavoured to resolve the matter by an offer to repay the sum of $23,523.68 at the rate of five hundred dollars per month, paying in full by October 1998 or alternatively that the defendant would pay the sum of $41,014.18 being the amount in the judgment debt which had been signed, at the rate of five hundred dollars per month until extinguished. 16 It is to be noted that in her Worship's judgment on costs her Worship only referred to the amount of the debt being paid by the defendant at an amount of four (sic) hundred dollars per month until October 1998. Her Worship then referred to the fact that latter offer, although what was referred to by the learned Magistrate was only part of the offer made, was repeated in a letter of 12 February 1998 from the defendant's solicitors, which was so, with some minor variation as to instalments, passed in terms of the original offer. 17 In the judgment as to costs her Worship acknowledged that the offers made did not include reference to costs and interest. Her Worship then stated that it had been put by the plaintiff in argument that an offer was made for the debts to be paid over four years and that this was clearly wrong as the offer was to be paid by October 1998 having been made in 1997. Her Worship has misquoted each of the letters if they were, in fact, before her. 18 The original offers to repay were in the alternative, one for a smaller sum payable within twelve months, one for a larger sum payable by a process of exhaustion. Neither made an offer as to costs or interest. Her Worship had also pointed out that there was a security by way of registered caveat on the defendant's title. I have not been shown the form of guarantee but I suspect the interest in title referred to in the caveat may not create a caveatable interest in land but in any event, a caveat is not a security, it is an endorsement on a title which merely gives notice to the caveator if an instrument is registered inconsistent with the interest of the caveator, here the plaintiff, and the caveator then has to start proceedings. 19 Her Worship at page 2 of the judgment said that the litigation was hard to describe other than that it should never have been brought. Her Worship then said the defendant had always admitted the debt but that the defendant had not complied with the forms prescribed by the Civil Claims Rules as to offers of compromise. Her Worship then held it was hard to resist the conclusion that had the plaintiff had not amended the claim to the amount in respect of which the plaintiff failed to obtain a judgment, default judgment would have been entered and the matter would have proceeded accordingly. 20 Her Worship then said that it was a great pity that the defendant did not take advantage of the rules which provided a simple way of apportioning costs. But it did not do so. Her Worship then said of the claim itself at page 3 of her judgment on costs: "In the circumstances it does seem to me that the matter was one which, as I've said, should not have been pursued but the plaintiff was put in a position where the defendant did not, as I've said, take advantage of the procedure which is expressly provided by the rules." 21 Her Worship then held that the plaintiff should pay, in those circumstances, the majority, but not all of the defendant's costs and the order was made that the plaintiff pay three-quarters of the defendant's costs from the notification of the Amended Statement of Claim which was 26 May 1997. 22 Her Worship then ordered that the defendant pay interest from 1 August 1995.

The Parties' Submissions 23 It is contended on behalf of the plaintiff that a plaintiff, prima facie, gets its costs unless there is disentitling behaviour. The plaintiff contends that the basis of the ordering that the plaintiff pay the defendant's costs can only have been done on the basis of the letters to which I have referred. The plaintiff contends that none of the offers made by the defendant could be characterised as an offer that could be accepted as the offers did not deal with the considerable amount of interest which ultimately was ordered to be paid which was of the order of $6,000.00 at the time of the hearing before me. 24 The defendant contended that the learned Magistrate reasonably and properly exercised her discretion in departing from the ordinary rule for costs by not awarding the plaintiff all of its costs and that in exercising her discretion her Worship stated that the defendant had always admitted the plaintiff's claim up to $23,523.68. The defendant said that her Worship acknowledged that the defendant's offer was without reference to costs but that her Worship found that the amount of costs would have been less if paid at an early stage. 25 It was further contended that in exercising her discretion her Worship took into account the written submission of both parties and that it was the plaintiff's unreasonable behaviour to deal reasonably with the offers repeatedly made.

The Law to be Applied 26 This is a matter in which the usual principles as enunciated in House v The King (1936) 55 CLR 499 should be applied and I refer to the passage at pp 504-505 of the majority judgment: "The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. 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." 27 Costs under s34 of the Local Court (Civil Claims) Act 1970 provides for the costs to be in the discretion of the court subject to any of the rules and any other act.

28 The ordinary rule is that a successful party, in the absence of special circumstances, should be awarded costs (Ritter v Godfrey [1920] 2 KB 47). Where the conduct of a party has resulted in an unnecessarily protracted trial the party may be deprived of an appropriate proportion of its cost. 29 Part 17A of the Local Courts (Civil Claims) Rules 1988 sets out, as her Worship indicated, a mechanism to communicate a formal offer of compromise. This, as the defendant contends, does not preclude the parties from communicating in an informal way the same offer alternatively to the procedure as is provided by the rules. 30 On a careful reading of her Worship's judgment on liability and on an examination of the correspondence it is clear that the defendant who is the guarantor of the original contract at no stage admitted personal liability for the amount. What was admitted was indebtedness by the bankrupt company in an amount but there was at all times a challenge to the guarantee, including the calling of medical evidence as to the defendant's capacity to enter that guarantee.

31 Her Worship is, therefore, in error in her finding that the indebtedness by the defendant was at all times admitted. That was not, in fact, the case. It was not until the final determination by her Worship that the issue of the guarantee was resolved that the plaintiff obtained a judgment for the amount of the debt. An admission by a director that a bankrupt company owed the debt, although that fact was part of the process of proof by the plaintiff, was hardly of any assistance to the plaintiff. The plaintiff, in order to recover the amount that her Worship found was the plaintiff's entitlement, was only achieved by the bringing of the proceedings. The acknowledgment that the company owed the sum of $23,523.68 and costs and interest did not end the matter. 32 The offers that were made in the alternative did not deal with costs or interest. Her Worship ultimately found that interest was payable. Neither offer was in fact an offer which was capable of being accepted without dealing with the issue that the offer was either inclusive of interest and costs or was exclusive of interest and costs. In either offer these matters were left unresolved. There was therefore no admission of liability on the part of the defendant for any amount nor was an offer made which the plaintiff was capable of accepting. 33 In finding, therefore, that it was the action of the plaintiff which prevented resolution of the matter for an amount which had been owing for some considerable time is, in my view, an error on the part of her Worship, leaving aside the factual errors that I have referred to above concerning the actual offers made. The plaintiff did not succeed for all of the amount owing but for a substantial part of it. There was no other way for the plaintiff to be paid and obtain a judgment other than to bring the proceedings. 34 The issues such as the denial of the guarantee and the failure to admit any indebtedness on the part of the defendant that were resolved by her Worship in the plaintiff's favour. The fact that the plaintiff did not succeed in the whole of the plaintiff's claim is part and parcel of a very large number of claims that are brought. The fact that the formal offer of compromise procedure was not used does not seem to me to be determinative of the issue of costs, it is the fact that no offer capable of acceptance was put the proceedings were brought to recover a claim and after contest the plaintiff succeeded in the substantial part of that claim. 35 There is in my view, therefore, no basis for her Worship to have found that there was any fault on the part of the plaintiff in the conduct of the proceedings and, therefore, in the proper exercise of her Worship's discretion the plaintiff should have succeeded in recovering costs against the defendant. The learned Magistrate, therefore, erred in the exercise of the discretion conferred on her as to costs. The appeal should, therefore, be upheld. 36 I, therefore, make the following orders: i. That the appeal be upheld; ii. That her Worship's order as to costs be vacated; iii. That the defendant pay the plaintiff's costs of the Local Court proceedings as may be agreed between the parties within 28 days of the date hereof or as assessed; iv. That the defendant pay the costs of these proceedings as agreed within 28 days of the date hereof or as may be assessed. **********

Last Modified: 03/27/2003 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.