Fillipou v Coates Hire Operations Pty Limited

Supreme Court of NSW|2011-08-18|Before: Johnson J

Judgment 1JOHNSON J : The Plaintiff, Phillip Fillipou, seeks leave to appeal under s.40 Local Court Act 2007 with respect to an order as to costs made on 5 November 2010 and an interlocutory judgment or order made on 13 December 2010 in proceedings involving the Defendant, Coates Hire Operations Pty Limited ("Coates").

The Local Court Proceedings 2The nature of the Local Court proceedings which gives rise to the present appeal may be stated shortly. 3Coates commenced proceedings in the Local Court contending that Citywide Civil Engineering Pty Limited ("Citywide") was liable to it in relation to a credit agreement concerning the supply of hire goods by Coates. Coates contended that Mr Fillipou and Bill Mihalopoulos had guaranteed the obligations of Citywide, and were liable to Coates as guarantors. 4Mr Fillipou filed a Defence which put in issue the claim against him. In addition, Mr Fillipou cross-claimed against Citywide and Mr Mihalopoulos and against another third party (Amita Pty Limited), contending in effect that, to the extent that he was liable to Coates, he was entitled to be indemnified by the Cross Defendants. Mr Mihalopoulos filed a Defence to the Cross-Claim in which he denied liability. The other Cross Defendants did not file Defences to the Cross-Claim. 5By the time of the hearing in the Local Court on 5 November 2010, Citywide was in administration. The Hearing on 5 November 2010 6The matter came on for hearing before Mr Brian Maloney, Magistrate, at the Downing Centre Local Court on 5 November 2010. At the conclusion of the hearing, his Honour delivered an ex tempore judgment returning verdicts in favour of Mr Fillipou and Mr Mihalopoulos. 7In his judgment, his Honour observed that Coates' action was by way of a common money count seeking recovery of a total sum of about $33,000.00. His Honour observed that the principal argument in the case concerned the validity of the guarantees (T59.9, 5 November 2010). 8After referring to submissions made concerning the facts and relevant legal principles, his Honour concluded (T66.33, 5 November 2010): "There is no evidence whatsoever in this case that allows me to accept that the defendants had proper notice, nothing. And I am not satisfied on those bases that I have referred to, that the plaintiff has made out its case." 9Having found against Coates and in favour of Mr Fillipou and Mr Mihalopoulos, applications were made for costs by counsel for those successful parties. The transcript of the cost applications on 5 November 2010 reveals the following (T66.38-T67.48, 5 November 2010): " [BLOUNT] [for Mr Mihalopoulos]: May it please the court. Your Honour, I apply for the second defendant's costs. HIS HONOUR: They're discretionary, aren't they? [BLOUNT]: They are discretionary, your Honour, but there are no circumstances that I am aware of, under which the second defendant would ordinarily be deprived of its costs. [KING] [for Mr Fillipou]: Y our Honour, the usual course is the costs follow the events, that's the defendant's --- HIS HONOUR That's the usual, more often than not. [KING]: Yes, that's right, your Honour, and the third defendant makes the same application and also in respect of its costs for the [cross] claim. HIS HONOUR: Just kick a man when he's down. [BLOUNT]: For the record, I oppose that application. SAHADE [for Coates] : Your Honour, we oppose costs, if your Honour would hear us on that. HIS HONOUR: You don't have to talk to me about that. What do you want me to do with the cross-claim and so forth? [KING]: By reason of your Honour's judgment now, the substance of that claim has been rendered redundant, there's no need to proceed with it. In my submission --- HIS HONOUR: They're going to want a result now, they'll want a result. They'll come running to me and say, 'What do we do here?' Isn't that right? [KING]: Your Honour, we're prepared to discontinue the [cross] claim on the basis that our costs are covered, and those costs arise from the evidence that has been prepared for the cross-claim which are two affidavits that I never had to take your Honour to. HIS HONOUR: That is fine. I JUST MADE AN ORDER, AND THIS IS ALL COSTS ARE DISCRETIONARY, AND THEY HAVE TO FOLLOW THE [CAUSE] , AND IT WOULD BE, INDEED, JUST, IF EACH PARTY PAYS THEIR OWN COSTS IN THE ACTION, AND THAT IS THE ORDER I MAKE IN RESPECT OF COSTS. HIS HONOUR: That might change things for you, Mr King. Do you just want to discontinue the action rather than you're just on the cross-claim? [KING]: Y es. HIS HONOUR: Why don't you just discontinue it, because they might go somewhere else with this? [KING]: Yes, your Honour, and we are prepared to discontinue it on the basis that then there is not --- HIS HONOUR: Just discontinue it. [KING]: We're prepared to discontinue the claim, your Honour. HIS HONOUR: The cross-claim is discontinued." The Hearing on 13 December 2010 10On 19 November 2010, Mr Fillipou filed a Notice of Motion in the Local Court seeking an order pursuant to Rule 36.16(3) Uniform Civil Procedure Rules 2005 ("UCPR") that the costs order made by Magistrate Maloney on 5 November 2010 to the effect that each party bear their own costs, be varied to an order that Coates pay the costs of Mr Fillipou of the claim, the Cross-Claim and the Motion. 11The Notice of Motion came on for hearing before Magistrate Maloney on 13 December 2010. Once again, Mr King of counsel appeared for Mr Fillipou. Mr Sahade, counsel for Coates, sought to resist the Notice of Motion upon a number of bases, including the fact that the Magistrate was functus officio on the question of costs. His Honour was taken to a number of authorities on the issue of functus officio and Rule 36.16 UCPR, including Hancock v Arnold (No. 2) [2009] NSWCA 19 and Gee v Burger (No. 2) [2009] NSWSC 1152. 12His Honour delivered an ex tempore judgment with respect to the Notice of Motion (T17-21, 13 December 2010), and concluded his reasons in the following way (T20.22-21.10): "Here, on 5 November, I made the order, 'In the action, each party pay its own costs'. I did confess to Mr [Sahade] and Mr King I perhaps should have taken a little more time to fully appreciate the position that the third defendant, the guarantor, was in. In fact, as Mr King has said, the proceedings took an unexpected turn so far as the third defendant was concerned, but at least the third defendant, I feel, should have been in a position to at least have seen it coming because it was part of his defence. On reflection, I should have made these orders, 2(a) and 2(b). 2(a) should have read, 'In the action between the plaintiff and the second defendant [Mr Mihalopoulos] , each party pay their own costs'. And (b), 'So far as the plaintiff and the third defendant [Mr Fillipou] the plaintiff pay the third defendant's costs'. But time has passed. Mr King for the third defendant, says, 'Well, time may well have passed. It may well have entered into the computerised system of the court, but I filed a notice of motion, I can still get it in and rely upon Hancock , a decision of the Court of Appeal - three justices of the court of Appeal - for you to fix that up'. Mr Sahade says, 'Well, McLaughlin [AsJ] would say, 'No, you're functus'.' And distinguish between what he clearly expressed in his decision Andrew Gee v Grace Burger. Whereas in Hancock , the time was given by Hulme J at first instance to give the parties time - to express what he intended - wanted to do to give the parties time to go away and come back with some consent orders. Whereas here, in my case on 5 November I fully determined not only the substantive matter, being liability, but the ancillary matter, costs. Mr King says 'Well, ancillary matters such as costs fall quite squarely within 36.16(3)'. Mr [Sahade] says, 'Well, even if they do, you're functus, because you have made a clear, concise determination, and if it is wrong, well then it should go somewhere else'. Today, I agree with Mr Sahade's submissions. I would like to be in a position to correct what I said should have been orders 2(a) and 2(b) but I agree with his submissions and relying upon the decision of McLaughlin AJ in Gee v Burger , I DISMISS THE NOTICE OF MOTION." 13The presiding Magistrate dismissed Mr Fillipou's Notice of Motion with costs.

The Appeal 14On 5 January 2011, a Summons was filed in this Court seeking an extension of time to appeal from the decision of 5 November 2010 and leave to appeal under s.40 Local Court Act 2007 from the decision of 5 November 2010 and the decision of 13 December 2010. 15At the hearing of the appeal before me on 18 August 2011, I granted Mr Fillipou leave to rely upon an Amended Summons, which expanded upon the reasons why an extension of time to seek leave to appeal ought be granted and why leave to appeal itself ought be granted.

Submissions on Appeal 16Written submissions were filed by the parties in the usual way. It is not necessary to repeat the detail of submissions in this judgment. 17Mr Neggo, counsel for Mr Fillipou, submits that error has been demonstrated on the part of the Magistrate with respect to costs on 5 November 2010. He observes that Mr Fillipou requires an extension of time to appeal from that decision because of the delay resulting from the unsuccessful application to revisit the question of costs on 13 December 2010. Mr Neggo submits that that extension ought be granted in the circumstances of the case. Further, counsel submits that this is a proper case for a grant of leave under s.40 Local Court Act 2007 and that clear error having been demonstrated, the Court should intervene on appeal. 18Mr Neggo submitted that the learned Magistrate acknowledged effectively on 13 December 2010 that he had erred in his approach to costs on 5 November 2010, but that he was functus officio and could do nothing about it. Mr Neggo submitted that his Honour was not functus officio at this time and that it was open to his Honour to make orders in terms of Mr Fillipou's Notice of Motion. 19Mr Neggo submitted that the Court should allow the appeal with respect to the costs decision on 5 November 2010 and the dismissal of Mr Fillipou's Notice of Motion on 13 December 2010, and that this Court should make orders to give final effect to those aspects of the litigation in favour of Mr Fillipou. 20Mr Sahade resisted the application for an extension of time and leave to appeal form the costs decision on 5 November 2010. He submitted that no error had been demonstrated in that respect and that the course taken by his Honour was open to him in the exercise of discretion. 21Mr Sahade submitted that his Honour had determined correctly on 13 December 2010 that he was functus officio, and that no error had been demonstrated in this respect.

Determination Concerning the Costs Order on 5 November 2010 22I am satisfied that Mr Fillipou should have an extension of time to seek leave to appeal to this Court from the costs decision on 5 November 2010. Although, as will be seen, the later application to the Local Court by Notice of Motion was misconceived, Coates was at all times well aware that Mr Fillipou was seeking to overturn the costs determination of 5 November 2010. He ought be entitled to do so by an extension of time to seek leave to appeal to this Court. 23Section 40(2) Local Court Act 2007 confines the avenue of appeal to this Court against a costs order to one of appeal by leave. This is an understandable hurdle where an avenue of appeal exists concerning costs in civil proceedings in the Local Court. It is necessary for the Court to determine whether leave to appeal ought be granted in the circumstances of the particular case. An examination of the merits of the appeal is required for this purpose in this case. 24It was Coates that determined to commence and maintain civil proceedings against Mr Fillipou in the Local Court. Mr Fillipou contested successfully the claim for relief against him in the Local Court on 5 November 2010. The principal argument before the Magistrate concerned the validity of the guarantee. Coates failed to make out its case, leading to a verdict in favour of Mr Fillipou. 25Mr Fillipou then sought an order for costs against Coates. 26It was necessary for the learned Magistrate to consider the question of costs in exercise of the judicial discretion reposed in him by s.98 Civil Procedure Act 2005 and the UCPR. 27The power to order costs is to be exercised judicially, and not arbitrarily or capriciously: Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at 81 [22]. The discretion is to be exercised according to rules of reason and justice, not according to private opinion or even benevolence or sympathy: Williams v Lewer [1974] 2 NSWLR 91 at 95. 28The general rule is that costs follow the event: Rule 42.1 UCPR. The effect of this rule is that a person seeking to displace its prima facie effect must show that there is something out of the ordinary in the case in order to justify a departure from the rule: Hastings Point Progress Association Inc v Tweed Shire Council (No. 3) [2010] NSWCA 39 at [18]. It is for the losing party to establish a basis for any departure from the usual rule: Waterman v Gerling Australia Insurance Co Pty Limited (No. 2) [2005] NSWSC 1111 at [10]. 29The rule reflects the general law position that a successful party to civil proceedings has a reasonable expectation of being awarded costs against the unsuccessful party: Oshlack v Richmond River Council at 97 [67], 120-123 [134]. 30The purpose of an order for costs is to compensate the person in whose favour it is made and not to punish the person against whom the order is made: Oshlack v Richmond River Council at 97 [67]; Ohn v Walton (1995) 36 NSWLR 77 at 79; All Plastics Engineering Pty Limited v Dornah Ltd [2006] NSWCA 33 at [34]. 31Mr Neggo sought to derive support with respect to the challenge to the costs order of 5 November 2010 by reference to statements made by his Honour in dismissing the Notice of Motion on 13 December 2010. 32Mr Neggo submitted that no basis had been demonstrated for an order other than that the costs of 5 November 2010 should follow the event. 33Mr Sahade submitted that the costs order made on 5 November 2010 should not be disturbed. He submitted that Mr Fillipou should not have his costs of that hearing because he had achieved, in effect, a technical legal victory where the guarantee could not be proved strictly. He contended that this must have been the approach taken by the Magistrate on 5 November 2010. 34To the extent that Mr Sahade sought to derive some comfort from other observations of the Magistrate in the course of the hearing on 13 December 2010, Mr Neggo pointed to other statements by the Magistrate, including those contained in the closing part of his judgment (set out at [12] above). If any part of what was said on 13 December 2010 may be taken into account on the appeal, it is the reasons for judgment, and not discussion between the Bench and counsel in the course of argument which may not reflect the considered and concluded view of the Magistrate: Director of Public Prosecutions v Illawarra Cashmart Pty Limited [2006] NSWSC 343; 67 NSWLR 402 at 408 [19]. 35I am not at all sure that Mr Fillipou can seek to bolster an argument that error occurred on 5 November 2010 by reference to the Magistrate's later statements on 13 December 2010. That said, the statements made by his Honour in the cited part of his judgement (at [12] above) do not support a conclusion that he had taken a firm (and permissible) view adverse to costs with respect to Mr Fillipou on 5 November 2010. 36In defence of the costs order made on 5 November 2010, Mr Sahade referred to Yavuz v Noaman [2001] NSWCA 449 at [11]-[15]. I do not think that anything said in that decision assists Coates on the appeal. It was a case where the application of principles to the facts of the case led to a particular result. I am satisfied that application of the relevant principles to the facts of this case demonstrate clear error on the part of the Magistrate. 37With the greatest of respect, the costs application of Mr Fillipou on 5 November 2010, was dealt with in a somewhat peremptory fashion by his Honour. Neither counsel was given a proper opportunity to make submissions. There is little to assist an understanding of what lay behind the refusal to order costs in favour of Mr Fillipou. His Honour was aware, clearly, of the usual rule as to costs. Apart from the somewhat cryptic observation by his Honour "just kick a man when he's down" and an indication that it was not necessary to hear from counsel for Coates, his Honour moved to conclude that it would be "just if each party pays their own costs in the action" . Nothing had been said in his Honour's judgment dismissing Coates' claim which shed light on how his Honour came to approach the costs issue, or which pointed to a principled basis for refusing Mr Fillipou his costs. 38It is necessary to bear in mind the pressure of work upon the Local Court when this Court exercises its appellate function: Moloney v Collins [2011] NSWSC 628 at [65]. However, the question of costs should be capable of being dealt with succinctly and without protracted debate or lengthy reasons. There is no sign that his Honour applied the usual rule in the circumstances of this case. Certainly, his Honour did not articulate any principled basis for refusing Mr Fillipou his costs against Coates. 39I am satisfied that his Honour failed to comply with the requirements of the law in determining Mr Fillipou's application for costs on 5 November 2010. His Honour failed to apply relevant principles applicable to a costs determination in civil proceedings (see [26]-[30] above). Clear error is demonstrated in accordance with the principles in House v The King [1936] HCA 40; 55 CLR 499 at 504-505. This error was compounded by a clear failure to give reasons for a determination as to costs. 40I am satisfied that Mr Fillipou should be granted leave to appeal from the costs decision on 5 November 2010, and that the appeal should be allowed and that costs order quashed.

Determination Concerning the Interlocutory Decision on 13 December 2010 41I turn to the application for leave to appeal from the interlocutory judgment on 13 December 2010. 42Rule 36.16 UCPR enables the Court to set aside or vary a judgment or order in certain circumstances. However, Rule 36.16 UCPR does not enable a party, such as Mr Fillipou, to return to the Court after the question of costs has been resolved finally against him. The principle of finality applies in such a case. I do not think that anything said in Hancock v Arnold (No. 2) or Gee v Burger (No. 2) assists Mr Fillipou. 43However peremptory the costs decision announced by his Honour on 5 November 2010 may have been, it was, nevertheless, a final decision on the application for costs by Mr Fillipou against Coates. His Honour had not left open any opportunity for Mr Fillipou to approach the Local Court to seek a different costs order. Mr Fillipou's remedy was to seek leave to appeal to this Court under s.40 Local Court Act 2007 . 44In my view, his Honour was correct to apply the principle of functus officio so as to dismiss Mr Fillipou's Notice of Motion on 13 December 2010. I would not grant Mr Fillipou leave to appeal against that decision. 45Accordingly, one of the consequences of the resolution of the present appeal will be that the orders made by his Honour on 13 December 2010, including the costs order, will stand.

Remittal to Local Court or Determination of Local Court Costs by this Court? 46If the Court allowed the appeal concerning the costs order of 5 November 2010, counsel sought that this Court determine to finality the question of costs sought on that day. Neither party submitted that I should remit the matter to the Local Court. Like McCallum J in Gorczynski v Holden [2010] NSWSC 992 at [61], I consider that remittal would plainly be undesirable in the present case since it would only result in further costs being incurred. 47A similar approach has been taken by other Judges of this Court on appeals from civil proceedings under the Local Court Act 2007 . It has been accepted that the alternatives contained in s.41 Local Court Act 2007 do not state exhaustively the powers of the Court on such an appeal. The provisions contained in s.75A Supreme Court Act 1970 and Rule 50.16 UCPR may be called in aid: Pacific Asia Express Pty Limited v Renegade Gas Pty Limited [2010] NSWSC 1188 at [33]-[41]; Pool Data Systems Pty Limited v Bayliss [2011] NSWSC 224 at [141]-[145]. 48This Court is in a position to determine Mr Fillipou's application for costs against Coates, arising from the verdict in his favour on 5 November 2010. The Court has the judgment of the learned Magistrate delivered that day and has the benefit of submissions made by reference to applicable principles on such an application (see [26]-[30] above). No further findings of fact are required to determine the costs application. 49Determination of Mr Fillipou's application for costs on 5 November 2010 requires application of the ordinary rule that costs follow the event. The issue at the hearing before his Honour concerned Coates' claim on the guarantee, a claim which failed. There is no feature of the litigation which demonstrates that departure from the ordinary rule was appropriate in this case. In my view, Mr Fillipou should have his costs as against Coates, arising from the hearing on 5 November 2010. 50Having regard to the history of the litigation and the costs already expended by the parties, I raised with counsel at the hearing of the appeal the question whether, if the Court determined that Coates should be ordered to pay the costs of Mr Fillipou of the Local Court hearing on 5 November 2010, such an order ought be in the form of a specified gross sum, instead of assessed costs, in accordance with s.98(4)(c) Civil Procedure Act 2005 . With this in mind, I requested counsel to provide the Court with information concerning the quantum of costs which might be considered in that respect. 51The solicitors for Mr Fillipou provided a calculation sheet to the Court identifying a total sum of $10,828.72 as having been expended by him for the hearing on 5 November 2010, less costs of his cross-claim. 52In my view, Mr Fillipou is entitled to his costs on the usual basis. No application for indemnity costs was made by Mr Fillipou nor, in the circumstances of the case, could it have been. Those costs should be confined to the costs of his successful defence of Coates' claim, and should not extend to the costs of Mr Fillipou's cross-claims. I have reached a provisional view that a just and reasonable sum by way of costs for the hearing on 5 November 2010 would be an order in the sum of $6,500.00. I will give counsel an opportunity to address further on this aspect before making final orders.

Costs of Appeal 53I raised with counsel, as well, the desirability of resolving to finality the question of costs of the appeal by the making of a costs order in the form of a specified gross sum in accordance with s.98(4)(c) Civil Procedure Act 2005 . 54In circumstances where the appeal springs from a dispute about costs in the Local Court, it seems appropriate to utilise a costs determination method on this appeal which will see the just, quick and cheap resolution of the question on costs of the appeal. Given the history of this litigation, such a course is particularly desirable to avoid further delay and cost concerning the litigation: Moloney v Collins at [81]. 55In accordance with the Court's direction, the solicitors for Mr Fillipou provided a document indicating costs of the appeal, including fees of counsel and solicitors, filing fees and transcript costs in a total sum of $11,568.10. 56The solicitors for Coates indicated that their client's costs of the appeal totalled $6,600.00. 57Mr Fillipou has succeeded in overturning the order of 5 November 2010, but not that of 13 December 2010. He has succeeded on the primary issue advanced on appeal, so that costs would ordinarily follow the event: Bostik Australia Pty Limited v Liddiard (No. 2) [2009] NSWCA 304 at [38]; Hawkesbury District Health Service Limited v Chaker (No. 2) [2011] NSWCA 30 at [10]-[15]. 58My provisional view is that costs should follow the event and that Coates should pay Mr Fillipou's costs of the appeal by way of a gross sum costs order of $7,000.00. However, I will hear the parties before proceeding to make any final costs order.

Orders 59I make the following orders: (a) I grant an extension of time to Mr Fillipou to seek leave to appeal to this Court against the costs order of 5 November 2010; (b) I grant leave to appeal from the costs order of 5 November 2010 and set aside the costs order made on 5 November 2010; (c) I refuse Mr Fillipou leave to appeal against the interlocutory judgment and order on 13 December 2010; (d) in accordance with these reasons, I will hear the parties on the order for costs with respect to the Local Court hearing on 5 November 2010 and the costs of the appeal to this Court.

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: 01 September 2011

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