Gu v Tampi [2020] VSCA 61

1 Dr Baijun Gu and Ms Hui Zhou ('appellants') applied for leave to appeal from the orders of Cameron J made on 12 July 2019 dismissing an appeal from orders of the Magistrates' Court summarily dismissing a proceeding brought by them against their neighbour, Mr Thomas Tampi, and Mr Tampi's builder, Westbourne Homes Pty Ltd.[1] Mr Tampi and Westbourne Homes are the first and second respondents respectively. The dispute centres on the removal by the second respondent of a fence and retaining wall constructed by the appellants.

2 On 18 March 2020, and for the reasons which follow, we made orders granting leave to appeal and allowing the appeal in the following terms:

1. The application for leave to appeal is granted.

2. The appeal is allowed.

1. The orders made by Cameron J on 12 July 2019 are set aside and in lieu thereof it is ordered:

(1) The appeal is allowed.

(2) The orders made in the Magistrates' Court by Judicial Registrar Andrew on 28 March 2018 and Magistrate Alger on 1 May 2018 are set aside and in lieu thereof it is ordered that the first defendant's application for summary judgment filed 8 March 2018 and the second defendant's application for summary judgment filed 15 March 2018 are dismissed.

(3) The first defendant pay the appellants' court filing fees.

1. The first respondent pay the appellants' court filing fees.

3 The appellants are the owners and occupiers of land at 7 Poets Court, Mernda, Victoria and the first respondent is the owner and occupier of adjacent land at 6 Poets Court. They share a common boundary with a length of approximately 30 metres.

4 The appellants were already living in their home at 7 Poets Court when the first respondent bought the adjacent land. The appellants constructed and paid for a timber fence along the 30 metre boundary between the two properties while the first respondent's land was still vacant. We shall refer to this 30 metre fence as the 'original fence'. The appellants understood that half of the cost of the original fence would be met by whoever acquired and developed the adjacent land.

5 The first respondent acquired the land at 6 Poets Court in 2014. In 2015, he engaged the second respondent to build a house on the land. The building works included the construction of a garage on the boundary between his land and the appellants' land. The construction of the garage involved the removal of part of the original fence and its replacement by the garage wall.

6 The appellants allege that on or around 27 July 2015, without notice to them and without their consent, the second respondent destroyed 13.6 metres of the original fence, damaged the remaining 14.4 metres of the original fence and removed a 9 metre retaining wall which was on the land belonging to the appellants.

7 The first respondent contends that after the commencement of the works, he became aware that the original fence had not been constructed on the common boundary but instead a short distance into his land. He made several demands to the appellants to join him to relocate the remaining part of the fence to the correct boundary, but these demands were rejected.

8 On 30 May 2016, the second respondent served a fencing notice on the appellants requesting them to assist with the construction of a new dividing fence on the remaining part of what the second respondent asserts is the true boundary between the properties. That notice was rejected by the appellants, who demanded that the first respondent pay half of the costs of the original fence and, at his own cost, rectify the section of original fence which was destroyed and the retaining wall. The first respondent rejected the appellants' demands.

9 The destruction of part of the original fence marked the beginning of years of acrimonious disputation between the appellants and the respondents, not limited to the question of the fence. The appellants complained that the destroyed remnants of the original fence were simply dumped on their land and left there, endangering their children and pets; they complained that notices of protection works were not given by the second respondent and protection works were not properly carried out; they refused access to their land to enable rendering of the first respondent's garage wall. The police were called to resolve angry incidents on more than one occasion. The location and height of the garage appears to be the source of ongoing conflict. The appellants have made numerous complaints to the Responsible Building Surveyor and to the Victorian Building Authority ('VBA') about the second respondent and the works being carried out on the first respondent's behalf and it appears that investigations into some of those complaints have yet to be concluded.

10 On 14 December 2016, the first respondent filed complaint number H10168174 in the Magistrates' Court (the 'First Proceeding'). The first respondent sought, in substance, to compel the appellants to pay half of the costs of a replacement fence to be erected pursuant to s 30C(1) of the Fences Act 1968.

11 On 14 February 2017, the appellants filed a notice of defence which not only denied any liability to contribute to a replacement fence, but included what was, in substance, a counter claim. The appellants (as defendants to the First Proceeding) sought the following relief:

1. Civil damages on the fence. The [first respondent] must restore the whole 28 meter timber paling fence to its original position and original state.
2. Civil damages on the retaining wall. The [first respondent] must restore the 9 meter destroyed retaining wall to its original position and original state.

1. The [first respondent] must pay $1,062.60 for half of the fencing cost of the original 28 meter fence.

1. The [first respondent] must serve a written apology to the [appellants] for (1) setting up protection work in the [appellants'] backyard without Notice of Protection Work or the [appellants'] consent; and (2) Leaving hazardous rubbish in the [appellants'] backyard for ten months; and (3) Trespass into the [appellants'] backyard in 12 May 2016.
2. Costs of legal expenses for the fence dispute.

12 The appellants and the first respondent participated in a court ordered mediation on 13 April 2017, as a result of which the First Proceeding settled. The appellants and the first respondent executed a settlement agreement on 19 April and 20 April 2017 respectively ( 'Terms of Settlement').

13 By the Terms of Settlement, the first respondent agreed to construct at his own cost a new timber paling fence for a length of 15.9 metres running in an east-west direction from the corner of the garage (the 'replacement fence'). The appellants would be permitted to fill the land directly adjacent to the garage as they saw fit. This was apparently intended to deal with the issue of the retaining wall, although, we infer, only as a temporary measure.

14 The Terms of Settlement contained a general release and a limited carve-out from that release in the following form:

1. Subject to paragraph 8 hereof, the parties hereby release each other from all claims, actions, suits, or complaints the subject of the claim (from and only in the COMPLAINT No. H1016874), and these terms of settlement may be produced as conclusive evidence that the parties are barred from any such claims.

1. The release in paragraph 8 does not include a release by the parties of their respective rights in relation to their disagreement as to the location and construction of the garage, which the plaintiff contends is lawfully constructed and the defendant contends is not. The construction of the garage is currently being investigated by the VBA and the parties reserve their rights in relation to the outcome of that investigation.

15 These clauses were the result of negotiations between the parties following the mediation, which saw at the request of the appellants the words 'and the defence' removed from paragraph 8, the removal of a clause referring specifically to the complaints made to the VBA and the insertion of paragraph 10.

16 The Terms of Settlement define the 'claim' and the 'defence' separately. However, the recitals record the parties' desire 'to move forward and resolve all outstanding issues between them, and to do so on the terms set out in these Terms of Settlement'.

17 Following the settlement, the first respondent constructed the replacement fence at his own cost. It runs from the corner of the garage to the western boundary of the two properties and is approximately 16 metres in length.

18 On 17 November 2017, the appellants commenced Magistrate's Court proceeding No. H13177255 against the first and second respondents (the 'Second Proceeding'). In the Second Proceeding, the appellants claimed:

1. Civil damages on the fence. The [first respondent] must restore the rest 12 meter timber paling fence to its original position.
2. Civil damages on the retaining wall. The [first respondent] and [second respondent] must restore the 9 meter destroyed retaining wall to its original position and original state.

1. A$1,062.60 paid by the [first respondent] for half of the fencing cost of the original 28 meter fence, particularly the [first respondent] has agreed twice to pay that amount.

1. A$50,000 compensation paid by the [first respondent] and [second respondent] for the intended and repeated psychiatric damages to the Plaintiffs' family, particularly to Plaintiff (Zhou) due to the Defendants' unlawful conduct including (1) destruction of the fence without notice or consent; (2) destruction of the retaining wall without notice or consent; (3) multiple trespass to the Plaintiff's backyard; (4) setting up building devices in Plaintiffs' backyard without notice or consent; (5) leaving hazardous building rubbish in the Plaintiff's backyard for a long period (10 months); (6) forging evidence; (7) threats to the Plaintiff in front of children; and (8) break in.
2. Costs.

19 The first and second respondents filed notices of defence on 14 December 2017 and 30 January 2018 respectively.[2] The first respondent pleaded that the Terms of Settlement had compromised the claims made in the Second Proceeding.

20 On 8 March 2018, the first respondent filed a summons seeking summary dismissal of the Second Proceeding under r 23.01 of the Magistrates' Court General Civil Procedure Rules 2010 ('Rules') and s 63 of the Civil Procedure Act 2010 ('CPA') or, in the alternative, that the statement of claim be struck out in whole or in part pursuant to r 23.01(2) of the Rules. The second respondent filed an identical summons on 15 March 2018.

21 The application for summary dismissal was made on the basis that:

(a) the appellants' claim had no real prospect of success because it had already been compromised by the Terms of Settlement; and

(b) the appellants' claim was vexatious or otherwise an abuse of process.

22 The summonses were both made returnable in the Magistrates' Court on 20 March 2018. Rule 22.18(4) required the summons (and any affidavit in support and any exhibit referred to in that affidavit) to be served not less than 14 days before the day for the hearing named in the summons. The first respondent's summons was served on the appellants on 13 March 2018 and the second respondent's summons was served on the appellants on 15 March 2018. Because the summonses were served by mail, the appellants received them somewhat later.

23 The first and second respondents accept that neither of the summonses was in the proper form,[3] and that neither was served within the time limit in the Rules.[4]

24 On 20 March 2018, the applications in both summonses were heard by a Judicial Registrar in the Magistrates' Court, who, following reasonably comprehensive oral submissions from the first respondent and the appellants, summarily dismissed the Second Proceeding under s 63 of the CPA on the basis that she was satisfied that it had no real prospect of success.[5]

25 The Judicial Registrar provided brief oral reasons for her decision as follows:

[Counsel for Mr Tampi] classified, I think accurately classified the major claims in Dr Gu's complaint, the fence claim, the fence destruction claim, and a claim of psychiatric damage.

I note that Dr Gu did not really address that third point of psychiatric damage, and the submissions... made by the parties really focussed on the fence claim and the fence destruction claim.

Having analysed and reflected on the submissions made by the two defendants and Mr Gu's response, I think... My conclusion is that there is no basis in law for the complaint. Matters are dealt with by the terms of settlement, except the outstanding issue of the garage, which is specifically provided for, has not been included in the release in paragraph eight of the Settlement Deed and it is indeed currently being investigated by the Victorian Building Authority, with the parties reserving their rights.

26 On 5 April 2018, the appellants sought review of the decision of the Judicial Registrar pursuant to s 16K(3)(a) of the Magistrates' Court Act 1989. The review was apparently conducted 'on the papers'. The first respondent filed no material. The appellants filed material including an affidavit in support of their application that gave as the ground for review an 'abuse of process' consisting of the short service and the lack of personal service of the summonses for summary dismissal.

27 On 1 May 2018, the Magistrate refused the application for review. He provided brief written reasons stating that even if the appellants were correct about the failure to comply with requirements for the service of the summonses, the appellants' case had no real prospects of success as it sought to re-litigate the subject-matter of the First Proceeding, which was settled pursuant to the Terms of Settlement. The Magistrate said:

1. The [appellants] in their application for review, refer to failures by the [first and second respondents] to comply with a number of timeline requirements under the Court Rules, in that they, the [first and second respondents], gave shorter notice of their application for summary dismissal than required by the Rules.
2. Even if the [appellants] are correct about the [first and second respondents] failing to comply with relevant timeline requirements , it does not automatically follow that their application for review must succeed.
3. If, on any reasonable view, their complaint has no real prospects of success, that must remain the position, irrespective of whether there had been compliance with relevant timeline requirements.
4. The difficulty for the [appellants] in this application for review, is that their complaint seeks to re-litigate the subject matter of the earlier proceeding, which was ultimately settled in accordance with the Terms of Settlement.
5. Strictly speaking, the [appellants] are bound by the Terms of Settlement only in respect of the [first respondent], as the [second respondent] was not a party in the earlier proceeding, and therefore not a party to the Terms of Settlement, however, in the circumstances of this case, the [second respondent] was effectively acting as the agent of the [first respondent] such that any claim against the [second respondent] is so closely connected with that against the [first respondent], that it could not meaningfully proceed on its own.
6. Ultimately, I am satisfied that the Terms of Settlement bind the [appellants] in respect of their complaint, to the extent that [it] has no real prospects of success.
7. It follows, therefore, that I am satisfied that the decision of the Judicial Registrar to summarily dismiss the complaint was a correct decision.[6]

28 On 24 May 2018, the appellants appealed the Magistrate's decision to the Trial Division pursuant to s 109 of the Magistrates' Court Act. The notice of appeal (as amended) raised seven grounds of appeal:

(a) the Magistrates' Court erred in failing to afford procedural fairness to the appellants;

(b) the Magistrates' Court erred in ignoring abuses of process or was otherwise biased;

(c) the Magistrate was misled by false documents and statements presented by the respondents and their counsel;

(d) the Magistrate erred in failing to consider that there were no reasons given by the Judicial Registrar;

(e) the Magistrate erred in making an order based on an assumption that the Settlement Agreement addresses all claims, rather than by reference to the evidence;

(f) the Magistrate erred in allowing an order without legal basis to be retained; and

(g) the Magistrate erred in neglecting alleged non-compliance and violations of law committed by the Judicial Registrar during the trial of Summary Judgment.

29 Many of these grounds are based procedural irregularities in the Magistrates' Court, notably the short service of the summonses for summary judgment and the failure to use the proper form. It was also submitted that the Judicial Registrar had no power to dismiss a claim for more than $10,000. However, the substantive challenge was to the Magistrate's holding that the Terms of Settlement compromised all of the claims in the Second Proceeding and that they therefore had no real prospect of success.

30 In the Reasons, the judge dealt with the ground of appeal (ground 5) alleging a misconstruction of the Terms of Settlement in short compass. She related this ground to the ground that the appellants were denied procedural fairness. She recorded the appellants' submission that they were denied an opportunity to present evidence supporting their position that the Terms of Settlement only compromised claims which were the subject of the complaint in the First Proceeding and not the defence[7] and summarised the first respondent's position as follows:

The Respondent maintains that the [appellants] were given adequate opportunity to present their case before the Judicial Registrar and the Magistrate, and in fact did explore the history of amendments to the Settlement Agreement at first instance. He says that Judicial Registrar Andrew and Magistrate Alger clearly considered the Terms of the Settlement Agreement, which contained no ambiguity, and the appellants have failed to identify any admissible evidence that was not considered.[8]

Based on my observations in paragraphs 57 to 63 above, I do not consider that there was any error on behalf of the Magistrate in relation to the interpretation of the Settlement Agreement nor do I consider any relevant evidence in relation to this issue was ignored.

Accordingly, ground 5 of the appeal must be dismissed.[9]

32 In paragraphs 56 to 63 of the Reasons, the judge dealt with the appellants' allegation that the first respondent misled the Magistrates' Court by submitting that the Terms of Settlement had the effect of compromising all outstanding matters in the Second Proceeding. Her Honour observed that there was a difference between the initial draft of paragraph 8 of the Terms of Settlement, where the release was expressed to be in relation to 'the claim and the defence', and the final version, which referred only to 'from and only COMPLAINT number 81016874'.[10] The judge also observed that paragraph 10 provided a limited and specific carve out from the release in paragraph 8 in relation to the location and construction of the garage.[11] The judge then said:

It is well accepted that when interpreting a contract, including a settlement agreement, the Court should give primacy to the actual terms used. Where there is no ambiguity in those terms, they should be given their plain and ordinary meaning in the context of the document as a whole. Unless the language is ambiguous, evidence of the surrounding circumstances is not admissible to contradict the meaning established.

In my opinion there is no justification in the present circumstances to permit any other construction of paragraph 8 of the [Terms of Settlement] beyond what I consider to be its plain and ordinary meaning. The plain and ordinary meaning to be ascribed to the words 'subject to the claim' includes necessarily 'all claims, actions, suits or complaints' that may arise by way of defence in the first proceeding.

The clear meaning of paragraph 8 of the [Terms of Settlement] is to dispose of the first proceeding subject only to the preservation of rights in relation to the garage in paragraph 10.

The form of the carve out from the [Terms of Settlement] in paragraph 10 could have been replicated in relation to any other matter or claim which the parties wished to preserve past the entry into the [Terms of Settlement]. It was not.[12]

33 The Second Proceeding was summarily dismissed under s 63 of the CPA.

34 In Lysaght Building Solutions Pty Ltd v Banalko Pty Ltd,[13] Warren CJ and Nettle JA made clear that the 'no real prospect of success' test under s 63 of the CPA should be construed as one of whether the respondent to the application for summary judgment has a 'real' as opposed to a 'fanciful' chance of success,[14] and observed:[15]

[I]t must be borne in mind that the power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried; and that is so regardless of whether the application for summary judgment is made on the basis that the pleadings fail to disclose a reasonable cause of action (and the defect cannot be cured by amendment) or on the basis that the action is frivolous or vexatious or an abuse of process or where the application is supported by evidence.

35 In the notice of appeal, the appellants have raised no less than nine proposed grounds of appeal. Again, many of them are directed to procedural irregularities in the Magistrates' Court which are misdescribed as both abuses of process and crimes. It is unnecessary to deal with these grounds, as the application for leave to appeal and the appeal can be determined on the single ground that the Magistrate erred in law in summarily dismissing the Second Proceeding under s 63 of the CPA on the basis that the Terms of Settlement bound the appellants in respect of their complaint to the extent that it had no real prospect of success.

36 In our view, the Terms of Settlement are not unambiguous and certainly not so clear as to make it unarguable that all of the claims raised by the appellants in their defence in the First Proceeding were compromised by the settlement. Moreover, it is unclear and it will be a matter for evidence whether issues covered by the 'carve out' in paragraph 10 relating to the 'disagreement as to the location and construction of the garage' are related to the claims in the Second Proceeding for reconstruction of the retaining wall and part of the original fence.[16] Furthermore, the appellants in the Second Proceeding make a claim against the second respondent for distress or psychiatric injury which, although on its face tenuous and arguably without legal foundation, is plainly not covered by the Terms of Settlement. Moreover, as the second respondent was not a party to the Terms of Settlement, the Terms do not compromise the claims made against it.

37 In the circumstances, at the conclusion of the hearing, we held that the power of summary dismissal should not have been exercised by the Magistrate, as it was far from clear that there was no real question to be tried in the Second Proceeding.

38 We therefore held that the judge erred in dismissing ground 5 and in declining to set aside the orders in the Magistrates' Court. Thus we made the orders set out in [2] above.

[1] Gu v Tampi [2019] VSC 454 ('Reasons').

[2] As noted by Cameron J, the notices of defence were filed outside the 21 day timeframe prescribed by r 8.01 of the Magistrates' Court General Civil Procedure Rules 2010: Reasons [14].

[5] In this hearing, Dr Gu made submissions on behalf of himself and Ms Zhou, while Mr Tampi and Westbourne Homes were represented by counsel.

[6] Gu v Tampi (Magistrates' Court of Victoria, Magistrate Alger, 1 May 2018) [12]-[18].

[12] Reasons [60]-[63] (citations omitted).

[13] [2013] VSCA 158; (2013) 42 VR 27.

[16] On that part of the boundary currently occupied by the garage wall.