Il Vizio Corp Pty Ltd v Cashflow Finance Australia Pty Ltd

Court of Appeal (NSW)|2018-06-27|Before: Meagher JA, Ward JA, White JA

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Judgment

THE COURT: On 8 June 2018, this Court upheld an appeal by Il Vizio Corp Pty Ltd from a decision in the District Court of New South Wales in which judgment had been entered against it (on the application of the respondent, Cashflow Finance Australia Pty Ltd) in the sum of $265,660.28 plus costs and interest. This Court set aside that judgment and, in lieu thereof, entered judgment against Il Vizio in favour of Cashflow in the sum of $27,394.81 (Il Vizio Corp Pty Ltd v Cashflow Finance Australia Pty Ltd [2018] NSWCA 122).
At the hearing of the appeal, an application as to the costs of the proceedings at first instance had been foreshadowed in the event that the appeal was successful. Accordingly, directions were made when judgment on the appeal was published for the service of written submissions on that issue with a view that it be determined on the papers. Those submissions have duly been served.
In summary, Il Vizio seeks an order that there be no costs of the proceedings at first instance or, alternatively, that it pay 10% of Cashflow's costs of those proceedings. Cashflow, on the other hand, submits that the existing costs order made in the District Court proceedings ought be reinstated (such that II Vizio remains liable to pay Cashflow's costs of those proceedings on an ordinary basis) or, alternatively, that Il Vizio should be ordered to pay 50% of Cashflow's costs of those proceedings, on the basis of the general principle that costs follow the event.

Submissions

Il Vizio points to the operation of r 42.35 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) (we have read the references to r 43.25 throughout Il Vizio's submissions as references to r 42.35, there being no r 43.25). Il Vizio accepts that Cashflow was entitled to commence the proceedings in the District Court, rather than the Local Court, having regard to the amount claimed by it. However, it submits that Cashflow was not entitled to continue the proceedings in the District Court after receipt of Il Vizio's affidavit evidence on or around 28 April 2017 (referring to the principles articulated by this Court in Singapore Airlines Cargo Pte Ltd v Principle International Pty Ltd (No 2) [2017] NSWCA 340 ("Singapore Airlines").
Il Vizio submits that by 28 April 2017 it must have been apparent to Cashflow that there was objective evidence establishing non-delivery of goods comprising $68,056.52 (referring to the credit notes issued by the supplier, Hometech); there was additional objective evidence establishing non-delivery of goods comprising $6,637.07 (referring to goods purchased as abandoned cargo and a handwritten document referring to partial delivery - see grounds of appeal [2.2(b)-(c)] of the Amended Notice of Appeal); and there were 11 tax invoices that were not in evidence (totalling $136,582.26). Il Vizio notes that if those amounts are excluded then the quantum of Cashflow's claim is reduced to $54,384.43 (an amount within the Local Court's jurisdictional limit of $100,000.00 - see Local Court Act 2007 (NSW) s 29(1)(a)).
Il Vizio points to the delay of approximately four months between the date of service of its evidence and the service of evidence by Cashflow in reply (which only occurred shortly before the hearing at first instance). It argues that the continuation of the proceedings in the District Court was not warranted once its evidence had been served, arguing that the primary factual contests were as to whether the goods the subject of the invoices had been delivered, thereby creating a debt between Il Vizio and Hometech, and whether Il Vizio had received notice of any purported assignment of the debt from the supplier to Cashflow. (It says that the latter issue effectively evaporated on 18 September 2017 when Cashflow reopened its case during closing submissions to tender objective evidence of notice of assignment having been provided.)
Il Vizio argues that the fact that Cashflow had had Il Vizio's evidence for almost four months prior to serving its own evidence is the particular feature of this case that (coupled with the lack of factual complexity) establishes that continuation of the proceedings in the District Court was unwarranted.
In addition to the operation and effect of r 42.35 of the UCPR, Il Vizio relies on the following discretionary considerations. First, Il Vizio maintains that the principle of proportionality is enlivened, noting that the outcome of the appeal was that Cashflow recovered only a little over 10% of the amount it sought and less than the threshold imposed by r 42.35 after a four-day hearing; thus it says Cashflow has not enjoyed "substantial success" (a reference to Shield Mercantile v Citigroup [2013] NSWSC 287 at [25] per McDougall J). Secondly, Il Vizio points to the manner in which Cashflow conducted the proceedings, which it says did not facilitate the just, quick, and cheap resolution of the real issues in dispute (in this regard, Il Vizio again points to the timing of service of Cashflow's evidence in reply and the fact that it adduced important objective evidence on the question of notice of assignment only during closing submissions).
Cashflow, on the other hand, argues that it was at a disadvantage as assignor (which we read as a submission that it was disadvantaged as assignee). It submits that it had "a real chance" of proving its claim for $265,660.28 but ultimately failed to secure the witnesses and obtain the documents needed to prove the whole of its claim. (Pausing here, there is no evidence to sustain the submission that Cashflow failed to secure any potential witnesses in the sense of seeking but being unable, due to circumstances beyond its control, to obtain evidence from them - rather, it was accepted on the appeal that there was no explanation for the fact that Cashflow had not attempted to obtain evidence from Mr Tanti of Hometech as to matters relevant to the issue of delivery of the goods.)
Cashflow points to the fact that Il Vizio did not concede at first instance that any amount was properly payable and that its defence was a bare denial of liability.
Cashflow also argues that in light of the jurisdictional limit of the Local Court, and having regard to the complexity of the assignment point, it was reasonable to commence and continue the proceedings in the District Court, pointing to McLennan v Antonios (No 2) (2014) 18 DCLR (NSW) 85; [2014] NSWDC 38 at [15]-[18], where Gibson DCJ considered relevant, in relation to the operation of UCPR 42.35, matters such as that the proceedings were hard-fought; involved extensive cross-examination; involved damages claimed well in excess of the jurisdictional limit of the Local Court; required the determination of both questions of law and fact; required the ordering of the transcript so that detailed submissions as to credit issues could be made, which, her Honour noted, is not easy to obtain in civil cases in the Local Court; and had the added complexity of involving two proceedings.
Cashflow argues that the same considerations here apply as applied in McLennan v Antonios and says that the fact that it did not meet its burden of proof on a large portion of its claim does not make its choice of jurisdiction unreasonable.

Determination

It is conceded that it was not unreasonable for Cashflow to invoke the jurisdiction of the District Court. Therefore the only issue, in relation to the operation of r 42.35 of the UCPR, is whether the continuation of the proceedings in that jurisdiction after the service of Il Vizio's evidence was warranted. The fact that, at that stage, there was objective evidence supporting Il Vizio's contention as to non-delivery of the goods does not of itself warrant the conclusion that the continuation of the proceedings in the District Court was unreasonable. Among other things, the fact that resources had already been committed to the prosecution of the claim in the District Court and the scope for challenge to the evidence of Mr Scarano during the hearing (as well as the complexity of the issue as to assignment of the debts) makes it difficult to conclude that it was unreasonable for Cashflow not to have moved at that point of the proceedings to abandon the bulk of its claim and to have the proceedings transferred to the Local Court.
As to the second of the discretionary considerations raised by Il Vizio, it is not possible on the material before this Court to determine the force or otherwise of the submission that Cashflow did not conduct the proceedings in the manner required by s 56 of the Civil Procedure Act 2005 (NSW). Cashflow was the assignee of the debts; its dealings with Il Vizio were limited to issues arising in relation to the dispute itself; and it was dependent on advice from the supplier, Hometech, as to the validity of the invoices and the delivery of the goods the subject of those invoices. Any forensic disadvantage arising out of those circumstances is not to the point other than that it may well explain delays in the conduct of the proceedings (for example in the service of Cashflow's evidence in reply).
As to the first of the discretionary considerations raised by Il Vizio, there is little room for doubt but that the outcome of the proceedings must have been wholly disproportionate to the costs incurred therein. Although Cashflow was successful in retaining the benefit of its first instance judgment in relation to the limited number of invoices on which liability was ultimately conceded by Il Vizio in this Court, overall Cashflow was unsuccessful on the bulk of its claim.
If the "event" is treated as pointing to which party (following the outcome of the appeal in this Court) can be seen to have enjoyed substantial success in the proceedings at first instance, that must on any view be Il Vizio - Cashflow's success being limited in scope. In those circumstances the appropriate order is that Il Vizio pay 10% of the costs of Cashflow of the proceedings at first instance.
The order of the Court will therefore be: 1. Order the appellant to pay the respondent 10% of the respondent's costs of the proceedings at first instance in the District Court of New South Wales.

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: 27 June 2018

Local Court Act 2007(NSW)s 29(1)(a)).

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