John Pachos v Charles Davison & Candice Weeden

LEGISLATION CITED : Civil Procedure Act 2005 Uniform Civil Procedure Rules 2005

CASES CITED : Newmont Yandal Operations Pty Limited v The J Aron Corporation and the Goldman Sachs Group Inc (2007) 70 NSWLR 411 Raybos (Australia) Pty Limited v Tectran Corporation Pty Limited (1988) 77 ALR 190

(P) John Pachos PARTIES : (D1) Charles Davison (D2) Candice Weeden

(P) Ms J. Keys COUNSEL : (D1) Mr Schneider (D2) No appearance

(P) Self represented SOLICITORS : (D1) Houston Dearne O'Connnor (D2) No appearance

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

2008/284943 JOHN PACHOS v CHARLES DAVISON & CANDICE WEEDEN

EX TEMPORE JUDGMENT 1 HIS HONOUR: The plaintiff, John Pachos, by notice of motion filed 3 September 2010 seeks an order varying order 2 of the orders made by the court in these proceedings on 30 March 2009. 2 The plaintiff relies upon the provisions of r 36.17 of the UCPR, which is usually referred to as the slip rule, to give the Court the power to make the order which is now sought. 3 The order which is sought is that the order originally made on 30 March 2009 in these terms: "By consent Plaintiff to pay Defendant's costs assessed and agreed at $11,000.00 inclusive of GST and to be paid within 28 days of 30 March 2009"

be varied so as to read: "By consent, Second Defendant to pay First Defendant's costs, assessed and agreed at $11,000.00 inclusive of GST and to be paid within 28 days of 30 March 2009." 4 I have determined, for the reasons which follow, that the motion ought be dismissed.

Procedural history 5 The background to this proceeding is that on 6 May 2008 the Local Court of New South Wales at Burwood made an order in the following terms: "1. Judgment for the First Defendant [Charles Davison] and Plaintiff [John Pachos] ordered to pay the First Defendant's costs which from 17 December 07 be on an indemnity basis. 2. Judgment for the Plaintiff against the Second Defendant [Candice Weeden] for $21,704 plus costs as assessed or agreed (not limited to $4,000)."

6 On 3 June 2008 John Pachos commenced proceedings in this court by filing a Summons commencing an appeal. That summons made plain that he was only appealing from part of the decision in the Local Court of NSW, in relation to the dismissal of his claim against the first defendant, Charles Davison. The orders sought in the Summons were these: "1. Appeal allowed.

2. Judgment and/or Order of the court below dismissing the Plaintiff's claim against the First Defendant, be set aside.

3. An order that the First Defendant is jointly with the Second Defendant and severally liable to pay the Plaintiff $16,500 (for lease of the Hi-Tech Motor sport V8 Ute) plus $5,204 (for damage caused to the Hi-Tech motor sport V8 Ute) in addition to interest for the period of 22 June 2007 until the time of judgment.

4. An order that the First Defendant pay the plaintiff's costs.

5. Any further or other order that the court considers just or reasonable."

7 That appeal came on for hearing before Mathews AJ on 30 March 2009. Her Honour heard full submissions from the parties as to whether the Local Court's judgment was erroneous and on that day delivered her judgment. She was not satisfied that the Local Court was in error and, accordingly, dismissed the appeal. 8 The judgment which her Honour delivered was done so orally at the conclusion of the submissions. Having delivered judgment, the transcript records that her Honour raised with the parties what was to happen about costs. The parties asked if there could be a short adjournment, which her Honour granted. At the conclusion of the short adjournment, the parties returned to court and the transcript records the following: "MONZO: The parties have reached agreement in relation to costs and as your Honour knows there are two proceedings. At first instance, costs would follow the event there and costs today.

The parties have agreed to an order whereby the plaintiff pays the first defendant's costs of those proceedings totally, $10,000 plus GST to be paid within 28 days. They are essentially the orders in relation to costs in respect of both.

HER HONOUR: I think I've already given my order dismissing the appeal.

HER HONOUR: In relation to costs, by consent, I order that the plaintiff pay the defendant's costs assessed and agreed at $10,000. Those costs to be paid within 28 days of today.

MONZO: My instructing solicitor reminds me plus GST.

HER HONOUR: Why don't we say $11,000 including GST to be paid within 28 days of today."

9 As a consequence of that discussion her Honour formally made the relevant orders with respect to costs. The orders made were the ones which she was asked to make by and with the consent of the parties. 10 Following that decision of Mathews AJ, the plaintiff, still dissatisfied, sought leave from the Court of Appeal to appeal against that decision. The Court of Appeal, comprising McColl JA and Handley AJ, having heard the application for leave on Tuesday, 20 October 2009, delivered short reasons dismissing the appeal. They express themselves to be satisfied that there was no error in the reasons of Mathews AJ. The orders of the Court of Appeal were: "1. Extend the time for summons to be filed seeking leave to appeal to 9 July 2009.

3. Order the applicant to pay the respondent's costs."

An arrangement to pay costs 11 Consequent upon the dismissal of the applicant's application for leave to appeal, correspondence has ensued between the plaintiff's legal representatives and the first defendant's legal representatives about the payment of legal costs arising from the hearing before Mathews AJ and the hearing before the Court of Appeal. 12 During the course of that correspondence it transpires that the plaintiff seeks to assert that he is not obliged to make the payment of costs of $11,000 for the proceedings before Mathews AJ and the costs ordered to be paid by the Court of Appeal because, he argues, that he, through his legal representative, Ms Keys, entered into an arrangement with Ms Weeden, the second defendant. 13 Ms Weeden has not at any stage ever appeared or played any role in any of the proceedings either in the Local Court, before Mathews AJ, in the Court of Appeal or in this Court. 14 The arrangement was that Ms Weeden will indemnify Mr Pachos, the plaintiff, with respect to any costs which are incurred in pursuing the proceedings before Mathews AJ. That arrangement seems to be encapsulated in a letter of 18 June 2008 written by Ms Keys to Ms Weeden. The relevant terms of it are as follows: "I refer to our various discussions since judgment in the amount of $21,704 plus costs was obtained by John Pachos against you in the Burwood Local Court on 6 May 2008, and confirm that Mr Pachos accepts your undertaking to be liable for any and all costs order/s made against him in connection with his pursuit of judgment for that amount against Charles Davison on appeal to the NSW Supreme Court.

I confirm that it is Mr Pachos' understanding that you have undertaken to be liable for any and all costs order/s made against him in favour of Mr Davison in connection with any and all appeal proceedings associated with or arising from the Local Court proceedings...on the basis that -

(a) Mr Pachos will not seek to enforce the Local Court judgment against you until all avenues of appeal against the dismissal of Mr Pachos' claim against Mr Davison have been exhausted;

(b) you do not wish to incur legal and associated costs as a result of your participation as a party in any appeal proceedings in NSW and consequently you do not intend to file a notice of appearance; and Mr Pachos will not cause a summons to be issued requiring your attendance to produce documents or otherwise give 'fresh' evidence in any such appeal proceedings; and

(c) you have given your undertaking after obtaining independent legal advice." 15 That document, according to Ms Keys' submissions to the court today, constitutes the critical document upon which her application is founded. The evidence of the defendant, Mr Davison, which is not challenged before me, is that he had no knowledge of that agreement. Ms Keys does not submit that there is any evidence at all that Mr Davison or his lawyers had any knowledge of that agreement. 16 It is also to be observed that the agreement recorded in the document of 18 June 2008 as having been entered into comes about two weeks or so after the summons seeking to appeal from the Burwood Local Court was filed in this court.

Discernment 17 The course of events in the appeal to this Court, which was ultimately heard by Mathews AJ, did not involve any claim being made in the notice of appeal that an order for costs should be made against the second defendant, Ms Weeden. Nor was there any claim made in that notice of appeal that Ms Weeden ought be held liable for any costs that Mr Pachos, the plaintiff, may be ordered to pay because of the agreement embodied in the letter of 18 June 2008. When the proceedings were argued before Mathews AJ no submission was put orally that any such agreement existed or that any order ought be made which reflected the existence of that agreement. Rather, as I have pointed to earlier in the transcript, the only order as to costs which was made was one made by consent of both legal practitioners. It was the fact at the time that order was made, and that fact must have been known to the legal representatives for the plaintiff, that whatever the agreement was made between the plaintiff and Ms Weeden, the terms of that agreement had not been disclosed to Mr Davison's representatives at the time the consent order was entered into. 18 Against that recital of relevant events, it is necessary to turn to the terms of r 36.17 of the UCPR. "If there is a clerical mistake, or an error arising from an accidental slip or omission, in a judgment or order, or in a certificate, the court, on the application of any party or of its own motion, may, at any time, correct the mistake or error."

19 The slip rule has a broad application. It has been held to apply to permit the inclusion of an order for interest on a judgment. It has been held to apply to include an additional order respecting the repayment of a judgment sum. It has also been held to apply to the making of an order for costs where no order had been made. In other words, it is not only to be applied where there is an order which is made which, on its face, is erroneous. 20 The slip rule can also be applied in circumstances where there has, through inadvertence, been no attention paid to the obtaining of a particular order. A good example of this latter application of the rule is to be found discussed in the judgment of Toohey J in the High Court of Australia in Raybos (Australia) Pty Limited v Tectran Corporation Pty Limited (1988) 77 ALR 190 at 191: "In many cases the slip rule or its equivalent is invoked when, through error or oversight, a judgment or order fails to express correctly the intention of the court at the time when the judgment or order was announced. But it is clear that this power of correction extends to cases where a matter, through inadvertence, was not dealt with at the hearing. In that case the purpose of correction is not to give expression to the intention of the court at the time the judgment or order was pronounced …"

21 The key phrase in that extract from the judgment of Toohey J is "through inadvertence." 22 The application of the slip rule has been considered recently by the New South Wales Court of Appeal in Newmont Yandal Operations Pty Limited v The J Aron Corporation and the Goldman Sachs Group Inc (2007) 70 NSWLR 411. 23 As is plain from [113]-[114] of the judgment of Spigelman CJ, s 56(2) of the Civil Procedure Act 2005 must be borne in mind when interpreting the rule, because the overriding purpose in that section must be applied in interpreting the rule: "As a matter of interpretation, r 36.17 must extend to the correction of a mistake or error in an order which, or which arguably, resolves an issue that has intentionally not been adjudicated upon. Such a consequence, in my opinion, falls squarely within the concept of an 'error arising from an accidental slip or omission.' In the present case, such matters as the existence of Goldman Sachs' debt were not, in my opinion, the 'real issue' in the 2004 proceedings. To hold otherwise would be to prefer form over substance, which the word 'real' in s 56(1) is designed to avoid."

24 His Honour went on to hold, at [116], that the words in the slip rule "error" and "correct" should not be given a narrow interpretation. 25 The evidence in this case puts beyond any doubt whatsoever that the issue of the liability of the second defendant, by an agreement entered into outside of the court proceedings, to indemnify the plaintiff in respect of any costs order which may be made against him and in favour of the first defendant, was not an issue which was litigated in the proceedings. Indeed, as Ms Keys properly and frankly conceded, by reason of the agreement which existed and which her client thought would be satisfied at the appropriate time, no relief was sought against the second defendant. No order was sought in the notice of appeal, no order was sought orally and the consent that was given did not embrace the second defendant. 26 In those circumstances it is obvious that the failure of the plaintiff to seek to entrench in these proceedings the agreement which he had entered into with the second defendant was not an error or mistake. It was not a failure which arose accidentally. It was not a failure which arose through inadvertence. Importantly it was not an issue which was litigated at any time in the course of the hearing. 27 There is, in my view, no possible basis for an application of r 36.17 to support the variation which is sought by the notice of motion filed on 3 September 2010. Indeed, it would be a misuse, in my view, of r 36.17 to apply it to make the variation which is sought. 28 The reality of this case was that outside of the appeal in this court, and wholly unrelated to the issues argued in the appeal, the plaintiff entered into an agreement with the second defendant. If the plaintiff wishes to enforce that agreement, then he must do so, if properly and so advised, by taking proceedings on the basis of that agreement. 29 Attempting to enforce that agreement through use of the slip rule to the disadvantage of the first defendant, who had no knowledge of and did not accept or consent to the agreement, would be an abuse of this Court's process. This motion ought be dismissed.

Indemnity costs 30 Consequent upon my dismissal of the motion Mr Davison, the first defendant and the respondent to that motion, has applied for an order for costs on an indemnity basis. Rule 42.2 of the UCPR provides: "Unless the court orders otherwise or these rules otherwise provide, costs payable to a person under an order of the court or these rules are to be assessed on the ordinary basis."

31 The award of costs is entirely discretionary. On this issue I received additional evidence. The first piece of evidence comprises a letter of 2 September 2010 from Ms Keys for the plaintiff to Houston Dearn O'Connor for the first defendant. That letter, relevantly, puts the first defendant on notice that a notice of motion is going to be filed in this court seeking amendment of the costs order made by Mathews AJ. It then puts an offer to resolve the bankruptcy proceedings by way of a payment of a sum of money less than that which was owing. That letter was apparently sent by facsimile on 2 September 2010. 32 On the following day, 3 September 2010, the solicitors for the first defendant responded to that letter by facsimile, email and in the post with a letter which rejected the offer to resolve the bankruptcy proceedings and which included this paragraph: "In relation to your filing a Notice of Motion in the Supreme Court, we place you on notice that we shall seek to have the Motion dismissed on the basis that there is no reasonable cause of action disclosed and the Motion is an abuse of process of the Court. We also place you on notice that, assuming our client's success in opposing the Notice of Motion, we shall seek costs of the Motion on an indemnity basis against your client and against you as his Counsel."

33 Ms Keys tells the Court, and I accept, as her letter of 2 September 2010 indicates, that she was not in her office on 3 September 2010 and so did not receive the facsimile on that day. Nevertheless, she did not initiate any inquiry before she filed a notice of motion by telephoning the solicitors for the first defendant to see if her client's offer had been accepted.

34 It is accepted by the legal representatives that on 3 September 2010 there was a telephone conversation between Mr Schneider, the solicitor for the first defendant and Ms Keys, of counsel for the plaintiff. The parties at the bar table are in dispute as to the contents of that conversation. In light of that dispute, which in the absence of sworn evidence I am unable to resolve, I prefer to have regard to the undisputed evidence which is contained in the various letters. 35 It is not clear from the evidence before me when the letter of 3 September 2010 came to the attention of Ms Keys but nevertheless it is plain that it was faxed and e-mailed on 3 September 2010. 36 Prior to the hearing of this matter today, by letter dated 10 September 2010, which was faxed on 13 September 2010 and emailed on that day as well, the solicitors for the first defendant sent to the legal representative of the plaintiff a further letter enclosing by way of service the affidavits upon which they intended to rely during the hearing. That letter included the following: "We place you on notice that, in our view, you have no reasonable cause of action and no reasonable prospects of success. Further, it is our client's position that the Motion is an abuse of process intended to draw out the proceedings, including the proceedings in the Federal Magistrates Court, thereby increasing costs for the parties and gaining nothing as a consequence.

We shall be pressing the Supreme Court to hear this matter on 17 September 2010 so that no further time and money is wasted. As we have already informed you, you are on notice that, assuming our client's success in the Supreme Court of NSW, we shall seek our client's costs on the Notice of Motion on an indemnity basis against your client and against you."

37 As I have said earlier, an order for costs is a matter which is in the discretion of the Court. The exercise of that discretion is not fettered in any particular way and the Court is entitled to have regard to, among other things, the nature of the proceedings that were brought, the strength or weaknesses of the arguments that were made, any correspondence between the parties referring to the likely outcome of the proceedings and the reasonableness or otherwise of a party not accepting an offer of the kind that was made here. In short, each of those matters is an integer of the fundamental test of the exercise of the Court's discretionary test that, as any order which is made must be one which has regard to the interests of justice. 38 In my view it was unreasonable of the plaintiff to have brought these proceedings. As I have found, they had no reasonable prospect of success. They were entirely misguided. The letters of 3 September 2010 and 10 September 2010 squarely placed the plaintiff on notice that in the event that the motion was unsuccessful an order for costs on an indemnity basis would be sought. 39 If there had not been any pause for thought prior to the receipt of those letters, the terms of those letters made it imperative that the plaintiff and his legal representative should pause and give careful consideration to the likely outcome before proceeding with the hearing of the motion. 40 In those circumstances, in my view it is in the interests of justice that an order for costs be made otherwise than on the ordinary basis.

(1) The plaintiff's notice of motion filed 3 September 2010 is dismissed.

(2) The plaintiff pay the first defendant's costs of the notice of motion on an indemnity basis.

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