KTD v Indoz Investments Pty Ltd [2018] NSWDC 158 | Case summary

District Court of NSW|2018-05-22|Before: Ms P

The plaintiff's claim for damages for breach of contract

The plaintiff, by statement of claim filed on 31 July 2017, brings a claim for damages initially pleaded to be the amount of $8,703, a declaration that the plaintiff has title to the goods in question (in Contracts 1 and 2), costs and interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW).
The first defendant did not attend court but I am satisfied, pursuant to r 29.7 Uniform Civil Procedure Rules 2005 (NSW), that it has been given proper notification of this hearing. The case against the second defendant has settled.

The nature of the plaintiff's claim

The circumstances of this claim are very unusual. The plaintiff is an Aboriginal person of the [Name of Tribe anonymised] Nation who resides in a remote rural area in New South Wales. Her life has been one of considerable hardship. She left school at the earliest opportunity and gave birth to two children when she was aged 15 and 17 years respectively. Since October 2010 she has been in receipt of parenting and family income support as her sole source of income and, not surprisingly given that background, she has difficulty reading and understanding documents of any complexity and is largely reliant upon verbal explanations to understand such documents. She has always lived, not at the poverty line, but below it, I would suspect, given that kind of financial history.
As a result, the plaintiff has the kind of limited financial literacy and limited understanding of basic financial concepts that would be expected for a person living in a remote community on very limited means. Similarly, she has little or no savings and let alone ability to obtain credit, no real work history and lives in social housing.
The plaintiff is clearly a "vulnerable person" for the purpose of relief under the Contracts Review Act 1980 (NSW), the National Consumer Credit Protection Act 2009 (Cth), National Credit Code and the Australian Securities and Investments Commission Act 2001 (Cth).
The circumstances in which she entered into contracts for the purchase of expensive (and almost certainly unnecessary) electrical goods, fortunately, need only be referred to briefly, as default judgment was entered against the first defendant on 1 May 2018. These proceedings are listed for assessment of damages against the first defendant only, the proceedings against the second defendant having been settled.
Those circumstances are as follows. The first defendant made a series of representations to the plaintiff offering her an alluring proposition that she could acquire an ex‑display model television, a new DVD player and two small speakers for $75 per fortnight by way of deduction from her Centrelink benefit. She was told that after she made two fortnightly payments these goods would be delivered to her residence, and after she made payments for 12 months, she could arrange to stop paying and keep these items by making what was called a nominal payment to the first defendant.
What the first defendant did not disclose to her was the total cost of the contract, the cash price or value of the goods or the consequences of non‑payment or any other breach in the contract. He gave her a document to sign, which she clearly did not understand. Regrettably, I note that the first defendant has refused to provide those documents, which is one of the many reasons for which I have made an order for indemnity costs in these proceedings.
The plaintiff struggled to comply with the terms of the contract. Unfortunately, shortly afterwards, that same representative of the first defendant made a further series of offers of goods to the plaintiff while she was visiting her brother. Those representations included offering an unsolicited contract for the purchase of a further television and two sofas by the increase of her existing fortnightly payments, in circumstances where the total cost, the cash price or value of the goods and the consequences of non‑payment or other breach of the contract were, once again, not disclosed.
The plaintiff signed a document to increase her Centrelink pay deduction. She was not provided with, and did not sign, any written terms and conditions, agreement or any other contract documentation.
Between 5 November 2012 and 21 July 2015, the plaintiff paid the first defendant a total of $8,703, as is set out in paragraph 37 of the well-drafted statement of claim. During this time, I am saddened to learn, she was struggling to pay for essential living expenses such as rent, food, energy, transport, clothing and health‑related expenses because of the burden of these financial payments.
From about 2014 onwards, the plaintiff contacted the first defendant on a number of occasions trying to purchase the goods in accordance with her understanding of the agreement, but the first defendant consistently refused to discuss these. She eventually cancelled her Centrelink pay deduction on 31 July 2015.

The plaintiff commenced dispute proceedings

On or about 3 March 2015, Legal Aid New South Wales, on behalf of the plaintiff, lodged a complaint against the first defendant with the Credit & Investments Ombudsman and commenced "dispute resolution proceedings". The plaintiff was fortunate enough to be represented by the Legal Aid New South Wales, who put forward a settlement offer of $7,000. I note the sorry history of intransigent response set out in paragraph 5 of that letter (see Annexure F to the affidavit of Patricia Bray of 22 May 2018, which is Exhibit A in these proceedings). The first defendant was expelled from the Credit & Investments Ombudsman and thereby leaving the dispute unresolved.
The settlement offer, which is an open offer, noted that "[t]he plaintiff has been waiting for a reasonable settlement offer from [the first defendant] since 3 March 2015, over two years ago." That offer of settlement required the transfer of ownership of the goods, pay back the settlement sum, mutual releases and removal of any adverse credit listings. The letter concluded by saying "[t]here have been extraordinary delays in this matter and at no time has your client indicated they are willing to negotiate."

A declaration as to the ownership of the goods

As a result, these proceedings were commenced. Liability has been determined by way of entry of judgment and the claim against the second defendant has settled for an amount which is agreed to be deducted from the total claim. The sole remaining issue I should deal with, in relation to liability, is whether or not I can make the second order sought in the statement of claim, namely the declaration under s 12GM Australian Securities and Investments Commission Act 2001 (Cth).
Regrettably, looking at s 12GJ and seeing the limitations as to the jurisdiction of "courts" as excluding this court, it would appear consistent with s 12GJ(3), that as an inferior court of a State or Territory, I am unable to grant that relief unless it is a remedy of the kind that this Court is able to grant in any event.
However, s 8 of the Contracts Review Act 1980 (NSW) gives the Court power to make "ancillary relief" in relation to "an application for a relief under this Act," which these proceedings provide. Schedule 1 provides that where the Court makes a decision or order under s 7, it may also make such orders "as may be just in the circumstances or with respect to any consequential or related matter" including orders for, among other items, "the making of any disposition of property" (Sch 1, cl 1(a)), and "such orders in connection with the proceedings as may be just in the circumstances."
"Disposition of property" is defined in cl 4 of Sch 1 as including a conveyance, transfer, assignment, appointment, settlement, mortgage, delivery, payment, lease, bailment, re‑conveyance or discharge of mortgage, a grant of power in respect of property, including release or surrender of any property "whether having effect at law or in equity." "Property" includes personal property as well as reality, and any caution of action for damages.
The terms of this legislation are wide enough for me to make such an order and, accordingly, pursuant to that legislation, I propose to make that order.

Assessment of damages

This brings me to the question of assessment of damages. The affidavit of Ms Bray sets out a formula for the calculation of damages in para 9, which arrives at a calculation of $1,300 as being the value of the goods still in the plaintiff's possession and also provides the information that the claim against the second defendant was settled for a sum of $2,500 inclusive of costs. However, the principal costs in these proceedings relate to the costs between the plaintiff and the first defendant. So the approach taken by the plaintiff's legal representatives of simply deducting this from the total sum claimed is, in my view, the best way to proceed.
The way in which the sum was calculated is as follows. The sum of $8,713 in the statement of claim is no longer claimed in that the settlement to the second defendant should be deducted leaving a total amount of $6,213. From this the estimated value of the goods at $1,300 must be deducted leaving a total of $4,913 plus interest, which I note has been calculated at $203.

Consideration of damages from the first defendant's point of view

These proceedings have been conducted in the absence of the first defendant. The first defendant being notified of the hearing and being called outside the Court on two occasions and has not appeared. The letter from the District Court Registry to the first defendant notifying the first defendant of these proceedings being listed today to commence at 9.30am in the District Court has been marked Exhibit B by me. It is clear proof that the first defendant was well aware of the hearing today.
In conducting this hearing I have also had regard to UCPR r 29.7; namely, the procedure to be followed by a party where one of the parties is absent. I have not only noted these matters in relation to the evidence that has been tendered, but I have used the provisions of UCPR r 29.7 as a guide to my obligations to the absent party.
First, I am satisfied that the party who is absent has knowledge or notice of the hearing date. I am satisfied that the party has been neither present nor represented when the matter was due to be heard in that the first defendant has been called outside the Court and failed to appear or to provide the Court with a credible explanation for non‑attendance.
Secondly, I have followed the procedure identified as appropriate in such circumstances by Barrett J in Satz v ACN 069 808 957 Pty Ltd [2010] NSWSC 365. I posed questions to the legal representatives of the plaintiff and generally taken all necessary steps to ensure that all relevant matters in relation to the application before me, which I note is for assessment hearing only, have been considered in favour of the missing party, including, in particular, issues of costs.
I have indicated that I am satisfied that the claim for $4,913 plus interest is made out.

Costs

This brings me to the question of costs. The first issue is that the amount claimed falls well below the threshold in UCPR r 42.35. However, there are strong reasons why I should, nevertheless, make a costs order. The history of these proceedings, the unusual nature of the plaintiff's vulnerability, the complexity of the legal issues (which I note include the requirement for me to consider the power to make a declaration as to ownership) and the circumstances of the case, including the manner of conduct of the case by the defendant are such that I am comfortably satisfied that these are proceedings which should have been commenced in this Court and which should be the subject of an order for costs.
Not only should these proceedings be the subject of an order for costs, but, in my view, having regard to s 98 Civil Procedure Act 2005 (NSW) and UCPR r 20.26, that those costs should be made on an indemnity basis.
Although no offer of compromise in terms was filed, the contents of the letter from Legal Aid dated 4 April 2017, which is an open offer of settlement, would clearly be sufficient. Given the extensive material set out carefully in that letter to the first defendant's solicitors, I am satisfied that it was not reasonable of the first defendant to reject that offer. It was open for a reasonable time. It was a fair and sensible offer having regard to the total amount owed by both defendants and compelling and cogent reasons are set out in a clear and concise fashion. Anyone receiving that letter ignored it at their peril.

A gross sum costs order

The next issue is if I am to make a costs order on an indemnity basis, whether I should make a gross sum costs order for the purposes of s 98 of the Civil Procedure Act 2005 (NSW). Section 98(4)(c) entitles the Court in certain circumstances to make an order for "a specified gross sum instead of assessed costs." It used to be the case that such costs orders were rare (Harrison v Schipp (2002) 54 NSWLR 738 at [21] ‑ [22]) and the rarity of these orders in other jurisdictions may be gleaned from the refusal of Dixon J to make such an order in Wilson v Bauer Media Pty Ltd [2018] VSC 161.
The particularly cautious response of courts to applications for gross sum costs orders has now changed. I note that the Federal Court of Australia Costs Practice Note (GPN-COSTS) at paragraph 4, now provides that gross sum costs orders are "[t]he Court's preference". Such orders have now come to be increasingly used in litigation of a very modest scope, and not merely in very large litigation of the kind described by Giles JA in Harrison v Schipp.
I am particularly assisted in this regard by the observations of Beazley P in Wilkie v Brown [2016] NSWCA 128 at [52]-[53], where her Honour considered these issues in relation to a very modest sum of $5,000 and made such a costs order in relation to a very modest amount of barrister's costs which had been the subject of an appeal.
The procedure to be followed is, first of all, to determine whether or not a gross sum costs order should be made. I can see many compelling reasons in this unusual litigation why that is the case. The second is to determine whether the Court can have "sufficient confidence" (Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 at [9]) to enable it to arrive at an appropriate sum on the material available.
The costs in question here could not be more reasonable. The costs claimed, totalling $3,577, are as follows: 1. Professional costs - $1,500; 2. Service fees - $209; 3. District Court filing fee - $668; 4. Professional costs of the assessment hearing - $1,200.
I consider that this would be a very modest sum for the amount of work involved in this quite complex litigation which has clearly been going on for close to two years, in that the statement of claim was filed on 31 July 2017 and prior to that there was a process of negotiation in the course of which solicitors became involved towards the end, that negotiation going back to 2015.
It is often the case where a gross sum costs order is made that a percentage is deducted to allow for the vicissitudes of costs assessment: see, for example, Hamod v State of New South Wales (No 13) [2009] NSWSC 756. However, that is not an across‑the‑board rule, and there may well be circumstances where it is not appropriate to make such a deduction. That was certainly the view of Beazley P in Bechara v Bates.
Accordingly, I am of the view that given the circumstances of this case, the very moderate and reasonable amount sought and the careful and well‑presented evidence put before me by Ms Doran and Ms Bray, that it is appropriate that no deduction at all should be made and that a gross sum costs order for the full sum sought, namely, $3,577 should be made.

Orders

Accordingly, the orders I propose to make are as follows: 1. Note the first defendant was called outside three times at 9:53am - No appearance. 2. Note the first defendant was called outside three times at 10:40am - No appearance. 3. Judgment for the plaintiff against the first defendant for the sum $4,913, plus costs in a gross sum $3,577 plus pre-judgment interest $203, totalling $8,693. 4. Pursuant to s 8 Contracts Review Act 1980 (NSW), a declaration that the plaintiff has title to the goods in contracts 1 and 2 exclusive of any interest or right of the first and/or second defendants.

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: 18 July 2018

National Credit Code Uniform Civil Procedure Rules 2005(NSW)

(NSW), the National Consumer Credit Protection Act 2009(Cth)

KTD v Indoz Investments Pty Ltd

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