Mears v Sydney Anglican Schools

EX TEMPORE Judgment 1On 17 May 2013, I delivered judgment with respect to an appeal which had been lodged by Mr and Mrs Mears against a judgment, and orders, of Favretto LCM in the Local Court on 31 May 2011 and 1 August 2011. 2For the reasons which I then expressed (Mears v Sydney Anglican Schools Corporation [2013] NSWSC 535), I ordered that the appeal by Mr and Mrs Mears to this Court be allowed. I made orders requiring the parties to consider what formal orders ought be made and fixing today for any debate about orders that could not be agreed. 3There is a large measure of agreement about a variety of orders which ought be made. However, the parties were not agreed on what orders should be made with respect to the proceedings in this Court including any order for costs, nor were they agreed on what orders should be made with respect to the costs of the Local Court proceedings. 4With respect to the proceedings in this Court, Senior Counsel for Mr and Mrs Mears submitted that, as the appeal was successful, costs should follow the event and an order should be made that the respondent to the appeal, the Sydney Anglican Schools Corporation, should be ordered to pay the plaintiffs' costs of the appeal. 5Counsel for the respondent submitted that the appropriate order would be one fashioned so that the costs of the appeal which Mr and Mrs Mears could recover should be limited to the filing fees and reasonable stationery costs and disbursements. 6Counsel for the respondent argued that, as is clear from the court record, a referral was made by the Court, pursuant to r 7.36 of the Uniform Civil Procedure Rules, of the plaintiffs to the Registrar so that they could obtain pro bono assistance. He submitted that his client's understanding, and the understanding of his client's legal representatives, was that that referral having been made and Senior Counsel's appearance having occurred pursuant to this Court's pro bono scheme, his client should not have to pay for Senior Counsel's appearance. 7It was conceded expressly by the respondent that there was nothing said or done by either Mr and Mrs Mears personally or by their Senior Counsel which induced in the respondent, and its legal advisers, a state of mind which suggested that the counsel appointed to act under the pro bono scheme was not entitled to be paid in circumstances where an order for costs would otherwise flow. 8Assuming - although this was not established by evidence - that such understanding, as described by counsel for the respondent existed, then I would conclude that it is a matter which is entirely irrelevant to the determination of the appropriate costs order. 9First, it is irrelevant because it is erroneous. Rule 7.41(2) of the UCPR is as follows: "If an order for costs is made in favour of a litigant who is assisted under the scheme, the barrister or solicitor who has provided the legal assistance is entitled to recover the amount of costs that another person is required to pay under the order." 10It is plain from sub-rule (1) of that rule that there is a prohibition on the recovery of costs for legal assistance provided to a litigant under the scheme. However, r 7.41(2) seems to me to provide an exception to that prohibition in circumstances where an order for costs is made in favour of a litigant. 11Second, I am also satisfied that the understanding is irrelevant since the understanding was formed by the respondent and its lawyers without any effect by Mr and Mrs Mears or their Senior Counsel. In other words, it was a unilateral understanding. 12In circumstances where a party forms such a unilateral understanding and relies upon it, it seems to me that that understanding cannot impact upon the interests of justice as between two parties or, alternatively, the interests of the party who is not responsible for forming that understanding. 13Rule 42.1 of the UCPR provides that: "If a Court makes any order as to costs, the Court is to order that the costs follow the event, unless it appears to the Court that some other order should be made as to the whole or any part of the costs." 14When the Court is engaged upon the exercise of discretion with respect to the ordering of costs, the guiding rule is what the interests of justice require. 15Prior to their appeal being heard and determined by this Court, Mr and Mrs Mears were, as I noted at [1], the subject of a judgment entered in the Local Court, together with other orders with respect to interest and costs. 16My judgment of 17 May 2013 upholds their appeal and I propose shortly to make orders that the judgment of Favretto LCM on 31 May 2011, and the orders of 1 August 2011, including the orders for costs in the Local Court, be set aside. 17Mr and Mrs Mears have been entirely successful in their appeal. They have undoubtedly incurred costs. Senior Counsel appeared for Mr and Mrs Mears and the respondent also retained Senior Counsel to appear for it and to put argument on the appeal. I can see no good reason why costs should not follow the event. Mr and Mrs Mears, as I have said, were successful. The proceedings were fully contested by the respondent. The respondent was unsuccessful. In those circumstances, the ordinary rules ought apply, and I am not persuaded that I should exercise my discretion to make any other order. 18In the Local Court, Mr and Mrs Mears were ordered to pay the corporation's costs for a period on an ordinary basis and for a period on an indemnity basis. As this judgment will show, I will shortly make an order to set aside those orders for costs because I am setting aside the whole of the judgment of Favretto LCM. 19However, a question arises as to whether it would be fair between the parties to make an order with respect to costs in the Local Court. 20Senior Counsel for Mr and Mrs Mears submits that the appropriate order would be to provide that the costs of the Local Court proceedings up to 13 October 2008 are to abide by any future determination made on a retrial of the substantive issues, but that the costs from 14 October 2008 through to and including 1 August 2011, ought be paid by the respondent. 21Counsel for the respondent submits that all costs in the Local Court should abide by the retrial; in other words, all costs orders should be left to a determination of the Magistrate or Judge who hears the substantive issues again. 22Senior Counsel for Mr and Mrs Mears submits that the basis for the orders which he seeks are that the respondent appears to have contributed, to a degree, to the errors which have brought about the decision in this Court to uphold the appeal. 23Specifically, Senior Counsel points to the fact that lawyers appearing for the respondent corporation did not draw Heilpern LCM's attention to matters of law, such as issue estoppel and res judicata, on 2 October 2008; nor did the lawyers for the respondent adequately inform Favretto LCM on 14 October 2008 about what had occurred earlier, and they did not undertake to refrain from raising in any subsequent proceedings any issues related to estoppel, res judicata, or similar defences. 24In short, Senior Counsel puts that the way in which the respondent conducted itself in the Local Court has significantly contributed to the outcome of the appeal. 25A question arises, when considering Senior Counsel's submissions, about what costs, if any, Mr and Mrs Mears have in fact incurred in the Local Court. After all, they appeared for themselves throughout, with the exception of one appearance by a lawyer on behalf of Mrs Mears to seek an adjournment and an amendment of some pleadings, and therefore whether an order of the kind sought by Mr and Mrs Mears ought be made on the basis it would have any real effect as between the parties. 26In opposing any order for the Local Court costs being made, counsel for the respondent submits that the errors in the Local Court which gave rise to an upholding of the appeal in this Court, centred upon a denial of procedural fairness which arose from a confusion between Heilpern LCM and Favretto LCM, the two Magistrates who heard the proceedings on 2 October 2008 and subsequently on 14 October 2008, and, as a consequence, he submitted, it would be "unfair and extremely prejudicial" to the respondent corporation for it to be ordered to pay costs from the Local Court. Counsel did not elucidate the content of this phrase. 27In my judgment on the appeal, I concluded that there was a denial of procedural fairness because, in the circumstances of what occurred, Mr and Mrs Mears were misled unwittingly by Heilpern LCM with respect to the status of their cross-claim and, further, that they ought to have been granted an adjournment by Favretto LCM on 14 October 2008 in the circumstances in which they found themselves. 28The details of that unfairness can be seen from the conclusion which I have expressed between [103] and [129] of my judgment of 17 May 2013. 29I am satisfied that the denial of procedural fairness was occasioned both by a degree of confusion between the two Magistrates as to what each intended, and the lack of clarity with respect to the orders about the crossclaim of Mr and Mrs Mears, and also as a consequence of the submissions which were put by the counsel for the respondent. 30The course, which the respondent contended for in the Local Court was, in effect, that there should be a separate hearing between the principal claim being made by the respondent and the matters set out in the cross-claim which were being made by Mr and Mrs Mears. However, as I have said in my earlier judgment, those matters were so intertwined and so interrelated that it was not possible for them to be heard separately without findings in respect of one part of such a hearing intruding into the other part of the hearing. 31It is clear that the respondent, in making submissions in the Local Court, contributed to the events that occurred. This was a circumstance where careful thought about the submissions which were put to the Court, and advertence to the legal issues which were ultimately raised, would have led a litigant acting in accordance with its obligation to the Court, under the Civil Procedure Act 2005, to have adopted a very different approach. 32It is not the purpose of a costs order to punish one party or another. Nor is it the purpose of a costs order to benefit unduly one party or another. Rather, the purpose of a costs order is to do justice between the parties. This necessarily reflects the vagaries of litigation, and the way in which parties conducted themselves in the course of and for the purposes of the litigation. 33I am satisfied that the respondent in the Local Court put submissions which it thought were in its best commercial interests. It sought, by advancing the submissions which it did, to ensure that it gained the judgment which it ultimately obtained and at the same time would not have that judgment, or the chance of obtaining it, diminished by the arguments which Mr and Mrs Mears sought to be put by way of disposition of their cross-claim. That is why it proceeded in the way it did. 34In other words, in seeking to advance its interests and in so doing, it accepted the ordinary risks and vagaries of litigation including, as occurred here, that in the circumstances, a denial of procedural fairness occurred. 35Accordingly, I am persuaded that in order to do justice between the parties, the parties ought to be put in the position that they were in, in effect, prior to the commencement of the final hearing in the Local Court. In order to do that, the respondent ought be ordered to pay the costs of Mr and Mrs Mears of what occurred from the 14 October 2008 onwards, until the judgment was delivered. 36Before concluding that that is the appropriate order, however, I need to consider the question of whether or not such an order would really have any effect between the parties in the sense that since Mr and Mrs Mears appeared for themselves, the costs which they incurred after 14 October 2008 are likely to be minimal. 37Whilst I am strongly attracted to that proposition, I do not have sufficient material before me to form a view whether the sum, which may be ultimately allowed for such costs, is of such a small amount as to warrant not exercising my discretion in accordance with the principles which I have enunciated. In those circumstances it is better to leave that ultimately to the costs assessment process, if the parties consider that undertaking such process would have any real effect. 38Accordingly, I have concluded that the orders which Senior Counsel for Mr and Mrs Mears contends for with respect to the Local Court ought to be made. I will make the following orders: (1) Appeal allowed; (2) Respondent to pay the appellant's costs of the proceeding in this court; (3) Dispense with the need for compliance with the Uniform Civil Procedure Rules, and grant leave to the appellants to move orally for orders with respect to the transfer of proceedings; (4) Order that pursuant to s 140(1) of the Civil Procedures Act 2005 that proceedings number 2007/308335 in the Local Court of New South Wales be, and hereby are, transferred to the Supreme Court; (5) Order that in those proceedings, the judgment entered on 1 August 2011 and each of the orders made on that day in the Local Court be set aside; (6) Order that the proceedings be reheard; (7) Order that the costs of the Local Court proceedings up to and including 13 October 2008 are to abide the determination of the judicial officer undertaking the rehearing; (8) Order that the costs of the appellants, if any, of the Local Court proceedings between 14 October 2008 and 1 August 2011 be paid by the respondent; (9) Order that the Registrar of the Supreme Court is to return to the appellants the sum paid into the Supreme Court by the appellants pursuant to order 5 of the orders made by Magistrate Favretto, dated 1 August 2011; (10) Order, pursuant to section 146(1) of the Civil Procedure Act 2005, that the whole of the Local Court proceedings which have been removed into this court be transferred to the District Court of New South Wales. This order is stayed until further order; (11) Pursuant to s 26 of the Civil Procedure Act, refer the whole of the proceedings in this court, including the Local Court proceedings, for mediation by a court appointed mediator. (12) Direct that the parties attend upon the Registrar of the court to obtain the earliest convenient date for such mediation; (13) Stand the proceedings over for further directions to 31 July 2013 at 9.30am so that the parties can report back with respect to the result of the mediation; (14) Order that there be liberty to apply on 48 hours' notice. (15) In the Local Court proceedings, for the avoidance of doubt, order that the cross-claim filed by Mr and Mrs Mears on 29 September 2008 be, and hereby is, reinstated.