Murdaca & Anor v Maisano & Anor [2004] VSCA 123

Court of Appeal (Vic)|2004-07-22|Before: CALLAWAY, BUCHANAN and NETTLE, JJ.A.

Misleading and deceptive conduct - Representation with respect to future matters - Whether judge mistook evidence - Whether evidence capable of establishing reasonable grounds for representation - Whether evidence established item of damages relating to superannuation - Whether open to judge to award solicitor/client costs - Trade Practices Act 1974, s.51A(2) - Fair Trading Act 1985, s.10A(2) - Fair Trading Act 1999, s.4(2).

"The learned judge erred in allowing an amount of $23,558.00 in respect of superannuation given that an amount of no more than $3,000.00 was identified in the evidence as referable to the respondents' (plaintiffs') Malvern employees."

The appellants' outline of submissions in relation to that ground began by pointing out that no claim for superannuation was made in the amended statement of claim, but it is apparent that the case was not conducted on the pleadings and the outline went on to concede that the evidence substantiated an amount of $3,000 relating to the Malvern franchise. I agree with Nettle, J.A. that the evidence did not establish the balance and that, accordingly, the judgment sum of $79,083.42 should be reduced by $20,558.

As Nettle, J.A. explains, leave to appeal against the costs order is not required, because s.74 of the County Court Act 1958 contains no equivalent of s.17A(1)(b) of the

Supreme Court Act 1986. As no specific error is alleged, the question is whether there were grounds on which the judge could reasonably order solicitor/client costs. [3] In my opinion, it was within his Honour's discretion to do so having regard to the failure to discover material documents, his assessment of the first appellant in the witness box and the changing defences which resulted in the case being run twice.

I have had the advantage of reading the draft reasons for judgment prepared by Callaway and Nettle, JJ.A. I agree with them that no error attends the conclusion of the trial judge that the appellants had no reasonable grounds for the representation that the respondents as operators of the Malvern business would become accredited AAMI repairers. I do not think that the trial judge treated the letter dated 14 November 1997 as if it contained information known to the first-named appellant when he made the representation in October 1997. I am also of the view that, in the light of the evidence described by Nettle, J.A, the appellants did not establish reasonable grounds for making the representation. Like Callaway, J.A. I would leave for another day the resolution of the question whether s.51A(2) of the Trade Practices Act 1974 reverses the legal burden of proof or imposes only an evidential burden.

I agree that the amount of the judgment should be varied as Nettle, J.A. proposes. I also agree that the exercise of the trial judge's discretion as to costs was not shown to have miscarried.

This is an appeal from a judgment of a Judge of the County Court given on 16 October 2002. The respondents' case below was that they had suffered loss and damage in connection with a "Bodycorp" franchise for the conduct of a panel

beating business at premises in Malvern Road, Glen Iris (called the "Malvern business"). The case was pleaded pursuant to s. 82 of the Trade Practices Act 1974 and in contract but the claim in contract was not pursued. The claim pursuant to s. 82 was that the respondents had suffered loss and damage by acting in reliance upon misleading representations made by the first appellant on behalf of the second appellant concerning the Malvern business. His Honour held that the respondents had indeed suffered loss and damage by reason of the appellants' misleading and deceptive conduct and he awarded the respondents $79,083.42 in damages with interest of $17,145.50.

By Amended Notice of Appeal dated 30 January 2003 the appellants advanced 18 grounds of appeal in support of a contention that his Honour's judgment and reasons for judgment were wrong in law and against the evidence and the weight of the evidence. Happily, most of those grounds were abandoned in the course of argument. Apart from one matter concerning the quantification of damages, to which I shall come later, and a question of costs, the appellants' argument on appeal was confined to a proposition that the Judge erred by treating the contents of a letter of 14 November 1997 as if it were information known to the appellants in the second week of October 1997 and, as a result, in holding that representations alleged to have been made by the first appellant in the second week of October 1997 were made at a time "when Mr Murdaca must have known that the prospects of the promises he made being fulfilled were not open at all in the foreseeable future".

It is convenient to begin by setting out the substance of the allegations made in the respondents' amended Statement of Claim. They were that:

* In or about the second week of October 1997 the appellants represented to the respondents that "the second [appellant] would secure for the [respondents] as the operator of the Malvern business `insurance company repair work' and `insurance company recommendations' from `AAMI', "CIC Insurance', `Royal Sun Alliance Insurance' and `Allstates Insurance' and a sign stating that the Malvern business was an accredited AAMI repairer". * Induced by and in reliance upon the representation, "in or about the third week of October 1997, the [respondents] ...entered into an agreement with the second [appellant] pursuant to which the [appellants] agreed to take over and conduct the Malvern business". * The representation was misleading or deceptive in that the second Appellant "failed to ensure that as the operators of the Malvern business, the [respondents] had the benefit of...a sign stating that the Malvern business was an accredited AAMI repairer" and that "at the time of making the representation "the [appellants] did not have reasonable grounds for making that representation". * By reason of the misleading and deceptive conduct the Respondents had suffered loss and damage constituted of amounts spent in fitting out the premises and trading losses incurred until they abandoned the business.

It also aids understanding to set out something of the Judge's reasons for judgment. His Honour began with findings that the representation had been made and relied upon and then turned to consider the question of whether the representation was misleading. His Honour said:

"If we turn to pp 85 and 86 of the defendant's court book...one will find first of all a letter dated 7 November 1997 addressed to ...AAMI, and signed by Mr Ian Rogers with a copy distributed to Mr Robert Belville who had responsibility of being manager operations for Australia with AAMI. These documents to my mind are at the very core of this dispute and so I will read them in full bearing in mind that they are quite short. The first of them at p.85 addressed to Mr Oswald reads: `Dear Phillip, re Bodycorp Malvern Accident Repair Centre. I am writing to officially advise you that Bodycorp has taken over a smash repair facility, 1439 Malvern Road, Glen Iris, which is formerly known as Malvern Body Works. This business is owned by Bodycorp Repairers Pty Ltd and is leased to Michael Mason ( the Judge interpolated that that was a reference to Mr Maisano) who is the current owner and operator of Bodycorp Moorabbin Accident Repair Centre. The new business is called Bodycorp Malvern Accident Repair Centre. Michael Mason will be involved in the running of both businesses. We are currently in the process of refurbishing the premises to take it to Bodycorp's standards. It will be ready to operated as from 17 November 1997. It will operate with new staff. AAMI is aware of the location of this business and has previously used this site both for a recommended repair (sic) and, we understand, for an on-trial repairer... We would be pleased to discuss this request further with you and/or to complete the necessary paperwork. We await your reply. Yours sincerely, Ian Rogers.' That letter to my mind establishes beyond a peradventure that at the time of writing the workshop in question was not the site of a recommended repairer from AAMI and...[c]ertain it is though that an effort was being made to obtain the recommendation which had been represented to be one which would be operative to cover the running of the business in the interests of Mr Maisano and Mr Attard. If the matter stopped there it would not in my view be unreasonable to suppose that the expectation of Mr Murdaca in the interests of Bodycorp Repairers Pty Ltd expected, based upon previous experience, that no trouble would be likely to be encountered in obtaining the recommendation when and if the premises were brought up to the standards of equipment and space and size which would be required to obtain the approval of AAMI which had in the past issued recommendations upon satisfaction in individual cases that the standards that they required would be met. But the matter didn't stop there. There was a response to Mr Rogers from Mr Oswald which was dated 14 November 1997...It reads as follows: `Addressed to Mr Ian Rogers, general manager, Bodycorp Repairers Pty Ltd, Thompson Street, South Melbourne. Dear Ian, re Bodycorp Malvern Accident Repair Centre; thank you for your letter of 7 November 1997 advising that Bodycorp now owns the business which was formerly known as Malvern Body Works. For reasons recently explained to you by Robert Belville AAMI will not be adding repairers to our existing recommended repairer panel until further notice. However, we appreciate your interest in requesting that Malvern Accident Repair Centre becomes and AAMI recommended repairer. Yours sincerely, Phillip Oswald, state manager, Victoria.' ...It could not in my view be made clearer than Mr Oswald made it that no recommendation would be forthcoming in the foreseeable future in respect of the repair works carried out at the Body Works in question and nobody who read that letter would, in my view be, be reasonably capable of misinterpreting that as being the construction which is to be placed upon that letter. Any representations to the effect that recommended repair status would be obtained for that repair shop in the foreseeable future would be quite unfounded. It is my view that those documents compel the construction that AAMI was not about to grant recommended repair work status to the works at the corner of Malvern Road (sic) and anyone who said that an application was in the works and was going to be processed favourably would be telling lies."

His Honour next went on to observe that the letters of 7 and 14 November 1997 had not been discovered by the appellants and had only come to light as the result of a subpoena served by the respondents on AAMI, and his Honour continued:

"This serious duplicity leads one to doubt what Mr Murdaca says concerning this transaction unless independent corroborative evidence is available to support what he says."

Thereafter his Honour noted that for most of the trial the appellants' defence was that the alleged misleading representation about obtaining an AAMI sign was not made,[4] but that when it had come time for final addresses counsel for the appellants was relieved of responsibility and replaced by other counsel, and that they were permitted[5] to advance a defence that if the representation had been made there were reasonable grounds for making it. Evidently, his Honour was not persuaded by the change of tack. His Honour concluded:

"I find, however, at the end of the day, and having reviewed all of the evidence and the submissions which have been made, that the plaintiff's case here in my view is made out. I am of the view that Mr Maisano and Mr Attard were misled. It is my view that the misleading statements were made at a time when Mr Murdaca must have known that the prospect of the promises he made being fulfilled were not open at all in the foreseeable future, and he induced Mr Maisano and Mr Attard to enter into the obligations concerned in the agreement concerning the running of the shop which was on a basis which was impossible to fulfil, certainly for the future as far as it could be foreseen at the time that the representations were made. This, in my view, justifies a finding that the plaintiff is entitled, in accordance with the claims made, to the compensation by way of damages which is sought..."

Now, to return to the appellants' argument. As I understood it, it proceeded by the following steps:

First, that the Judge's observation about what would not have been "unreasonable to suppose" if the matter had stopped with the letter of 7 November 1997 was tantamount to a positive finding that Mr Murdaca had an expectation based upon previous experience that it was unlikely that trouble would be encountered in obtaining AAMI accredited repairer status when and if the Malvern business premises were brought up to standard.

Secondly, that such a finding would have been sufficient without more to establish the existence of the defence that the appellants had reasonable grounds for making the representation.

Thirdly, that the Judge was wrongly deflected from deciding the case on that basis by erroneously treating the information contained in the letter of 14 November 1997 as if it were information known to Mr Murdaca at the time of making the representation in the second week of October 1997 (as opposed to information of which Mr Murdaca had no knowledge until receipt of the letter of 14 November 1997, some three weeks after making the representation).

Fourthly, that the Judge erred in that fashion is manifest in the Judge's observation that "anyone who said that an application was in the works and was going to be processed favourably would be telling lies", and in his Honour's characterisation of Mr Murdaca's conduct as "serious duplicity", and in his Honour's final conclusion that "Mr Murdaca must have known that the prospects of the promises being fulfilled would not be open at all in the foreseeable future".

In my opinion the appellants' argument breaks down at several levels. To begin with I do not consider that it is permissible to treat his Honour's observation as to what it might not have been unreasonable to suppose as if it were a positive finding of fact. More specifically, I do not consider that it is permissible to treat an observation as to what might have been in different circumstances as if it were a finding of fact made in those circumstances. Whatever his Honour might have supposed if the circumstances had been different to what he perceived them to be is not what his Honour found in the circumstances as he perceived them to be. His Honour's perception was that matters did not stop with the letter of 7 November 1997 and one can only speculate as to the inference which he might have been drawn if his perception had been that matters did stop with the letter of 7 November 1997.

Next, and assuming for argument's sake that his Honour did make a positive finding of fact in the terms contended for, I do not consider that such a finding would have been enough of itself to establish that there were reasonable grounds for the representation that AAMI would accredit the Malvern Business as an AAMI approved repairer. To say that Mr Murdaca had a perception that problems were not likely to be encountered is not the same thing as saying that there were reasonable grounds for Mr Murdaca to represent that accreditation would be forthcoming. It would depend among other things upon the breadth and quality of Mr Murdaca's previous experience and the frequency with which applications for approval had been granted or rejected in the course of that experience[6].

In the course of argument counsel for the appellants referred to the following passage of evidence given by Mr Murdaca as support for the existence of reasonable grounds:

"...Why would he write that (the letter of 7 November 1997) if nothing was said?---Your Honour, I would say that because we requested the same for Moorabbin and we got it, and all our other franchises and we got it. With this particular store, the reasons being due to the litigation going on at the moment, they would have reneged on giving any more signs. For that reason, they haven't given signs out to anybody."

It was submitted that that evidence demonstrated that Mr Murdaca had had an amount of successful experience in obtaining accreditation and that arguably if not certainly there was sufficient in that experience to establish reasonable grounds.

That submission is not persuasive. I repeat that the question of whether previous experience constitutes reasonable grounds for prediction is as much dependent upon the quality of experience as it is upon its frequency. Here there was nothing to show that the shops which had been successful were sufficiently similar to the Malvern business reasonably to conclude that the Malvern business would be successful, and nothing was said as to why Mr Murdaca had not foreseen that the litigation which he said was going on would affect the chances of success.

Next, and perhaps most importantly, I am not persuaded that the Judge did treat the letter of 14 November 1997 as if it had been received by Mr Murdaca before making the misrepresentation in the second week of October 1997. The reference to "telling lies" is unfortunate. It was unnecessary and it opened up the possibility for argument that his Honour may have overlooked that the letter was not received until after the representation was made. But given the experience of the Judge and the obviousness of such a mistake, I think it unlikely that his Honour would have fallen into error of that kind. I am strengthened in that view by the fact that his Honour's reference to "telling lies" was followed immediately by reasoning as to why it was appropriate to "doubt what Mr Murdaca says". If the Judge had determined on the basis of no more than the letter of 14 November 1997 that the representation as to AAMI accreditation was a lie, that would have been all the reasoning required to decide the case in favour of the respondents. Why then go on, as his Honour did, and assess Mr Murdaca's credibility based upon his "duplicity" in failing to discover relevant documents and upon the reasons which Mr Murdaca gave for that failure, or conclude, as his Honour did, that Mr Murdaca's evidence was not to be relied upon except where corroborated?

That brings me to the Judge's conclusion "that the misleading statements were made at a time when Mr Murdaca must have known that the prospects of the promises he made being fulfilled were not open in the foreseeable future..." (my emphasis). It may be conceded that the Judge's use of the word "must" is not inconsistent with the possibility of his Honour having concluded that Mr Murdaca received the letter of 14 November 1997 before making the misrepresentation in the second week of October 1997. But I regard that possibility as unlikely. As can be seen, his Honour's conclusion came at the end of a long passage of reasoning devoted to the unsuccessful attempts of new counsel to persuade his Honour that there were reasonable grounds for making the representation. Read in context, the emphatic "must" appears as intended to convey no more than that "having reviewed all of the evidence and submissions of counsel" (and not, be it noted, having regard only to the letter of 14 November 1997) the Judge was satisfied that Mr Murdaca knew enough of AAMI's intentions to know that there were negligible prospects of obtaining AAMI accreditation for the Malvern business within the foreseeable future.

That conclusion was plainly borne out by the facts. There was evidence that the representation was made. It was given by Mr Maisano as follows:

"Yes?---At one of the Bodycorp meetings, because we used to have monthly meetings, and he told me that he had secured another premises in Malvern, and he asked if I wanted to take on the second franchise, and I asked him at the meeting whereabouts the premises was, which he told me, and also I asked him if it had recommendation, because I had recommended repairer status at Moorabbin, and I asked him if Malvern had status and--- Why did you ask him that?---Well, without recommendation, I wouldn't have had-there's not work. So to go into a venture with no work wouldn't be worthwhile. So I asked him did it have any insurance work and recommendation, he said it didn't, but he said he had put the wheels in motion to secure recommendation and by the time that Bodycorp would be taking over, it would have a sign and all the principals (sic) in place like we had at Moorabbin and all his other shops would be the same for that one as well." (Emphasis added.)

There was also evidence that the representation was misleading, in the sense that it was not until some three weeks after making the representation in the second week of October 1997 that Bodycorp made an application to AAMI on 7 November 1997 for accreditation for the Malvern business. Thus, as the Judge said: "anyone who said that an application was in the works and was going to be processed favourably would be telling lies." Of course that was not the sense in which the respondents alleged that the representation was misleading. But it was relevant to an assessment of whether the representation was misleading in the sense alleged.

There was as well evidence that AAMI had already made corporate decisions not to appoint any further accredited repairers for the foreseeable future and not to appoint the Malvern business as an accredited repairer in any event. It was given by Mr Martin, who was the supply and development manager of AAMI, in the course of cross examination by counsel on behalf of the appellants, as follows:

"That the policy changed in about June or July of 98 and AAMI began putting other people on trial for recommended repairer status at any site in Victoria?---The policy - I don't know what you actually mean by about the policy. If I may, there certainly was a decision made from late 97, mid-97 or thereabout for a considerable amount of time not to put any repairers on whatsoever. The last repairer that was added to out Victorian panel was in early 1999, so there would have been - there may well have been a couple added towards the end of 1998, but I certainly can't remember, I really can't. But I know the last one, because it comes up often, the last one was added to out panel in early 1999... ... Has it (the Malvern business) subsequently been approved as a recommended repair workshop?---No, and it had not been for several years before Michael Maisano - (f)or at least 18 months or so before he was in there, there was a history with the shop where we had made a company decision, a corporate decision, not to use that shop in any event regardless of who was there. If I may, the last bit - since Debbie Holzer moved from there another fellow took over the shop and our position has been consistent with him as well. What was the reason for that aversion to this site when it was properly set up to do your work?---There were many shops set up capable of doing our work. We only have so much market share and we can only deal with a selected number of repairers, but the history with that particular shop, there was some financial issues with the predecessor and we certainly made a decision not to get involved with that shop because it involved some of the part suppliers of AAMI."

Mr Martin's evidence was corroborated by Mr Oswald, who was the technical services manager for AAMI, who said that at the time there was a moratorium on putting repairers onto the AAMI recommended repairer scheme.

Further evidence was given by Mr Belville, the chief executive officer of AAMI, also in cross examination on behalf of the appellants, that he knew of no arrangement between Bodycorp and AAMI for Bodycorp shops to be put on trial for accreditation:

"Was it the case that until that letter of 14 November was written, there had been an understanding with Bodycorp that repairers and sites that were brought to a particular standard and undertook to abide by the AAMI philosophy would be put on trial to receive a recommended retailer status if they lived up to it?---That wouldn't have been my understanding, not mine, but."

There was as well evidence that at the time of making the representation the appellants knew that the Malvern business had lost its AAMI approved repairer accreditation and that, if there were any cause for optimism, it rose no higher than that the "repair liaison manager" at AAMI had told Mr Murdaca that he might reconsider reallocating work to the Malvern business (note, not appoint the business as an accredited repairer) if the shop were brought up to standard. That evidence was given by Mr Murdaca, as follows:

" ...But that shop (the Malvern business) turned against AAMI doing third parties there for a while. But I looked at the shop, I contacted at the time Don Casbolt for AAMI, Darren Perriment. They made me aware that it had actually lost its accreditation. The needed that shop in that area but wouldn't deal with the current proprietors in there. I told them, `I'm interested in looking at it and possibly franchising it. Would I get support?' Basically, on the phone what Mr Perriment at the time said--- HIS HONOUR: Mr who?---Mr Darren Perriment from AAMI. Yes?---Was, `You'd really need to spruce the shop up so we could reconsider to reallocate work to that shop."

In the scheme of things Mr Perriment's prognostication as to what he might do about reallocating work was as good as worthless. According to the evidence, virtually every panel beating shop in Melbourne would undertake some AAMI work from time to time whether or not they were accredited. Mr Martin explained that in terms that as with any repair shop in Melbourne there is sometimes some AAMI work that goes to the Malvern business on a casual basis and that a subsequent owner of the Malvern business was given some work by AAMI on an overflow basis but that it was never intended that she be appointed an accredited repairer. But obtaining accreditation as an approved repairer was quite another thing. As Mr Attard explained, the great advantage of accreditation as opposed to casual or overflow work was that it allowed the repairer to quote all AAMI work within the repairer's area of operations and thus provided the repairer with a steady flow of work.

It may also to be doubted, and there is no question but that the Judge doubted, that Mr Perriment gave any sort of assurance to Mr Murdaca. The respondents called Mr Oswald and Mr Belville and Mr Martin as part of their case and there was no challenge made to their evidence that AAMI made a corporate decision in mid-1997 not to appoint any further accredited repairers for the time being. Nor, to begin with, was anything put to those witnesses in cross examination about any assurance having been given by Mr Perriment to Mr Murdaca. As the Appellants' case was opened it was not even suggested that Mr Murdaca expected that the Malvern business would be granted accreditation or assessed for accreditation. For most of the trial the appellants' case was simply that Mr Murdaca did not make any representation as to AAMI accreditation and that the only promise ever made was that "there would be the opportunity to quote work from various insurers that Bodycorp had access to." Mr Perriment was not even mentioned until Mr Murdaca gave evidence and it was at that point that counsel for the appellants was relieved of responsibility and replaced by new counsel.

Clearly enough, the new counsel persuaded the Judge that the AAMI witnesses should be recalled so that they might be cross examined on matters that had not been put to them to that point. But the Judge was not persuaded by the further cross examination. His Honour recorded that:

"The attempts made to present this case in a different light I allowed and I allowed counsel to reput the defendant's case to the various witnesses from AAMI and call further evidence. I must say that in my view those attempts made by Mr Hayes later accompanied by his junior counsel Mr Sandbach were done skilfully and with complete propriety but were unsuccessful." (Emphasis added.)

This Court was provided with a transcript of the further cross-examination and I have read it. But I was unable to discern anything of significance in it. So much doubt appears to have been put upon the credibility of Mr Murdaca's evidence by the change of tack in defence, and by Mr Murdaca's insouciance in shrugging off the appellants' failure to discover critically relevant documents, that the Judge came forcefully to the conclusion that Mr Murdaca's evidence should not be relied upon unless corroborated. It was not corroborated in respect of the making of the representation or the existence of reasonable grounds for its making by anything in the further cross examination

To this point I have referred to the evidence as supporting the conclusion that the Judge did not err in the fashion suggested by the appellants. I should also say that, even if the Judge had erred in the manner alleged, I do not consider that the error would have made any difference to the outcome of the appeal. The case below was fought and decided on the basis of s. 52 of the Trade Practices Act and, despite the defence first advanced that the alleged misrepresentation had not been made, I consider that the Judge was plainly entitled to be satisfied that it had been made. After the arrival of new counsel the case became one about whether there had been reasonable grounds for making the representation, as to which of course the burden of establishing the burden of proof lay upon the appellants[7]. It followed that unless the appellants adduced evidence sufficient to establish the existence of those grounds the appellants were bound to fail[8].

In my opinion the state of the evidence was such that the only conclusion to which the Judge could properly have come was that the existence of reasonable grounds was not made out. The highest that the appellants were able to put their case for reasonable grounds was upon the evidence given by Mr Murdaca about what he was told by Mr Perriment. For the reasons already expressed that evidence was neither persuasive nor particularly credible. Moreover, even if one puts to one side the doubts which the Judge expressed about Mr Murdaca's credibility, what Mr Perriment is alleged to have said did not suffice to establish reasonable grounds.

I turn to the appellants' minor grounds of appeal. The first (ground 11) was that the Judge erred in allowing a sum of $23,558 by way of damages in respect of superannuation outgoings alleged to have been paid in respect of the Malvern premises. The only evidence adduced in support of the claim for that expense was an entry in a cash book which Mr Maisano swore was used solely for business expenses of the Malvern business. He had no personal knowledge of the contents of the book. He was able only to say that:

"When was that written up and who writes it up? Who wrote it up?---It would have been commenced at the start of the time we went up to Malvern, commenced trading, and we had hired an office girl at the time, Lauren, who is at court today, Your Honour, and she was instructed by Moorabbin girl, because I had a separate girl there, how to identify it , and she wrote the book in."

That evidence was not sufficient to establish that the cash book was a business record for the purposes of s. 55(1)(b) of the Evidence Act 1958 or otherwise to prove that the $23, 558 or any of it was laid out on superannuation expenses incurred in the course of or as a consequence of the Malvern business operations. The respondents' accountant, Mr Brown, was called but he was unable to take the matter any further. The appellants conceded, however, in their written submissions that the evidence did establish expenditure on superannuation of $3,000. In my opinion the claim for the superannuation expense was not proved and it should not have been allowed, except in the sum of $3,000. The judgment should be reduced accordingly.

The second minor ground of appeal (Ground 13) was that the Judge erred in the exercise of discretion in awarding solicitor/client costs in favour of the respondents. Section 17A(1)(b) of the Supreme Court Act 1986 provides that an order as to costs which are in the discretion of a Judge of the Trial Division is not subject to an appeal to the Court of Appeal except by leave. The better view is that leave is required to appeal against such an order even where the appeal relates also to the merits[9]. Regrettably, the section does not apply to an appeal under s. 74 of the County Court Act 1958 [10] and so no leave is required. Even so I am unable to discern any appellable error in the Judge's exercise of discretion.

The application to the Judge for solicitor/client costs was put on the basis that the appellants had acted unmeritoriously in failing to discover the letters of 7 and 14 November 1997, and an application for indemnity costs was made in respect of the period after new counsel were briefed on the basis that the change of counsel and the restructuring of the appellants' defence was an expensive and unmeritorious waste of time. Both bases were open to be argued.

The Judge awarded solicitor/client costs in respect of both periods on the expressed basis that the appellants' defence of the claim was "not high minded and was unmeritorious" but it is apparent from a passage of the transcript which preceded his Honour's reasons that his Honour used the expression "high minded" in order to refer with a degree of levity to the typographical error which appears in [63.012.180] of Williams Supreme Court Practice. Jokes aside, there is no doubt that his Honour intended to and did pick up and apply the reasoning of Tadgell, J. in AGC v. DeJeager[11] that solicitor/client costs might be awarded to a successful party where the losing party's conduct of the case amounts to an unmeritorious and "high-handed presumption".

The meaning of "high-handed presumption" in that context was later considered by Woodward, J. in the much cited authority of Fountain Selected Meats (Sales) Pty Ltd v. International Produce Merchants Ltd[12]. As Woodward, J. put it, it is appropriate to consider awarding solicitor/client costs or indemnity costs whenever it appears that a party properly advised should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts or the clearly established laws.

The subject of indemnity costs has since received a good deal of consideration in a large number of cases[13]. It is, however, unnecessary and undesirable to say much of those cases here. After all the award of costs was an exercise in the discretion of the Judge and if an appeal against the award is to succeed it must be shown that his Honour erred in principle or had regard to extraneous considerations or failed to have regard to relevant considerations or that the decision which he made was not open to be made on the material which was before him. Nothing advanced in the course of argument persuades me that the Judge failed to have regard to proper principle or otherwise erred in the exercise of his discretion to award solicitor/client costs.

In the result, I would allow the appeal and vary the judgment the subject of appeal by reducing the amount of damages allowed by the sum of $20,558 in respect of superannuation outgoings (making for a new total of $58,525.42) and the interest awarded should be reduced accordingly.

[1] Trade Practices Act 1974, s.51A(2); Fair Trading Act 1985, s.10A(2). Both Acts were pleaded. Those sub-sections speak only of adducing evidence, but distinguished judges have understood them to reverse the legal burden of proof and that is how this appeal was argued. Accordingly what I have said in these reasons implies no opinion on the point, leaving it to be decided in a case where it is submitted that s.51A(2) imposes only an evidentiary burden. Section 10A(2) has been replaced by s.4(2) of the Fair Trading Act 1999, which unequivocally reverses the legal burden of proof. See and compare Futuretronics International Pty. Ltd. v. Gadzhis [1992] VicRp 63; [1992] 2 V.R. 217 at 239 line 16 - 240 line 40; Bowler v. Hilda Pty. Ltd. (1998) 80 F.C.R. 191 at 215D-F; King v. GIO Australia Holdings Ltd. [2001] FCA 308; (2001) 184 A.L.R. 98 at [33]; Australian Competition & Consumer Commission v. Universal Sports Challenge Ltd. [2002] F.C.A. 1276 at [46] and Cross on Evidence (looseleaf Australian ed.) at [7005]-[7015].

[2] See also his Honour's alternative ratio at [33]-[34].

[3] Etna v. Arif [1999] VSCA 99; [1999] 2 V.R. 353 at [67]- [68] and the cases there cited.

[5] Apparently without amendment to the defence.

[6] Cf. Cummings v. Lewis (1993) 41 F.C.R. 559 at pp. 567-568 and p. 581.

[8] Futuretronics International Pty Ltd v. Gadzhis [1992] VicRp 63; [1992] 2 V.R. 217 at pp. 237-241; Australian Competition & Consumer Commission v. Universal Sports Challenge [2002] F.C.A. 1276 at [46].

[9] Hanlon v. Brookes (1997) 15 A.C.L.C. 1626 at p. 1632; Etna v. Arif [1999] VSCA 99; [1999] 2 V.R. 353 at 378 [66].

[10] Gilmour Drafting Services Pty Ltd v. Bechtel Australia Pty Ltd [1999] VSCA 185 [25]; Williams, Supreme Court Practice at [190.100].

[13] Some of which some are digested at pars [63.02.200] et seq of Williams.

At a glance

Court

Decision date

Before

Source

Judgment (71 paragraphs)

Parties