Magistrates - Appeals and review - Tasmania - Dispute as to construction of offer of compromise in civil claim and consequences of acceptance of it - Jurisdiction of magistrate to resolve issue.

Magistrates Court (Civil Division) Rules 1998 (Tas), rr4, 5, 31, 32, 89 and 91.

PROFESSIONAL HEALTH PARTNERS PTY LTD v HELEN GILMORE SPIERS and ANDREW GLEN SPIERS and SPIZBIZ PTY LTD

1 On 12 June 2007, the appellant (referred to in these reasons as "the claimant"), filed a claim in the civil division of the Magistrates Court against the three respondents (referred to in these reasons as defendants). There is no dispute the third defendant is a company and that, at all material times, the first and second defendants were directors of that company.

2 The claim disclosed no cause of action against the third defendant.

3 On 17 December 2007, an offer of compromise was filed on behalf of "The Defendants". The same practitioner acted for all defendants. The offer affected the position of all defendants in the proceedings. Contrary to the view expressed by the learned magistrate, whose decision is sought to be appealed, there is nothing in my view to indicate that the offer of compromise was not filed on behalf of all defendants.

"TAKE NOTICE that the First and Second named Defendants offer the sum of Five thousand dollars ($5,000.00) together with costs to be agreed or taxed in full and final settlement of the Claimant's claim to the Claimant in this action.

The amount stated does not include an amount in respect of costs.

This Offer is subject to the following conditions:

1 That the Claimant discontinue any claim, action, suit or demand against the Third named Defendant, Spizbiz Pty Ltd, relating to the matters referred to in the Action B07 60042.

5 Thereafter, the solicitors for the parties entered into an exchange of correspondence for the purpose of agreeing the terms of a consent order to be filed with the Magistrates Court to give effect to what was perceived to be the settlement of the action. The solicitors for the claimant prepared a consent memorandum which they forwarded to the solicitors for the defendants. The first clause in the memorandum provided:

"Judgment be entered for the Claimant against the First and Second Named Defendants for the sum of $5,000 together with costs to be agreed or taxed."

The second clause in the memorandum provided as follows:

"The Claimant discontinue the claim against the Third Named Defendant with no order as to costs."

6 The solicitors for the defendants amended the second clause by hand and returned the memorandum to the solicitors for the claimant. They deleted the words "with no order as to costs" and inserted in their place the words "and the Claimant pay the costs of the Third Defendant to be agreed or taxed." In a covering letter returning that amended memorandum to the solicitors for the claimant, the solicitors for the defendants relevantly said:

"We have amended the Consent Order to reflect the end result of your client's acceptance of the Offer of Discontinuance. Pursuant to Rule 32(2) your client having discontinued against our client, your client should pay costs of the action against the Company. If you do not agree with what is proposed in the Consent Memo, please let us know. If the Consent Memo is signed by you, please confirm having filed it with the court."

7 The solicitors for the claimant responded, advising the solicitors for the defendants that the consent memorandum should be exactly as set out in the offer of compromise. They enclosed a further consent memorandum. The first clause was the same as that in the previous proposed memorandum. As to the second clause, it read as follows:

"The Claimant discontinue any claim, action, suit or demand against the Third Named Defendant relating to the matters referred to in the action B07/60042."

8 On 6 February 2008, the solicitors for the claimant wrote again to the solicitors for the defendants. They advised as follows:

"The Consent Order should be entered in the terms of the Offer of Compromise. If at law that gives you a right to costs then you should simply prepare and file your Bill of Costs pursuant to the relevant rules. There is no need for it to be stated in the Consent Order."

9 At the point in time when the above letter was written, it would have been obvious to the solicitors for the claimant that the solicitors for the defendants viewed the settlement achieved as one involving an obligation upon the claimant to discontinue against the third defendant, with a consequent entitlement of the third defendant to have its costs. Nevertheless, the solicitors for the claimant did not, at that point, raise the possibility that the offer of compromise and its acceptance may have been construed differently. Instead, on 26 February 2008, the solicitors for the claimant wrote again to the solicitors for the defendants advising that, after careful consideration of the relevant court rules, they had entered judgment pursuant to r91. That judgment was in the following terms:

1 The First Named Defendant and the Second Named Defendant pay to the Claimant the sum of $5,000,00 together with costs to be agreed or taxed.

2 The Claimant discontinue any claim, action, suit or demand against the Third Named Defendant, Spizbiz Pty Ltd, relating to the matters referred to in the Action B07 60042."

10 A taxation of costs then occurred. The solicitors for the defendants had filed a bill of costs on behalf of the third named defendant in the belief that the Magistrates Court (Civil Division) Rules 1998 ("the Rules"), r32, applied. At taxation, the claimant objected to the payment of those costs. The solicitors for the third named defendant in those circumstances filed an application with the court which was ultimately dealt with by a magistrate. By that application, the third defendant sought an order in the following terms:

"The Third Named Defendant applies for an Order that pursuant to Rule 32(2) of the Magistrates Court (Civil Division) Rules 1998 and the Rules generally that an Order be made that the Claimant having discontinued the action against the Third Named Defendant, the Third Named Defendant is entitled to the Third Named defendant's costs of and incidental to the action to be taxed or agreed and paid by the Plaintiff."

11 The learned magistrate delivered a decision in relation to the application on 15 December 2008. He found in favour of the third defendant and ordered the claimant to pay the third defendant's costs. The learned magistrate determined that, by the entry of judgment in the action in the terms it was entered, the claimant had discontinued the action against the third defendant and that, as a consequence of the operation of r32, the third defendant was entitled to its costs of the action against the claimant. He went on to say that, even if there were a discretion as to costs, he would not have departed from the general rule that costs follow the event.

12 It is from that decision that the claimant now appeals. The sole ground of appeal is that the learned magistrate erred in finding that the claimant discontinued its action against the third named defendant and that the third named defendant was, as a consequence, entitled to an order for costs.

13 The Rules, r32, provides for the discontinuance of an action. It provides that a party may discontinue an action commenced by that party at any stage of the proceedings by notice in writing filed and served on any other party. It goes on to provide that, unless the parties otherwise agree, the costs of the action are to be paid by the party discontinuing. Rule 31 provides for the abandonment of a claim. It permits a claimant to abandon any part of a claim at any stage of proceedings and prevents that claimant from pursuing a separate claim in respect of the aspect of the matter abandoned.

14 Rule 89 deals with offers of compromise. Rule 89(2), (3), (4) and (5) provide:

"89 Offer of compromise

(1) ...

(2) The offer may be made subject to any specified condition.

(3) The offer may relate to liability, quantum, matters in issue in the action or any order, remedy or relief sought.

(4) An offer of compromise is to specify -

(a) whether the offer includes costs and interest; or

(b) the amount offered for costs and interest up to the date of the offer.

(5) If the offer does not comply with subrule (4) -

(a) the offer is taken to refer only to the sum of money claimed in the action; and

(b) the party accepting the offer may apply for costs and interest in addition to the sum of money comprised in the offer."

15 Rule 91 provides for the acceptance of an offer of compromise. It provides that a party may file and serve a judgment in the terms of an accepted offer of compromise.

16 Other relevant rules are rr4 and 5, which provide:

"4 Conduct of Court proceedings

Proceedings in the Court are to be conducted -

(b) in a manner that ensures, as far as is practicable, that the parties are on an equal footing; and

(i) the amount of any claim; and

(ii) the importance or complexity of the action; and

(iii) the financial positions of the parties.

5 Order to give effect to rules

If the Court determines that the justice of the case so requires, the Court may make an order or do any other thing necessary or expedient to give proper effect to these rules or the Act."

17 Much of the dispute between the parties arises from their differing contentions as to the construction of the offer of compromise. The claimant's submission is that the settlement evidenced by the offer of compromise, its acceptance and the consequent judgment, did not place any obligation upon the claimant to discontinue the relevant proceedings as against the third defendant, nor did the filing of the judgment act as a notice of discontinuance in writing such as to activate r32. Counsel submitted that r32 had no application to this matter at all and that, even if it had, the learned magistrate had no jurisdiction to entertain the application that he did. The offer of compromise, he maintained, was wider than a mere settlement of the action. Therefore the term "discontinue" in the offer must simply mean that the claimant was not to pursue any demand relating to the matters referred to in the action against the third defendant, and did not oblige the claimant to file a notice of discontinuance.

18 A further contention was that the offer did not state that the third defendant sought to recover its costs from the claimant. Had the third defendant intended that to be the case, it could have made provision accordingly. Counsel submitted the defendants prepared the offer and had full control over its terms. It was appropriate in those circumstances to consider that fact when construing the terms of an offer which were ambiguous and uncertain. In making this submission, counsel relied on the comments of Evans J in Heather v Vita Pacific Ltd [1999] TASSC 17 at par6. Evans J said:

"The terms of the agreement which resulted from the plaintiff's acceptance of the offer were not negotiated, they were the terms stipulated by the defendant. In such a situation it is not unreasonable to construe an ambiguity in the agreement against the party who had complete control over its terms."

19 Counsel for the third defendant contended that the offer, its acceptance and the judgment, placed an obligation on the claimant to discontinue the action against the third defendant. It was evidenced by the judgment, and therefore r32 applied. Hence, the learned magistrate was correct.

20 With respect to the submissions of counsel for the claimant, in my view there is no ambiguity or uncertainty in the terms of the offer of compromise read as a whole. It is clear, particularly having regard to the lack of any properly pleaded cause of action against the third defendant, that the offer made was that the first and second defendants would pay the claimant $5,000, plus its costs, on condition that it discontinued the action against the third defendant. Given their connection to the third defendant, and given all defendants had the same solicitor, it is unlikely that the first and second defendants would, by an offer, seek to end the proceedings against themselves but not the third defendant. The term in the offer was "discontinue", a term which has a particular meaning in the context of court proceedings. The offer did not say that the claimant was to release the third defendant from any claims it might have against it. The requirement was that the claimant "discontinue". That is clearly how the offer should be construed.

21 The learned magistrate took the view that the filing of the judgment by the claimant constituted a notice of discontinuance for the purpose of r32. The rule does not require that a particular form of notice be filed. It simply requires that a party may discontinue by filing and serving a notice in writing to that effect. It was open, in those circumstances, to the learned magistrate to form the view that the filing of a judgment which provided for discontinuance was such a notice.

22 Counsel for the claimant submitted, however, that it is irrelevant to the question of the learned magistrate's jurisdiction to hear and determine the application he did, whether the judgment constitutes a notice of discontinuance or the claimant is in breach of the judgment by failing to file one. In either event, he says, the learned magistrate had no jurisdiction to make an order for costs as he did.

23 I accept that, if the judgment constituted a notice of discontinuance, r32 applied. In those circumstances, no application for costs was necessary. The third defendant's bill of costs needed simply to be filed for the purpose of taxation. If the registrar on taxation ruled that the third defendant was not entitled to have its costs taxed by reference to r32, then the third defendant could have sought a review of the registrar's ruling by a magistrate. The evidence before me does not permit me to find precisely what happened at the taxation, although it may be inferred the matter did not proceed to there being any ruling. The application to the learned magistrate was, in any event, not an application to review a ruling of a registrar at a taxation.

Did the learned magistrate have jurisdiction to deal with the application before him?

24 Counsel for the claimant suggested that the alternative to a review of a registrar's ruling on taxation would have been for the third defendant to seek a declaration as to the effect of the judgment. His submission was that the third defendant did not seek such a declaration by its application filed on 8 April 2008. He submitted, therefore, that, on the face of it, the learned magistrate was without jurisdiction to entertain the application that he did. Lack of jurisdiction was not a ground of appeal, although the issue was argued before the learned magistrate and in this Court, without objection from counsel for the third defendant.

25 Counsel for the claimant characterised the third defendant's application as an application that "the Plaintiff pay the Third Defendant's costs". Reading the application literally, the third defendant did not ask the court to order the claimant to pay its costs. The order that it sought was an order that "the Claimant having discontinued the action against the Third Named Defendant, the Third Named Defendant is entitled to the Third Named Defendant's costs of and incidental to the action to be taxed or agreed and paid by the Plaintiff."

26 It must be accepted that the order that the learned magistrate ultimately made was not in the form of a declaration of entitlement as to costs, but in the form of an order that the claimant pay the third named defendant's costs. He made such an order consequent upon identifying for himself what the issues were, and finding in favour of the third defendant as to those issues. However, the third defendant by its application, although the word "declaration" did not appear there, did seek an order that in given circumstances it was entitled to a particular outcome. It was, in my view, open to the learned magistrate to consider it as an application for a declaration, which, I infer from the submissions of counsel for the claimant, it is conceded the learned magistrate had power to deal with.

How therefore should this appeal be disposed of?

27 The Magistrates Court (Civil Division) Act 1992, s28, provides that this Court, on an appeal, may make such orders as are appropriate in the circumstances. The claimant seeks an order that the appeal be allowed, the decision of the learned magistrate be quashed, the application of the third defendant filed 8 April 2008 be dismissed, and a consequential order for costs made. The practical effect of such orders would be that the parties would be back where they were prior to the application of the third defendant to the learned magistrate, and the third defendant, if it wished to pursue the matter further, would have to take further steps before a taxing officer and/or a magistrate to achieve the result that it wanted. Obviously that would not be a palatable outcome for the third defendant. It simply seeks that I dismiss this appeal and allow the order of the learned magistrate to stand.

28 The Supreme Court Rules 2000, r693, deals with the powers of the Court in appeals of this nature. Rule 693(7) and (8) provide:

"(7) The Court or judge may make any order with respect to an appeal from an inferior court which may be just for the purpose of ensuring the determination of the merits of the real question in controversy between the parties.

(8) Subject to section 47(1) of the Act, the Court or judge, on hearing an appeal from an inferior court, may -

(a) give or make any judgment the Court or judge considers should have been given or made by the inferior court; and

(b) set aside, reverse, alter or vary any judgment given or made by the inferior court; and

(c) make any other order the Court or judge considers appropriate."

29 The real question in controversy between the parties, following the wording of the rule set out above, is the construction of the offer of compromise and consequent judgment, and the consequences which flow. I have made a finding as to the construction of the offer of compromise. It accords with that of the learned magistrate.

30 The learned magistrate thereafter found that the entry of the judgment by the claimant constituted the filing of a written notice in accordance with r32. If he is correct as to that, and it should be noted that neither party addressed in any detail that finding, then r32 applied automatically without any order. The only further steps then open to the third defendant, in the event of a dispute as to the claimant's obligation to pay costs, were an application to review any taxation ruling, or an application for a declaration as to its entitlement to costs.

31 On the other hand, if the learned magistrate is wrong as to his finding that the filing of the judgment constitutes a discontinuance, then that leaves the claimant, given the manner in which I have construed the offer of compromise, with an obligation to file a notice of discontinuance which it may or may not choose to comply with. If it does, r32 then applies. If it does not, further proceedings will no doubt follow.

32 The powers of this Court in relation to an appeal such as the present are, it would seem to me, quite broad and designed to ensure that where possible, proceedings are brought to an end. I have determined that the offer made required the claimant to discontinue the proceedings against the third defendant. I have found that it was open to the learned magistrate to find the filing of the judgment constituted that discontinuance. As to the third defendant's application, by that application, the issue sought to be agitated was whether or not r32 applied such as to entitle it to costs. While the wording of the learned magistrate's order was framed as an order for costs, it was consequent upon his findings as to the third defendant's legal position. Had the learned magistrate said that he declared the third defendant was entitled to its costs, there could have been no challenge to his jurisdiction to do so. Against that background, since it is within the power of this Court to resolve the real question in controversy between the parties, I take the view it should do so.

33 The order of this Court is that the order of the learned magistrate made 15 December 2008 as set out in the last paragraph of his reasons delivered that day, is set aside and in its place there is a declaration that, the claimant having discontinued action number B07/60042 against the third named defendant, the third named defendant is entitled to its costs of the proceedings against the claimant by virtue of r32.

34 Insofar as this does not dispose of the appeal, it is dismissed.