Rose v Tunstall

Court of Appeal (NSW)|2018-10-09|Before: Basten JA, Payne JA, Lawrence J, Schmidt J

Solicitors: Lawrence J Myers (Applicant and Cross-Respondent) Vector Legal (Respondents and Cross-Applicants) File Number(s): 2018/00078057 Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Civil Citation: [2018] NSWSC 172 Date of Decision: 23 February 2018 Before: Schmidt J File Number(s): 2017/139138

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Headnote [This headnote is not to be read as part of the judgment] In 2015 the applicant commenced proceedings in the Local Court against the respondents, members of the executive committee of Boxing NSW Inc., a former incorporated association, claiming that they were liable under Associations Incorporation Act 1984 (NSW), s 38(1) for a costs order made against the association prior to the cancellation of its registration in 2010. In 2017 the proceedings were dismissed by a Magistrate. The applicant appealed to the Supreme Court on a question of law pursuant to Local Court Act 2007 (NSW), s 39(1). The primary judge found that the Magistrate had erred in law in failing to consider the operation of Associations Incorporation Act, s 38(1)(a)(ii). The primary judge, at the invitation of the parties, proceeded to make findings of fact in order to resolve both the s 38(1)(a)(ii) issue and the question of whether the respondents had established a defence under s 38(2), purportedly pursuant to Local Court Act, s 41(1) and Supreme Court Act 1970 (NSW), s 75A. The primary judge dismissed the appeal on the basis that the applicant had not established the matters the subject of Associations Incorporation Act, s 38(1)(a)(ii). The primary judge also overturned the Magistrate's finding that the respondents had established a defence under s 38(2). The applicant sought leave to appeal to this Court on the s 38(1)(a)(ii) issue. The respondents sought leave to cross-appeal to this Court on the s 38(2) issue. The issues in both applications were: (i) In an appeal on a question of law pursuant to Local Court Act 2007 (NSW), s 39(1), does the Supreme Court have the power to make findings of primary fact? (ii) Should leave to appeal and/or cross-appeal be granted in the circumstances of the case? The Court (Payne JA, Basten JA and Simpson AJA agreeing) held, refusing leave to appeal and leave to cross-appeal: In relation to issue (i), In an appeal under Local Court Act, s 39, when an error of law has been established the Supreme Court does not have the power to make findings of primary fact: [31] Local Court Act 2007 (NSW), s 39; Lesley-Swan v Owners SP 32735 [2013] NSWSC 1635, World Avenue Pty Ltd v Tsunashima [2013] NSWSC 502; B & L Linings Pty Ltd v Chief Commissioner of State Revenue (2009) 74 NSWLR 481; [2008] NSWCA 187; North Broken Hill Ltd v Tumes [1999] NSWCA 309; (1999) 18 NSWCCR 412, applied. Local Court Act 2007 (NSW), s 41(1); Supreme Court Act 1970 (NSW), s 75A, considered. Lend Lease Development Pty Ltd v Zemlicka (1985) 3 NSWLR 207, distinguished. Accordingly the primary judge, although invited to do so by the parties, was not entitled to embark upon any review of the decision-making process of the Local Court beyond that necessary to address the appropriately identified questions of law: [32] In relation to issue (ii), If leave to appeal or cross-appeal were granted, the matter would need to be remitted to the Local Court. The legal costs already incurred are disproportionate to the amount in dispute and the case does not involve an issue of principle, question of general importance or a reasonably clear injustice: [33]-[34] Be Financial Pty Ltd as Trustee for Be Financial Operations Trust v Das [2012] NSWCA 164; The Age Company Ltd & Ors v Liu (2013) 82 NSWLR 268; [2013] NSWCA 26, applied.

Judgment

BASTEN JA: I agree with Payne JA.
PAYNE JA: The applicant and cross-applicants seek leave to appeal and cross-appeal respectively from a decision of Schmidt J in Rose v Tunstall (No 3) [2018] NSWSC 172.
In 2004, the applicant, Mr Rose, was expelled from Boxing NSW Inc. (the Association). In 2006, the applicant commenced proceedings in the Supreme Court of NSW challenging the validity of the Association's decision to expel him. Sometime in 2006, a costs order was made against the Association in relation to an interlocutory issue (the 2006 costs order). On 11 December 2006, Brereton J made orders against the Association after a final hearing, including a further costs order. On 31 January 2007, Brereton J gave reasons for making those orders: Rose v Boxing NSW Inc. [2007] NSWSC 256 (the 2007 costs order).
In June 2009, the 2006 costs order and the 2007 costs order were assessed, presumably pursuant to Part 3.2 Division 11 of the Legal Profession Act 2004 (NSW). Although the relevant certificate or certificates of assessment were not before the Court, apparently assessments were made of $20,463.34 referable to the 2006 costs order and $78,383.38 referable to the 2007 costs order. The primary judge found that in June 2009 "the assessor's certificate was registered in the District Court as a judgment". The primary judge found that in November 2009 the Association paid Mr Rose $20,463.34, being the amount assessed in relation to the 2006 costs order.
On 1 October 2010, the Association's registration under the Associations Incorporation Act 2009 (NSW) [1] was cancelled. Following the winding up of the Association the amount of $78,383.38 assessed in relation to the 2007 costs order remained unpaid and forms the subject matter of these proceedings.
In 2015, the applicant commenced proceedings in the Local Court against the respondents, who had been members of the executive committee of the Association, claiming that the respondents were jointly and severally liable for the 2007 costs order pursuant to s 38(1) of the Associations Incorporation Act 1984 (NSW).
Section 38 of the Associations Incorporation Act 1984 (as at 31 January 2007) provided: "38 Offences relating to incurring of debts or fraudulent conduct (1) If an incorporated association incurs a debt and: (a) immediately before the time the debt is incurred: (i) there are reasonable grounds to expect that the association will not be able to pay all its debts as and when they become due, or (ii) there are reasonable grounds to expect that, if the association incurs the debt, it will not be able to pay all its debts as and when they become due, and (b) the association is, at the time the debt is incurred, or becomes at a later time, an association to which this Division applies, any person who was a member of the committee of the association at the time the debt was incurred is guilty of an offence and liable to a penalty not exceeding 50 penalty units or imprisonment for a period not exceeding 1 year, or to both such penalty and imprisonment, and the association and that person or, if there are 2 or more such persons, those persons are jointly and severally liable for the payment of the debt. (2) In any proceedings against a person under subsection (1), it is a defence if the defendant proves: (a) that the debt was incurred without the defendant's express or implied authority or consent, or (b) that, at the time the debt was incurred, the defendant did not have reasonable cause to expect: (i) that the association would not be able to pay all its debts as and when they became due, or (ii) that, if the association incurred that debt, it would not be able to pay all its debts as and when they became due. (3) Proceedings may be brought under subsection (1) for the recovery of a debt whether or not the person against whom the proceedings are brought, or any other person, has been convicted of an offence under subsection (1) in respect of the incurring of the debt. (4) Where subsection (1) renders a person or persons liable to pay a debt incurred by an incorporated association, the payment by that person or either or any of those persons of the whole or any part of the debt does not render the association liable to the person or persons concerned in respect of the amount so paid. (5) If: (a) an incorporated association does any act (including the entering into of a contract or transaction) with intent to defraud creditors of the association or of any other person or for any other fraudulent purpose, and (b) the association is at the time it does the act, or becomes at a later time, an association to which this Division applies, any person who was knowingly concerned in the doing of the act with that intent or for that purpose is guilty of an offence and liable to a penalty not exceeding 100 penalty units or imprisonment for a period not exceeding 2 years, or to both such penalty and imprisonment."
On 11 April 2017, Atkinson LCM dismissed the proceedings against the respondents in Wayne John Rose v Estate of Arthur Tunstall & Ors (Local Court (NSW) 11 April 2017, unrep).
The applicant appealed to the Supreme Court pursuant to s 39 of the Local Court Act 2007 (NSW), which provided: "39 Appeals as of right (1) A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court may appeal to the Supreme Court, but only on a question of law. (2) A party to proceedings before the Court sitting in its Small Claims Division who is dissatisfied with a judgment or order of the Court may appeal to the District Court, but only on the ground of lack of jurisdiction or denial of procedural fairness."
The notice of appeal relied upon before the primary judge and the questions of law which were identified were not before this Court.
The primary judge found, at [111], that the Magistrate had erred in law in failing to consider the operation of s 38(1)(a)(ii) of the Associations Incorporation Act. Specifically, the primary judge found that the Magistrate had failed to consider whether the applicant had proven that if the Association incurred the debt resulting from the 2007 costs order, at the time immediately before the time the debt was incurred there were reasonable grounds to expect that the Association would not be able to pay all of its debts as and when they became due.
The primary judge, at the invitation of both parties and purportedly acting pursuant to s 41(1) of the Local Court Act and s 75A of the Supreme Court Act 1970 (NSW), made findings of fact in order to resolve the issues raised by s 38(1)(a)(ii) of the Associations Incorporation Act. Those findings of fact included findings about what the contents of the financial records of the Association in evidence revealed (at [124]), findings about "the steps taken to rein in [the Association's] expenses" (at [123] and [143]) and findings about "the sources and amount of its ongoing income" (at [143]). In so doing, the primary judge relied upon Lend Lease Development Pty Ltd v Zemlicka (1985) 3 NSWLR 207. The primary judge also made extensive additional findings of fact, at [149]-[161], in overturning the Magistrate's findings that the respondents had established a defence under s 38(2) of the Associations Incorporation Act 1984.
The primary judge dismissed the applicant's appeal. On the facts as the primary judge had found them, the applicant had not established the matters the subject of s 38(1)(a)(ii). The applicant sought leave to appeal to this Court on the s 38(1)(a)(ii) issue. The respondents sought leave to cross-appeal to this Court from the primary judge's rejection of the defence under s 38(2) of the Associations Incorporations Act 1984.

Consideration

Section 101(2)(r)(ii) of the Supreme Court Act provides that an appeal to the Court of Appeal shall not lie, except by leave of the Court of Appeal, unless the matter involves (directly or indirectly) any claim respecting any property having a value of $100,000 or more.
Ordinarily, leave to appeal to the Court of Appeal is limited to matters which involve issues of principle, questions of general public importance or an injustice which is reasonably clear: Be Financial Pty Ltd as Trustee for Be Financial Operations Trust v Das [2012] NSWCA 164 at [32]-[38]; The Age Company Ltd & Ors v Liu (2013) 82 NSWLR 268; [2013] NSWCA 26 at [13].
It was common ground before this Court that the value of the claim in this case, $78,383.38 plus interest, was comfortably below the statutory threshold. It may be inferred that the total legal costs involved in the case before the Local Court and the appeal before the primary judge and the application to this Court already involve a sum considerably in excess of the amount in dispute.
Section 60 of the Civil Procedure Act 2005 (NSW) provides: "60 Proportionality of costs In any proceedings, the practice and procedure of the court should be implemented with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject-matter in dispute."
As Basten JA pointed out in Be Financial Pty Ltd at [39]: "This direction has an important operation in respect of leave applications involving amounts below the statutory threshold. Where, as in the present case, the costs of the trial are disproportionate to the amount in dispute, the incurring of additional costs, for a potentially uncertain return, will be a factor weighing heavily against a grant of leave."
In argument on the application for leave to appeal and leave to cross-appeal, the Court raised with the parties the question of whether, having identified error on a question of law, the primary judge had power to make findings of fact. Additional written submissions were made by each party on that question.
Before the primary judge, the applicant bore the onus of demonstrating error on a question of law by the Magistrate under s 39 of the Local Court Act.
Section 40 of the Local Court Act, which permits an appeal to the Supreme Court by leave on a mixed question of fact and law, was not relied upon. It may thus be put to one side. Any question of the exercise of a discretion upon a successful appeal on a question of law of the kind addressed by this Court in Thaina Town (On Goulburn) Pty Ltd v City of Sydney Council (2007) 71 NSWLR 230; [2007] NSWCA 300 also does not arise in this case.
Upon error on a question of law being found, the powers of the primary judge provided by s 41(1) of the Local Court Act were as follows: "(1) The Supreme Court may determine an appeal made under section 39(1) or 40: (a) by varying the terms of the judgment or order, or (b) by setting aside the judgment or order, or (c) by setting aside the judgment or order and remitting the matter to the Local Court for determination in accordance with the Supreme Court's directions, or (d) by dismissing the appeal."
At the invitation of both parties, the primary judge made extensive factual findings relevant to the s 38(1)(a)(ii) issue and to the defence under s 38(2) of the Associations Incorporation Act 1984. To the extent that the applicant submitted that the primary judge did not find facts but rather engaged in an exercise of "using existing evidence and factual findings", that submission must be rejected. Factual findings about each issue were necessary in order to make a determination about matters the primary judge found the Magistrate had overlooked. The applicant's principal contention on the appeal, if leave were granted, was that the primary judge erred by not giving sufficient weight to a letter written by Mr Tunstall, then secretary of the Association, to a member of the Association in March 2007. That issue, the weight to be given to the Tunstall letter, could only be addressed in the context of the factual findings made by the primary judge.
The applicant submitted that the approach of the primary judge in making findings of fact was permissible by reason of s 75A of the Supreme Court Act, which provides, relevantly: "75A Appeal (1) Subject to subsections (2) and (3), this section applies to an appeal to the Court and to an appeal in proceedings in the Court. … (4) This section has effect subject to any Act. (5) Where the decision or other matter under appeal has been given after a hearing, the appeal shall be by way of rehearing. (6) The Court shall have the powers and duties of the court, body or other person from whom the appeal is brought, including powers and duties concerning: (a) amendment, (b) the drawing of inferences and the making of findings of fact, and (c) the assessment of damages and other money sums. (7) The Court may receive further evidence. (8) Notwithstanding subsection (7), where the appeal is from a judgment after a trial or hearing on the merits, the Court shall not receive further evidence except on special grounds. (9) Subsection (8) does not apply to evidence concerning matters occurring after the trial or hearing. (10) The Court may make any finding or assessment, give any judgment, make any order or give any direction which ought to have been given or made or which the nature of the case requires."
The applicant submitted the powers under s 75A of the Supreme Court Act were neither ousted nor limited by the terms of s 41(1) of the Local Court Act. The applicant submitted that s 41(1)(c) of the Local Court Act is in exactly the same terms as s 41(1)(b), but with an additional power to remit the proceedings to the Local Court. This context suggested that an exercise of power pursuant to s 41(1)(a) or (b) of the Local Court Act, particularly s41(1)(b), may involve something other than merely being satisfied of an error of law and remitting the proceedings. Although the applicant referred to authority, it was for the purposes of distinguishing that authority. No case was cited in which the construction of s 41 of the Local Court Act for which he contended had been accepted.
The respondents submitted that the primary judge, having found error on a question of law, as required by s 39 of the Local Court Act, was not authorised by s 41 of the Local Court Act or s 75A of the Supreme Court Act to make findings of fact. That submission should be accepted. The authority relied upon by the primary judge, Lend Lease Development Pty Ltd v Zemlicka (1985) 3 NSWLR 207 involved an appeal from a trial in the District Court, pursuant to s 127 of the District Court Act 1973 (NSW), which is an appeal by way of rehearing, not an appeal limited to a question of law. As the applicant correctly accepted, Zemlicka does not refer to s 75A of the Supreme Court Act or to s 41 of the Local Court Act. It is of no assistance in resolving the present question.
In North Broken Hill Ltd v Tumes [1999] NSWCA 309; (1999) 18 NSWCCR 412 this Court dealt with an appeal under s 32 of the Compensation Court Act 1984 (NSW). At [24]-[25], Beazley JA (with whom Giles JA and Davies AJA agreed) said: "The jurisdiction of this Court is limited by s32 of the Compensation Court Act to the determination of whether the trial Judge erred in law or wrongly admitted or rejected evidence. Section 32(2) provides that this Court may on the appeal 'remit the matter to the Compensation Court for determination … in accordance with the decision of the Court of Appeal and may make such other order in relation to the appeal as the Court of Appeal sees fit'. That latter provision does not, however, invest the Court of Appeal with jurisdiction to make findings of fact."
In B & L Linings Pty Ltd v Chief Commissioner of State Revenue (2009) 74 NSWLR 481; [2008] NSWCA 187 Allsop P at [59]-[70] (with whom Giles JA and Basten JA relevantly agreed) conducted an extensive survey of State and Commonwealth statutes which provided for an appeal to a superior court from a body or tribunal or court in terms which invoke some restriction or criterion referable to a question or error or point of law. In addressing relevant NSW appeal provisions, Allsop P concluded that once an error in point of law was found, this Court could not make findings of fact for itself. Basten JA, in a separate concurring decision, expressly considered the breadth of the power conferred by s 75A of the Supreme Court Act in this context and concluded that: "[149] … It follows that, in so far as s 75A of the Supreme Court Act expressly provides that the appeal shall be by way of rehearing, it is, in categorical terms, inconsistent with a statutory provision conferring a more limited right of appeal. Section 75A must, in accordance with its own terms, have effect subject to the ADT Act: s 75A(4). Whether it applies at all might be an open question; it should not, in its terms, operate so as to affect the scope of the appeal conferred by sections to which it is, in its terms, subject. It does not operate to expand the scope of the appeal permitted by ss 119 and 120 of the ADT Act. [150] … The function of this Court, exercising jurisdiction in relation to an appeal brought under s 119 of the ADT Act, is limited to the identification of an erroneous answer in respect of a question of law. For that purpose it is not required, and indeed is not entitled, to embark upon any review of the decision-making process of the Tribunal beyond that necessary to answer the appropriately identified questions of law….."
In World Avenue Pty Ltd v Tsunashima [2013] NSWSC 502, Harrison J said of an appeal to the Supreme Court under ss 39 and 40 of the Local Court Act: "[29] There is no right of appeal on a question of fact alone. This Court has no authority to engage in a fact finding process on the merits of the case, even if the appeal involves a mixed question of fact and law: B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187; (2009) 74 NSWLR 481 at [38] - [70] and [144] - [150]; Nichols v Lee [2008] NSWSC 1243 at [61]; Ken Wolf Real Estate Pty Ltd v O'Halloran [2012] NSWSC 993 at [50] - [53]."
In Lesley-Swan v Owners SP 32735 [2013] NSWSC 1635, Beech-Jones J said of a near identical application to make findings of fact in an appeal on a question of law under s 39 of the Local Court Act: "[70] … Mr Young SC submitted that, in the event the Court identified an error of law warranting interference with the second Local Court judgment, it should proceed to determine for itself the balance of the outstanding factual issues. He submitted that factors of convenience and costs strongly favour this course especially given the history of this matter to date. In light of the conclusion that I have come to it is not strictly necessary to address this issue but nevertheless, for the sake of completeness, I will. [71] The fundamental difficulty with Mr Young SC's submission is that, in my view, this Court does not have the power to make findings of primary fact on a Local Court appeal even if an error of law has been established or even if an error of mixed fact and law has been established. This follows from the terms of ss 39 to 41 of the Local Court Act with or without s 75A of the Supreme Court Act 1970. [72] …In Thaina Town, Spigelman CJ, with whom Mason P, Beazley, Giles and Ipp JJ agreed, held that, with the assistance of s 75A, the Court of Appeal could on an appeal on a question of law exercise a discretionary power vested in the body appealed from when no further factual findings were required (at [104]). In so stating the Court in Thaina Town overruled an earlier authority (Maurici v Chief Commissioner of State Revenue [2001] NSWCA 78; 51 NSWLR 673) which appeared to preclude the exercise of such discretionary powers but nevertheless affirmed the status of the Maurici so far it held that the Court of Appeal was precluded from making findings of fact (Thaina Town at [110])…"
I agree with Harrison J and Beech-Jones J that in an appeal under s 39 of the Local Court Act, when an error of law has been established, the Supreme Court does not have the power to make findings of primary fact.
The primary judge did not have power to determine facts in an appeal limited to a question of law under s 39 of the Local Court Act. Section 41(1) of the Local Court Act did not permit the primary judge to engage in a fact-finding process on the merits of the case. Section 75A must, in accordance with its own terms, have effect subject to the Local Court Act: s 75A(4). The primary judge was not entitled to embark upon any review of the decision-making process of the Local Court beyond that necessary to answer the appropriately identified questions of law.
So far as the application for leave is concerned, if leave were granted the inevitable outcome would be that the decision of the primary judge would be set aside and the matter remitted to the Local Court to make the necessary findings of fact. The same conclusion inevitably applies to the application for leave to cross-appeal. That would involve a fourth examination of the underlying case. It would only be in the most compelling circumstances that this should occur.
Such circumstances are not present here. This is a case of the kind described by Basten JA in Be Financial Pty Ltd where the legal costs already incurred are disproportionate to the amount in dispute. The incurring of additional costs, for a potentially uncertain return, is a factor weighing heavily against a grant of leave. The case does not involve an issue of principle, question of general importance or a reasonably clear injustice. The sum involved, even with interest added, is comfortably under the statutory threshold.
I would refuse leave to appeal and to cross-appeal.

Costs of the application for leave to appeal and leave to cross-appeal

Although the respondents have ultimately been successful, the point that has been determinative in those applications for leave was not raised by either party until it was raised by the Court.
In those circumstances, the proper order is that there should be no order as to costs in this Court.

Proposed orders

For the foregoing reasons I propose the following orders: 1. leave to appeal refused; 2. leave to cross-appeal refused; 3. no order as to costs in this Court.
SIMPSON AJA: I agree with Payne JA.

Endnote

Which had replaced the Associations Incorporation Act 1984 (NSW). 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: 25 October 2018

Associations Incorporation Act 1984(NSW)

Legal Profession Act 2004(NSW)

Compensation Court Act 1984(NSW)

Supreme Court Act 1970(NSW)ss 75A, 101

(1999) 18 NSWCCR 412

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