Saggers v Yaghoubpour & anor

Chilcotin Pty Ltd & Anor v Cenelage Pty Ltd & Ors [1999] NSWCA 11 House v The King (1936) 55 CLR 499 CASES CITED : Maviglia v Maviglia [1999] NSWCA 188 Probiotec Ltd v The University of Melbourne [2008] FCAFC 5 Stoker v Adecco Gemvale Constructions Pty Limited [2004] NSWCA 449

TEXTS CITED : Ritchie's Uniform Civil Procedure NSW, LexisNexis Butterworths 2005

Maree Ann Saggers (Plaintiff) PARTIES : George Yaghoubpour (First Defendant) Majestic Caravans Pty Limited (Second Defendant)

Mr A Crossland - Plaintiff COUNSEL : Mr D Accoto (Solicitor) - First Defendant Ms V Sydun (Solicitor) - Second Defendant

Turnbull Hill Lawyers SOLICITORS : Dph Lawyers Sydun & Co

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

14423/08 Maree Ann SAGGERS v George YAGHOUBPOUR & MAJESTIC CARAVANS PTY LIMITED

JUDGMENT 1 HIS HONOUR: This matter is an application for leave to appeal from the Local Court in proceedings arising from a dispute over a defective caravan. The appeal is concerned with an order for costs. Leave is required pursuant to s 40(2)(c) of the Local Court Act 2007.

2 Mr George Yaghoubpour bought a caravan from a business conducted by Mr & Mrs Saggers ("the Saggers"). It had some defects which were not rectified. He commenced proceedings against them in the Local Court seeking damages in the amount of $60,000. The Saggers filed a defence denying liability but they also filed a cross claim against the manufacturer of the caravan, Majestic Caravans Pty Limited ("Majestic").

3 Majestic played no part in the proceedings and default judgment with damages to be assessed was entered against them on the cross claim.

4 The hearing of the substantive claim, and the assessment of damages on the cross claim, was heard in the Local Court over two days in June 2008. The magistrate reserved his decision. On 30 July 2008 he gave judgment in favour of the plaintiff and awarded damages in the amount of $4,000. He assessed damages on the cross claim in the same amount. He ordered that the Saggers pay Mr Yaghoubpour's costs on the ordinary basis and that Majestic pay the Saggers' costs on an indemnity basis.

5 The Saggers had sought an order that Majestic be ordered to pay Mr Yaghoubpour's costs and they now appeal against the magistrate's refusal to make such an order.

6 The orders sought in a further amended summons are: 1 That the second defendant (the cross defendant in the Local Court) indemnify the plaintiffs (the defendants / cross claimants in the Local Court) for the costs that the plaintiffs were ordered to pay the first defendant (the plaintiff in the Local Court) 4 Leave to appeal pursuant to section 40(2)(c) of the Local Court Act 2007 5 Costs

The proceedings in the Local Court 7 The claim by Mr Yaghoubpour against the Saggers was that the caravan was not of merchantable quality and was not fit for its intended and commonly used purpose: s 19(1) and (2) Sale of Goods Act 1923. The cross claim brought by the Saggers against Majestic alleged a failure to repair and make good the defects and they sought that Majestic indemnify them against any liability for Mr Yaghoubpour's loss pursuant to s 40ZA Fair Trading Act 1987.

8 In the judgment delivered in writing on 30 July 2008 the magistrate made the following findings: · The claim that the caravan was not fit for its intended purpose (s 19(1) Sale of Goods Act ) failed.

· The claim that the caravan was not of merchantable quality (s 19(2) Sale of Goods Act ) succeeded. The magistrate noted the Saggers had not really resisted such a finding and only disputed the magnitude of the defects and the cost to remedy them.

· Majestic was liable to indemnify the Saggers in respect of any damages awarded against it in favour of Mr Yaghoubpour.

· The best estimate of the cost to remedy the defects to the caravan was $4,000.

9 The following orders were set out at the end of the written judgment: On the plaintiff's statement of claim, there will be a verdict and judgment in favour of the plaintiff in the sum of $4,000.00 plus interest at the prescribed rate(s) to be calculated in the Registry, plus issue and service fees.

On the defendants cross claim there will be a verdict and judgment in favour of the cross-claimant in the sum of $4,000.00 plus interest at the prescribed rate(s) to be calculated in the Registry, plus issue and service fees as above.

The cross-defendant is to pay the cross-claimants costs on an indemnity basis.

10 The matter was stood down and came back before his Honour later in the day. He heard submissions from the representatives of both Mr Yaghoubpour and the Saggers. On behalf of the latter it was submitted that an order should be made that Majestic pay Mr Yaghoubpour's costs. Their counsel submitted that it would be unjust that they would only have an order that Majestic pay their costs and not the plaintiff's costs, that they would otherwise be liable for, as well. It was put that the magistrate had held in the Saggers' favour that there was an indemnity arising from their contract with Majestic and so it followed that the costs payable to the plaintiff should be paid by Majestic.

11 This was opposed by Mr Yaghoubpour whose representative submitted that it was necessary for his client to bring the action against the Saggers because no cause of action lay against Majestic. It was a matter for the Saggers whether or not Majestic were joined in the proceedings by way of a cross-claim but insofar as Mr Yaghoubpour was concerned he was entitled to an order for costs against the unsuccessful defendant in the proceedings he had brought. It was submitted that there would be an injustice if Mr Yaghoubpour had to chase Majestic for payment of his costs where Majestic had played no part in the proceedings. As to that submission the magistrate immediately responded, "I would have thought that, common sense would have dictated that surely".

12 It was submitted on behalf of the Saggers that there was no evidence that making the order sought would work an injustice to Mr Yaghoubpour because it was just as likely that he would be able to recover his costs from Majestic as he would be able to recover them from the Saggers. It was submitted that the real injustice would be that the Saggers would have to pay the plaintiff's costs when it had been held that Majestic were liable to indemnify the Saggers for damages payable to Mr Yaghoubpour

13 Having heard these submissions the magistrate then announced the following orders: The plaintiff's statement of claim there will be a verdict (and) judgment in favour of the plaintiff in the sum of $4,000.00 plus interest at the prescribed rate to be calculated (in) the Registry, plus issue and service fees.

As regards to that particular statement of claim the defendant is to pay the plaintiff's costs as agreed or as assessed and under the defence cross-claim there will be verdict (and) judgment to pay the cross-claim of the sum of $4,000.00 plus interest at the prescribed rate to be calculated in the Registry, plus issue and service fees and the cross-defendant is to pay the cross-claimant's costs on an indemnity basis.

14 The magistrate gave no reasons for making the costs orders. He gave no reason for rejecting the submissions made on behalf of the Saggers. He made no reference to the discretion and flexibility that a court has in making costs orders. His attention had been drawn to the commentary in Ritchie's Uniform Civil Procedure NSW, LexisNexis Butterworths 2005, at 42.1.45. It was submitted: I hate to be technical your Honour but that part of Ritchie's I was referring you to just to give you some comfort that the court can and should do this all … 42.1.45 deals with a whole series of cases where in different ways the court makes orders and has for some time been allowed to make orders where an unsuccessful defendant, in this case the cross-defendant, unsuccessful against us, can be made to pay the costs of a third party, third party as between the two parties, being in this case the plaintiff. That happens often, happens all the time, there's Bullock and Sanderson orders which are species of that but this would just be another type of such order.

15 There are 2 grounds of appeal: 1 The magistrate erred in law by failing to properly exercise his discretion in relation to the costs orders to be made in respect of the plaintiff's (the Saggers) liability for the first defendant's (Mr Yaghoubpour) costs

2 That the magistrate erred in law by failing to exercise his discretion in relation to the costs of the statement of claim.

16 There are particulars pleaded in respect of the first ground. They are that given that the Saggers had succeeded in their cross claim for an indemnity in respect of their liability to Mr Yaghoubpour then, in the circumstances, the only reasonable costs order would be an order that Majestic be liable to indemnify the Saggers for their liability to pay Mr Yaghoubpour's costs.

17 In written submissions it was put that the appeal is against the decision of the magistrate not to order that Majestic indemnify the Saggers for their liability to pay the costs of Mr Yaghoubpour. One short answer to that is that the magistrate was not, in direct terms, asked to make such an order. He was asked to make an order that Majestic pay Mr Yaghoubpour's costs directly. The Saggers seek to complain on appeal that the magistrate did not do something that he was never asked to do. Parties to an appeal are, generally speaking, bound by the course they adopted at trial: Chilcotin Pty Ltd & Anor v Cenelage Pty Ltd & Ors [1999] NSWCA 11 at [12] - [18] per Giles JA.

18 The explanation that has been put is that it was understood that the magistrate had already made an order for costs on the cross-claim and "given his Honour's orders, the question of the costs of the statement of claim was the only costs question still at large". That is not really an acceptable explanation. It would have been open to counsel for the Saggers to seek a variation of the order which had not at that time been entered: see Part 36 Uniform Civil Procedure Rules 2005. At the hearing of the appeal, counsel conceded that with hindsight that is something he could have pursued. At the time he felt that he was precluded from further agitating the issue of costs as between his client and the cross defendant (Majestic) and so he pursued what he regarded as his "second best argument". It should be noted that prior to the written judgment being delivered the magistrate had not heard any argument as to costs. Counsel expected that he would have been given the opportunity to be heard on the issue at large after the issues of liability and quantum had been determined.

19 The principles discussed by Giles JA in Chilcotin are said to be founded on regard to the finality of litigation. However, after a review of relevant authorities, he also said: [18] … As always, the particular circumstances must be considered, with due recognition that mistakes occur, that second thoughts are sometimes good thoughts, and that the appellant is entitled to justice; but extending justice to an appellant who has failed to take a point at the trial may work an unacceptable injustice on the respondent.

20 In my view, whilst an order that Majestic indemnify the Saggers for the costs they were liable to pay to Mr Yaghoubpour was not sought in terms, the fact that the magistrate had a wide discretion as to the payment of costs was raised. It was claimed that it would be unjust for the Saggers to bear responsibility for Mr Yaghoubpour's costs. Accordingly the issue of Majestic being liable to pay Mr Yaghoubpour's costs was raised in one form.

21 As to whether there would be "unacceptable injustice" to Majestic in having the point now raised I note that if the point had been directly raised in the court below there is no suggestion that Majestic would have acted any differently, given it did not take any part in the proceedings. So far as it was concerned, it was, apparently, content to have the matter determined in whatever way the court decided. If the court had made the order now sought, Majestic would have had no cause to complain.

22 I am satisfied that leave to appeal should not be withheld because of the course adopted by the plaintiff in the court below.

23 The magistrate, in short terms, held that the Saggers were liable to Mr Yaghoubpour for damages in the sum of $4,000. He, in turn, held that Majestic were liable upon their indemnity to the Saggers in the exact same sum. On the face of it, justice would seem to demand that the Saggers not be liable for the costs of Mr Yaghoubpour but that Majestic be held liable, on its indemnity, to pay his costs as well as those of the Saggers.

24 It cannot be seen that the magistrate gave any real consideration to this. The only reasoning disclosed in the exchange between bench and bar is that to which I have earlier referred when he indicated that the Saggers being liable for Mr Yaghoubpour's costs and Mr Yaghoubpour not having to chase Majestic for their costs was "commonsense". After hearing the further submissions made on behalf of the Saggers, including having his attention drawn to the commentary in Ritchie to which I have referred, he said nothing except, "Well having heard those submissions I think the only orders that I propose to make are as indicated as follows." He then announced the orders.

25 Whilst reasons for making an order for costs are commonly unnecessary because they follow the event, in the circumstances of a case such as this, and in the light of the submissions that had been made, there must be an expectation that some reasoning would be disclosed.

26 In Stoker v Adecco Gemvale Constructions Pty Limited [2004] NSWCA 449, Santow JA observed: [41] It is clear that the duty to give reasons is a necessary incident of the judicial process. Without adequate reasons, justice has not been seen to be done, so that failure to give adequate reasons may be an error of law: Pettitt v Dunkley (1971) 1 NSWLR 376; Soulemezis v Dudley (Holdings) Pty Limited (1987) 10 NSWLR 247 at 278-279 per McHugh JA; Mifsud v Campbell (1991) 21 NSWLR 725; Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430. But the duty does not require the trial judge to spell out in minute detail every step in the reasoning process or refer to every single piece of evidence. It is sufficient if the reasons adequately reveal the basis of the decision, expressing the specific findings that are critical to the determination of the proceedings.

27 In Maviglia v Maviglia [1999] NSWCA 188, Mason P said at [1]: An ex tempore judgment should not be picked over. And appropriate allowance should be given for the pressures under which judges of the District Court are placed by the volume of cases coming before them.

28 The same can be said in respect of magistrates of the Local Court where the volume of cases to be dealt with is considerably greater. The magistrate in this case was sitting at Fairfield, renowned as one of the busiest in that jurisdiction. At an early stage of hearing the submissions on costs he said, "(I) didn't want to spend all day on this, I have a busy list day". Counsel informed me at the hearing of the appeal that there was something like one hundred cases, all more important than the present one, awaiting the magistrate's determination. In these circumstances one can have considerable sympathy for the magistrate's predicament.

29 Regrettably, however, I must conclude that it was incumbent upon the magistrate to spend a short moment giving brief reasons for rejecting the submission that had been made to him on behalf of the Saggers. Applying what was said in Stoker v Adecco Gemvale Constructions Pty Limited, there was no adequate revelation of the basis of the decision to rule against the Saggers.

30 The magistrate's order as to costs was a discretionary decision. An appeal against a decision of that nature is governed by well established principles. It is not a matter for the appellate court substituting its own decision for that of the court below. The principles in House v The King (1936) 55 CLR 499 at 505 are well known in both criminal and civil jurisdictions. They provide that a discretionary decision can only be overturned in five limited circumstances: 1 if the judge acts upon a wrong principle

2 if the judge allows extraneous or irrelevant matters to guide or affect him or her

4 if the judge does not take into account some material consideration

5 where it does not appear how the judge has reached the result embodied in the order, but upon the facts it is unreasonable or plainly unjust it may be inferred that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance.

31 In the present case it is not possible to conclude that there has been error of any of the first four types but that is because of the failure of the magistrate to give any reasons for making the order that he did.

32 In these circumstances it is appropriate to look at the decision of the magistrate and consider whether it was "unreasonable or plainly unjust". I am satisfied that it was. The effect of the magistrate's findings was that Majestic was ultimately responsible for the defects of the caravan and were liable to pay the value of the costs of repairs. In other words, it was not the fault of the Saggers that the caravan was defective. They were caught in the middle. It was necessary for Mr Yaghoubpour to bring the proceedings against the Saggers as he had no contractual or other basis to bring proceedings directly against Majestic. If one was to ask whether it is just and fair that the Saggers be required to pay Mr Yaghoubpour's costs, as opposed to Majestic, the answer is resoundingly in the negative.

33 It was submitted on behalf of Majestic that the ordinary rule is that costs follow the event and in this case that is what occurred with the successful plaintiff having an order for costs against the unsuccessful defendant and the successful cross claimant having an order for costs against the unsuccessful cross defendant. So much may be accepted but that is to ignore an overall view of the litigation.

34 It was submitted on behalf of the Saggers that the magistrate erred in separately considering the costs of the statement of claim and the costs of the cross claim rather than considering the costs of the proceedings as a whole. In answer to this it was submitted on behalf of Majestic that the magistrate had a power to do so, and reference was made to s 90(2)(b) Civil Procedure Act 2005. This, too, may be accepted, but again it is to ignore the overall view.

35 A further submission on behalf of Majestic was that "the primary purpose of an award of costs is to indemnify the successful party". However, part of that concept is that it is the unsuccessful party who is responsible to the successful party and, in this case, the ultimate unsuccessful party was Majestic. The Saggers were, in effect, just a conduit between the party liable to receive damages and the party responsible for the issue from which liability for damages arose.

36 It was also submitted that, in any event, costs are discretionary and the magistrate "acted appropriately" in exercising that discretion. It was put that he "properly considered all relevant matters to costs of the substantive action and acted reasonably and within his discretion in reaching the conclusion set out in the order appealed against". I cannot accept that submission in the light of the failure to give any hint as to why he rejected the submission that was made to him on behalf of the Saggers.

37 At the hearing of the appeal it was pointed out on behalf of Majestic that Mr Yaghoubpour's claim was for $60,000 and that he only succeeded in securing an award for damages of $4,000. In other words, to a very large extent the plaintiff in the court below did not succeed in what he set out to establish. It was submitted that Majestic played no part in the proceedings and should not be liable for the conduct of the proceedings as between Mr Yaghoubpour and the Saggers. There is some force in this. However, the converse was pointed out by counsel for the Saggers. They were in large part successful in defending the action. Majestic contributed nothing in having a claim for $60,000, for which Majestic may well have been held liable through its indemnity to the Saggers, reduced to an award for only $4,000.

38 It was also submitted that by waiving its rights to appear Majestic in fact reduced the costs incurred by the other parties. I do not think that submission assists. Majestic at no stage disputed its liability on the cross claim. It would have made no difference if it had appeared or not.

39 A point was sought to be made of the fact that it was the choice of the Saggers to issue proceedings against Majestic. That was their right and they were, in effect, vindicated by Majestic not contesting those proceedings and implicitly accepting liability. An alternative course of action available to the Saggers would have been to commence separate proceedings against Majestic after Mr Yaghoubpour's proceedings were finalised and they would have been entitled through those separate proceedings to seek recompense for the amounts they had been ordered to pay Mr Yaghoubpour by way of both damages and costs. What the Saggers did by cross claiming against Majestic was to minimise costs to all by having the one issue litigated in the one proceeding.

40 In the context of referring to the stance of inactivity taken by Majestic, reference was made to Probiotec Ltd v The University of Melbourne [2008] FCAFC 5. There, Rares J stated the issue before the Court as: [2] Should a party which files a defence denying both its infringement of a patent and the validity of that patent, but then takes no further steps in the proceedings, other than to comply with orders for discovery, be liable for the full costs incurred by the party successful in enforcing its patent rights when the proceedings are actively defended by other parties?

41 The primary judge had held that the party was jointly and severally liable with other unsuccessful defendants.

42 Later, Rares J concluded: [71] I consider that the Probiotec parties did not play any substantive role in the proceedings or contribute significantly to the overall costs of the proceedings. Their defences required issues affecting them to be determined, which were also common to some other respondents.

[77] I consider that it would be just to allow the appeal and vary his Honour's order so that the Probiotec parties pay 10%, rather than 100%, of the costs that he ordered them to pay.

43 Probiotec was a considerably different case to the present. It involved rather more complex and multi-party litigation. The decision provides no more than an illustration of how the discretionary judgment as to costs may be made in such a case. It does not change my view of what was appropriate in the present case.

44 I am satisfied that the decision of the magistrate was unreasonable. I propose to grant leave to appeal, allow the appeal and vary the order in the terms sought.

45 As to costs of the appeal, as between the plaintiff (the Saggers) and the second defendant (Majestic) it was conceded that costs should follow save for costs ordered by the Registrar on 1 April 2009 when an earlier hearing date was vacated upon the application of the plaintiff.

46 The first defendant (Mr Yaghoubpour) has sought an order for costs in his favour. He has played no real part in the hearing of the appeal because the orders as finally sought in the further amended summons did not concern the costs order made by the magistrate in his favour. The original summons filed on 26 August 2008 sought, inter alia, that the costs order of the magistrate in relation to the statement of claim be set aside. The amended summons filed on 7 November 2008 sought the same. It was not until the further amended summons was filed on 25 June 2009 that the plaintiff desisted from seeking this relief. Accordingly it was necessary for Mr Yaghoubpour to involve himself in the appeal proceedings rather than simply file a submitting appearance. After the filing of the further amended summons it was necessary for his involvement to continue so as to pursue the claim for costs against the plaintiff (the Saggers) necessitated by his earlier involvement.

47 Whilst the substantive appeal is to be decided in favour of the plaintiff, it is appropriate in these circumstances that the costs of the first defendant be paid by them.

2. Allow the appeal 3. Vary the order of the magistrate by adding an order that the second defendant (the cross defendant in the Local Court) indemnify the plaintiffs (the defendants/cross claimants in the Local Court) for the costs that the plaintiffs were ordered to pay the first defendant (the plaintiff in the Local Court). 4. The second defendant is to pay the plaintiff's costs of the appeal, with the exception of those costs the subject of the order of the registrar of 1 April 2009, as agreed or assessed. 5. The plaintiff is to pay the first defendant's costs of the appeal, including those costs the subject of the order of the registrar of 1 April 2009, as agreed or assessed. **********

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