ICR Engineering Pty Ltd v Blayney Cold Storage Distribution Pty Ltd [2016] NSWSC 1703
Plymouth Brethren (Exclusive Brethren) Christian Church v The Age Company Ltd
Source
Original judgment source is linked above.
Catchwords
ICR Engineering Pty Ltd v Metziya Pty LtdICR Engineering Pty Ltd v Blayney Cold Storage Distribution Pty Ltd [2016] NSWSC 1703
Plymouth Brethren (Exclusive Brethren) Christian Church v The Age Company Ltd
Judgment (2 paragraphs)
[1]
Judgment
HER HONOUR: By summons filed 21 July 2017, Secure Parking Pty Ltd seeks leave to appeal an order as to costs made in proceedings in the Local Court sitting in its General Division. The appeal faces two separate requirements for leave. Leave is required under s 40(2)(c) of the Local Court Act 2007 (NSW) because the appeal relates to an order as to costs. Separately, leave is required under s 40(1) of the Act as a number of the proposed grounds of appeal raise questions of mixed law and fact.
A cross summons has been filed by one of the defendants but is pressed only in the event that leave is granted in respect of the summons. After hearing from the parties this morning in respect of the summons only, I have concluded that leave to appeal should be refused, for the following reasons.
The proceedings in the Local Court arose from the collision of two cars in a carpark operated by Secure Parking. The circumstances of the collision may be summarised briefly. On 16 December 2013, Mr Richard Macphillamy drove into the carpark in his Subaru Impreza, which had manual transmission. He had used the carpark on many previous occasions. In accordance with previous practice, he left the car on a level ramp inside the entrance, in neutral with the engine running and the hand brake on, to be parked by one of the valet car parking attendants.
Mr William O'Dwyer had earlier the same day driven a Mercedes Benz belonging to Ralan Property Services Pty Ltd to the same carpark. As the Mercedes was being driven by another attendant up a steep ramp towards the level where the Subaru had been left, the Subaru began to roll down the ramp with no driver. It collided with the Mercedes.
Secure Parking Pty Limited v Ralan Property Services Pty Limited [2018] NSWSC 660 | Case summary | Zoe
Proceedings were brought in the Local Court by Ralan to recover the costs of repair to the Mercedes. The defendants in the proceedings in the Local Court were Mr Macphillamy and Secure Parking. Quantum was not in issue, the cost of the repairs being agreed in the sum of $10,873.93. The issue was, who was liable for those damages?
The Magistrate found that the hand-brake of the Subaru had failed and that the collision was caused by negligence on the part of Mr Macphillamy, in short, because he knew the hand-brake was defective and should not in that circumstance have left the car in neutral with the engine running. His Honour entered judgment for Ralan against Mr Macphillamy in the sum sought. Ralan's claim against Secure Parking was dismissed.
Following a separate hearing as to costs and after receiving written submissions on that issue, the Magistrate made the following orders as to costs:
1. that Mr Macphillamy pay Ralan's costs in the sum of $3463.56;
2. that Mr Macphillamy pay Secure Parking's costs in the sum of $3463.56.
The quantum of costs was calculated by reference to the amount of damages claimed and in accordance with the practice note governing case management of civil proceedings in the Local Court, Practice Note Civ 1, Part G. His Honour rejected an application by Secure Parking that Ralan pay its costs on an indemnity basis from a certain date.
In the result, whereas Secure Parking had sought indemnity costs against Ralan, it obtained only capped costs and the order made was against Mr Macphillamy, not Ralan (I will refer to the order against Mr Macphillamy as the Sanderson order). By its application in this Court, Secure Parking seeks to have the Sanderson order set aside and in its place seeks indemnity costs (as sought below) against Ralan. In the alternative, it seeks an order not sought in the Court below that Mr Macphillamy pay those indemnity costs.
The approach to be applied in determining whether to grant leave was not in dispute. The relevant principles are helpfully summarised in a recent decision of the Court of Appeal in Gibson v Drumm [2016] NSWCA 206 cited in Secure Parking's written submissions in the present application. As stated by Beazley P and Simpson JA in that decision at [19], there are no exhaustive or rigid rules of practice or criteria governing the grant of leave to appeal but it has been consistently stated that leave should only be granted where there are substantial reasons that call for appellate review and, in particular, where there is an error of principle, a matter of public importance or injustice which is reasonably clear in the sense of going beyond what is merely arguable.
The decision also acknowledges that a relevant consideration in determining whether to grant leave is the sum in issue in the proposed appeal.
In oral submissions this morning, Secure Parking also drew my attention to the decision of Schmidt J in Metziya Pty Ltd v ICR Engineering Pty Ltd; ICR Engineering Pty Ltd v Metziya Pty Ltd; ICR Engineering Pty Ltd v Blayney Cold Storage Distribution Pty Ltd [2016] NSWSC 1703 where her Honour noted at [12] that the mere fact that the amount involved is small will not preclude the grant of leave where the appeal raises errors of principle, matters of public importance or injustice going beyond what is merely arguable. I would respectfully agree. Cases involving small sums are no less susceptible to error of principle and often entail complexity disproportionate and even inversely proportionate to the amount at stake. Accordingly, I do not approach the present case on the basis that leave should be refused for that reason alone. However, it is a relevant factor and, indeed, an important factor in the present case, in my view.
My reasons for refusing leave, in summary, are threefold. First, the principal issue of importance sought to be raised is one which has been addressed in other decisions of this Court. Secondly, my consideration of the proposed grounds of appeal has not persuaded me that there has been an error of principle in the present case. Thirdly, I have had regard to the relatively modest sum involved and its disproportion to the costs of prosecuting the present application. I will elaborate on each of those matters.
It is appropriate first briefly to summarise what occurred at the costs hearing. I should note that there is no transcript of that aspect of the hearing before this Court; the parties have sought to obtain it and it is not available. As already noted, however, the Magistrate requested written submissions in addition to the oral summations made at that hearing and those are before me.
The Magistrate delivered his reserved decision as to costs on 23 June 2017. The judgment recorded that there was no dispute as between Ralan and Mr Macphillamy regarding the costs of Ralan's claim against him. The primary order as to costs (order 1 above), which capped costs in accordance with the practice note, was made on that basis.
As to the Sanderson order sought against Mr Macphillamy in respect of Secure Parking's costs, the Magistrate noted Ralan's submission that Mr Macphillamy should also pay those costs, also capped in accordance with the practice note. Separately, his Honour noted that Secure Parking sought the order to which I have referred against Ralan for costs on an indemnity basis from a certain date.
The basis for Secure Parking's application for indemnity costs was that it had, in advance of the hearing, made an offer of compromise under the rules. The offer of compromise had been preceded by a Calderbank letter dated 30 August 2016 in which Secure Parking set out in careful detail the reasons it contended Ralan's claim against it must fail. That offer expired on 27 September 2016. By letter dated 26 September 2016, Ralan repeated an offer in the same terms, this time in accordance with rule 20.26 of the Uniform Civil Procedure Rules 2005 (NSW). The terms of the offer were that there be judgment in favour of Secure Parking and no order as to costs.
It is clear enough that the offer accordingly reflected some measure of compromise in that Secure Parking was offering to bear its costs up to that date. Further, it may be accepted that Ralan did not achieve a better result as against Secure Parking, having been unsuccessful against it in the proceedings.
The combination of the making of the offer, the fact that Ralan did not accept it and Ralan's failure to obtain a better result (more accurately, the fact that Secure Parking obtained a result "no less favourable") triggered the application of rule 42.15A, which provides:
(1) This rule applies if the offer is made by the defendant, but not accepted by the plaintiff, and the defendant obtains an order or judgment on the claim no less favourable to the defendant than the terms of the offer.
(2) Unless the court orders otherwise:
(a) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and
(b) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, assessed on an indemnity basis:
(i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and
(ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made.
In his judgment as to costs, the Magistrate accepted that Secure Parking had "a prima facie entitlement to a special order for costs" and that it was for Ralan "to displace that entitlement." In its written submissions, Ralan submitted that it was reasonable to reject the offer for the following reasons:
"a. it was made before the final evidence in the case was provided, so Ralan was unable to properly assess the contentions in the letter;
b. it was made in circumstances where the Carpark failed to provide the video of which it had sole control that would support, or contradict, the allegations the Carpark made;
c. where the Carpark withheld the only objective evidence (the video) that would assist, or contradict, its representations in the letter of offer, it was reasonable to infer that the evidence must not have assisted the Carpark's allegations; and
d. unlike a case involving two parties (a Plaintiff and a Defendant) this case involved three parties with two defendants alleging the other was to blame. Principle confirms that it is not unreasonable to reject an offer from one party where there are three interconnected parties involved in the proceedings."
It may be noted that those submissions referred to Secure Parking's "offer of compromise of 30 August 2016." More accurately, the letter dated 30 August 2016 was a Calderbank letter; the offer of compromise under the rules was dated 26 September 2016. However, as already noted, the offer of compromise was in the same terms as the Calderbank offer. Further, the place where Secure Parking had set out its reasons for contending that the claim against it must fail was in the Calderbank letter, not in the correspondence under cover of which the offer of compromise was served. Accordingly, although Ralan's submissions incorrectly referred to the "offer of compromise of 30 August 2016", the substance of the task for the Magistrate under rule 42.15A was to consider the offer of compromise by reference, among other things, to the matters set out in the Calderbank letter of that date. I do not think the incorrect reference in Ralan's submissions is likely to have misled the Magistrate in that respect.
In any event, at [6] of the costs judgment, the Magistrate recorded Ralan's submission that it was reasonable to reject "the offer of compromise of 30 August 2016", expressly adopting the reasons offered at paragraph 10 of the written submissions (set out above).
The Magistrate set out his reasons for making the orders he did at [10] and [11] of the judgment, as follows:
I am of the opinion that the conduct of the successful second defendant disentitles it to indemnity costs for the reasons submitted by both the plaintiff and the first defendant, which can be summarised as the delay caused in the proceedings by the various, mainly unsuccessful, applications made by the second defendant, as well as the failure to produce all of the video in accordance with the notice to produce. The evidence of Mr Ayers is critical in this regard I am also of the view that it was reasonable for the plaintiff to reject the second defendant's offer of compromise of 30 August 2016.
It was reasonable, however, for the plaintiff to proceed against the successful (second defendant), given that each defendant was alleging that the other was the cause of the loss, and, having regard to the contents of the letter of 15 August 2016 from the plaintiff to the first defendant, indicating that the plaintiff had amended its statement of claim to join the second defendant "based on the allegations made by your client against the second defendant", it is therefore fair to impose liability upon the first defendant for the costs of the second defendant by the making of a Sanderson order. I am of the view that the Court should make a Sanderson order against the first defendant in favour of the second defendant, and having regard to Civil Practice 1, the second defendant's costs will be limited to 25% of the Further Amended Statement of Claim, namely $3,463.56
Mr Ghabar, who appears for Secure Parking, submitted that the present case is one in which there should be a grant of leave because it raises a matter of public importance, namely, the application of Practice Note LC Civ 1 and its potential conflict with the provisions of the rules relating to offers of compromise. He submitted that, in dealing with Secure Parking's application for indemnity costs, the Magistrate did not refer to the relevant rule or to that potential conflict, but simply proceeded on the basis that the practice note applied.
Mr Ghabar also submitted that his Honour failed to make appropriate findings about the alleged delay and rather simply adopted the submissions put on behalf of Ralan. He submitted that the Magistrate ought to have examined the evidence relating to those matters and made some attempt to quantify the alleged delay and to make findings of fact as to the matter of the allegedly withheld video evidence. Mr Ghabar submitted that these are important matters of principle, the effect of which is to have visited injustice upon Secure Parking and which have the potential to visit injustice on any successful defendant who has made an offer of compromise in proceedings in the Local Court.
As to the potential conflict between the practice note and the rules, it may be accepted that in certain cases the application of those respective provisions will point in different directions. In the Local Court in particular, the risk of disproportion between legal costs and the interest at stake is high. The Chief Magistrate has sought to address that concern in part G of the practice note by the device of indicating that, unless the Local Court orders otherwise, in proceedings where the amount of the claim is $20,000 or less, certain orders are taken to have been made at the point when a defence is filed in the proceedings. The effect of those orders is to impose a costs cap of the kind that was in fact imposed in the present case. Clause 36.3 of the practice note provides that a party may file and serve a notice of motion and supporting affidavit seeking to vary the maximum costs order otherwise taken to have been made. An application can be made at any time up until two weeks prior to "the first review date." No such application was made in the present case.
At a broad level, the potential for conflict between the practice note and the rules relating to offers of compromise has been addressed in decisions of this Court. The parties drew my attention to the decision of Adamson J in Ada Evans Chambers P/L v Santisi [2014] NSWSC 538; my decision in T&DC Pty Limited v Workforce Clothing Pty Limited [2015] NSWSC 1731 and a decision of mine in Colbron v Freeman (No 2) [2014] NSWSC 1528. In particular, as submitted by Mr Bennett, it is established clearly enough by the decision of Adamson J in Ada Evans Chambers v Santisi at [19] that the practice note does not fetter the court's discretion under the statute or the rules. The fact that her Honour had determined that point was cited by me in T&DC at [83] as a reason for refusing leave to appeal against an order as to costs in that case. I do not think there is any point of principle raised by the present case which is not made clear by those authorities.
Separately, the fact that the moving party in the present case did not take the step of filing a notice of motion seeking to warn the other parties of its intention to seek to vary the application of the maximum costs order is a relevant consideration on the question of leave.
Turning to the proposed grounds of appeal, as I have indicated, I am not persuaded that error of principle is established. The summons specifies 15 grounds of appeal in all. I do not think it is necessary to deal with each ground individually. The grounds were addressed in groups in the submissions of the parties and I will take the same course.
Grounds 1 to 5 and 14 and 15 in broad terms address the alleged failure to deal with the offer of compromise. It may be accepted that the Magistrate made no express reference to rule 42.15A in his judgment on costs. However, as already explained, his Honour did refer to the Calderbank letter, which was necessary to understand the reasonableness or otherwise of not accepting the offer of compromise. Furthermore, his Honour directly quoted from Secure Parking's written submissions concerning the offer of compromise. Those submissions set out the terms of rule 42.15A in the very passage from which his Honour quoted in the judgment.
Separately, in my view, the task his Honour identified for himself (set out at [4] of the judgment) accurately reflected his Honour was required to undertake in applying rule 42.15A.
Particular mention should be made of proposed ground 2 in the summons which is:
"The Magistrate failed to find that there were any exceptional circumstances that warranted departing from the costs order envisaged by rule 42.15A in favour of a successful defendant."
Secure Parking submitted that it is the established position in New South Wales that the provisions of the rules ought not be departed from "except in exceptional circumstances". Those words do not appear in the rule. Mr Ghabar submitted however that there is a long line of authority to that effect, citing the remarks of Clarke JA (Handley JA and Santow AJA agreeing) in Houatchanthara v Bednarczyk, an unreported decision of the Court of Appeal (NSW) dated 14 October 1996. The full decision was not provided. The passage quoted in the written submissions was as follows:
"The rule lays down the general principle that should be applied and the order provided for in that rule should only be departed from for proper reasons which in general only arise in an exceptional case."
To the extent that those words are to be understood to mean that the rule applies except where a basis is established for granting an exception to it, that is an unexceptionable proposition. To the extent, however, that the remarks have been understood to impose a higher test, that is, one requiring a party to establish something unusual or extraordinary, I would respectfully disagree. Further, having been made in 1996, his Honour's remarks must now be read in light of part 6 of the Civil Procedure Act 2005 (NSW), which should be understood to have effected a "cultural change": Plymouth Brethren (Exclusive Brethren) Christian Church v The Age Company Ltd; Plymouth Brethren (Exclusive Brethren) Christian Church v Fairfax Media Publications Pty Ltd [2018] NSWCA 95 at [134] per Basten JA (in dissent but not as to that proposition).
As I have already noted, the risk of disproportionate costs is particularly acute in the Local Court. Parties must engage with the terms of the practice note in that context. Where the interest at stake is likely to be disproportionate to lawyers' costs, either costs must be curbed or, if it is considered necessary to incur extensive costs, the device of forewarning the other parties by a notice of motion as contemplated by the practice note should be employed.
The proposed grounds of appeal also included a number of grounds directed at the issue of the Magistrate's assessment of Secure Parking's conduct of the proceedings. Those grounds raised mixed questions of fact and law and in one instance, in my view, a pure question of fact (ground 6). The Magistrate's assessment of the conduct of the proceedings is a factual inquiry best undertaken by the Magistrate.
One of the issues raised by the proposed grounds is the Magistrate's reliance upon Secure Parking's alleged failure to produce additional CCTV evidence in accordance with a notice to produce. I am not persuaded that there is any substance in those grounds. It may be accepted, as contended by ground 10, that the Magistrate appears to have had regard to Secure Parking's failure to produce a document required for production by a notice to produce which post-dated the closure of the offer of compromise. However, the point to which the Magistrate was referring was, I think, one of slightly greater subtlety. His Honour had regard to the submissions made by Ralan that it was required to consider the offer of compromise before the final evidence in the case had been provided and in circumstances where, "the carpark failed to provide the video of which it had sole control that would support or contradict the allegations the carpark made."
In the hearing before me, Ralan accepts that it did have access, well before the offer was made, to the video which ultimately was in evidence at the hearing. However, that video showed only the moments immediately before the Subaru began to roll down the ramp. Ralan's point, arising from evidence given at the hearing, was that any greater segment of footage had not been searched for or made available to it, with the result that it had no basis before the hearing for assessing which of the two defendants to the action might be responsible for the fact of the car commencing to roll down the ramp. That was important because, in a case where there were two potential defendants, either of whom might have been to blame, Ralan had no basis in advance of the hearing for choosing between the two. Ralan had made the point in its written submissions, accepted by the Magistrate, that it was not unreasonable to reject an offer from one party where two defendants each pointed the finger at each other.
Ground 13 alleges a failure to afford procedural fairness by failure to put Secure Parking on notice of the Magistrate's potential view that it was responsible for delay in the proceedings. The consideration of that issue is complicated by the absence of the transcript of the hearing as to costs. Mr Bennett, who appears for Ralan today and appeared for Ralan in the court below, has stated from the bar table that the question of delay was raised in oral submissions, after which Secure Parking had an opportunity to put on written submissions. Separately, the question of delay was raised in written submissions postdating Secure Parking's written submissions. Secure Parking sought no opportunity to respond to those submissions. I do not think the ground of denial of procedural fairness appears to have sufficient prospects of success to warrant a grant of leave on that ground alone.
Finally, ground 14 alleges a failure to give reasons. For the reasons I have already stated, I consider that, whilst it may be accepted that the Magistrate did not expressly refer to the particular rule brought into play by the failure to accept the offer of compromise, it is clear enough, reading the reasons fairly as a whole, together with the written submissions to which his Honour expressly referred, that his Honour did apply the right test. I consider his Honour's reasons to have been comprehensive and cogent.
For those reasons I do not think there is sufficient merit in any of the proposed grounds to warrant a grant of leave.
Finally, as I have already indicated, the third consideration to which I have had regard is the quantum involved, which is small. It may be that the quantum of costs which would have been ordered had indemnity costs been allowed would have been considerably greater than suggested by the costs order in fact made. However, for the reasons I have already indicated, in my view, the very purpose of the practice note is to address the expectations of parties in that respect. For those reasons, I consider that leave to appeal should be refused. It follows that the leave sought in the cross summons should also be refused. It will be necessary to hear the parties as to the costs of today's hearing.
ORDERS:
1. Leave to appeal sought in the summons refused; summons dismissed;
2. Leave to appeal sought in the cross-summons refused; cross-summons dismissed.
[2]
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Decision last updated: 14 May 2018