The background to the present dispute can be gleaned from the primary judge's reasons in the District Court, which were tendered by the applicants as part of the record of proceedings in that Court (Exhibit A) and an affidavit of Mr Christopher Oliver, the sole director of Optima, sworn on 31 March 2014 which was tendered by Optima in these proceedings and admitted, subject to relevance, as Exhibit 2. Transcripts of the Local Court proceedings on 24 September 2013, 18 December 2013 and 29 April 2014 and of the District Court proceedings on 19 June 2014 were tendered by Optima and admitted, again subject to relevance, as Exhibit 1.
The applicants (the second of whom is a solicitor) were the defendants in proceedings commenced on 25 July 2013 by Optima, a town planning consultant, in the Local Court of New South Wales at Woy Woy (2013/00226100). In its statement of claim, Optima claimed the sum of $8,879.80 (comprising $8,679.80 plus service and filing fees) in a short form money count for work done and materials provided to the applicants at their request. Relevantly, the jurisdictional limit of the Local Court sitting in its Small Claims Division is $10,000 (s 29(1)(b) of the Local Court Act 2007 (NSW)).
The applicants filed a defence dated 28 August 2013, denying Optima's claim. In answer to the whole of the statement of claim the applicants asserted (at [6(a)]) that the claim for relief was not particularised and that the claim should be dismissed. However, no strike-out application seems to have been brought by the applicants (and nowhere was the basis of any substantive defence to the claim made apparent).
Optima then filed a notice of motion, seeking (as so described by his Honour Magistrate Day on 24 September 2013 on the hearing of that motion) an order that the defence be struck out and thereafter the entry of judgment and costs. In support of that application, Mr Oliver swore an affidavit on 13 September 2013 in support thereof, which became an exhibit to the later affidavit which is Exhibit 2 in these proceedings.
Optima's notice of motion was returnable before his Honour Magistrate Day on 24 September 2013, on which occasion a further affidavit of Mr Oliver, sworn that day, was filed in Court. There was no appearance by the applicants when the matter was called and his Honour then proceeded on an ex parte basis. From the transcript of proceedings on 24 September 2013, it appears that his Honour had reference to Mr Oliver's affidavit of 13 September 2013, in which Mr Oliver had deposed to receipt of an email of 3 June 2013 in which it was said the applicants had made admissions as to their indebtedness to Optima. The text of the email is set out in the primary judge's reasons at [20]. His Honour Magistrate Day struck out the defence as being "totally without merits" (his short oral reasons stating that the affidavits made it plain that there had been an acknowledgment of debt in correspondence between the defendant company and its director and the plaintiff company).
I note that the transcript does not record that any order for judgment in favour of Optima was pronounced on that occasion although all parties (and the magistrate) appear thereafter to have acted on the basis that the striking out of the defence amounted to the giving of judgment in Optima's favour. Nothing ultimately turns on this given that an order for judgment was later entered (part of Exhibit A) on 8 October 2013. It recorded the date of judgment as being 24 September 2013.
It is accepted by Optima that, after the conclusion of the proceedings on 24 September 2013, when Mr Oliver and his solicitor were in the Court registry, a lawyer representing the applicants arrived and sought their consent to have the matter re-listed on the basis that she had only just received the brief. No such consent was forthcoming.
The next step (noted by the primary judge at [28] of his reasons) was the filing by the applicants on 4 October 2013 of a notice of motion seeking a stay of the judgment entered on 24 September 2013 and an order setting aside that judgment. (The primary judge referred to the 24 September 2013 judgment in this context as a default judgment, which strictly speaking it may have been since the effect of the striking out of the defence was that there was then no defence answering Optima's claim, but the magistrate himself subsequently made clear that he regarded this as a summary judgment. Again, nothing ultimately turns on the distinction in my opinion.)
Subsequently, and before the applicants' motion was returnable, on 8 October 2013 an order for judgment in the amount of $9,643.16 inclusive of costs was entered by the Local Court Registry against the applicants and in favour of Optima. The terms of judgment/order described this as "[d]efault judgement [sic] entered". It seems to be a mystery as to how this order came to be entered. Optima's legal representative informed this Court that no application for entry of judgment had been made by it.
On 22 October 2013, the applicants' notice of motion seeking to set aside the summary judgment was listed before another magistrate in the Local Court (his Honour Magistrate Chicken) who ordered that the matter be listed for determination before his Honour Magistrate Day (see [30] of the primary judge's reasons).
On 5 November 2013, his Honour Magistrate Day heard arguments by the applicants and stood the matter over to be heard before him on 18 December 2013, requesting that transcript of the proceedings on 24 September 2013 be made available (see [31] of the primary judge's reasons and [13] of Mr Oliver's affidavit (Exhibit 2)).
On 18 December 2013, his Honour Magistrate Day heard argument on the applicants' motion, referred to two affidavits that had been filed for the applicants (one, his Honour indicated, raising the applicants' complaints as to procedural fairness and another complaining about lack of particularisation of Optima's claim) and again concluded that, in light of the earlier acknowledgement of indebtedness, the defence was without merit. The lawyer appearing for the applicants on that occasion made clear that he had limited instructions from his clients. From the transcript of the proceedings on that occasion, nothing seems to have been foreshadowed as to the substance of any defence to the claim, the applicants' legal representative simply informing his Honour that the defence was "quite valuable" to Ms Bechara and noting that she would be "interested" in the opportunity to amend the defence or at least to reconsider the defence.
The transcript of proceedings on that date records that his Honour referred to what had occurred on 24 September 2013 and that in that context his Honour said: "The judgment that was entered was striking out of the defence and judgment being entered. … It's not a default judgment".
When the issue of costs was raised (by his Honour), Optima's solicitor sought an assessment of costs on an indemnity basis. There followed a debate (in which the applicants' legal representative apparently did not seek to participate) as to that aspect of the matter. His Honour suggested that there was no power to set aside the costs order he had already made on 24 September 2013 but indicated that he was prepared to make costs orders in respect of the three other appearances on an indemnity basis. His Honour further indicated that the section under which he considered the assessment would be made was s 208 of the Legal Profession Act 2004 (NSW) (which it is clear was incorrect). His Honour assessed the costs, based on the information provided by Optima's legal representative as to those costs, at $8,000.
His Honour then proceeded to pronounce judgment for Optima in the sum of $10,624.16 (which, from his Honour's reasons comprised damages of $9,843.16 and contractual interest of $781.00) and separately awarded costs in the sum of $8,000 "under the Legal Profession Act". (In so doing it seems that there was a typographical error in the principal amount; Optima accepts that it should have been $9,643.16 not $9,843.16.) His Honour raised, but immediately dismissed, the possibility of ordering that the judgment be entered forthwith and then dissolved a stay which had apparently been granted in the interim in respect of the 24 September 2013 judgment.
Pausing there, read literally what his Honour pronounced on 18 December 2013 was a second judgment in the same proceedings, there already being an extant judgment in favour of Optima (formally entered by the Local Court Registry on 8 October 2013). Optima's position during the course of the present application varied but ultimately it contended that what had occurred on 18 December 2013 was that his Honour had implicitly varied the earlier judgment such that the amount of that judgment was subsumed in the 18 December 2013 judgment or had implicitly set aside the earlier judgment. It does not contend (at least at this stage) that there are two judgments that could separately be enforced for amounts totalling close to $30,000.
Returning to the chronology, on 9 January 2014 the applicants filed a summons in the District Court commencing the appeal that in due course was heard and determined by the primary judge (see [38] of his Honour's reasons). The primary judge goes on to note that on 24 January 2014, Optima's solicitor wrote to the Local Court Registry stating that the notice of order issued after the 18 December 2013 hearing did not reflect what had occurred (pointing to the error referred to at [21] above and other matters) ([39]). His Honour noted that Optima's solicitor sought amendments to the order under the "slip rule" (Uniform Civil Procedure Rules 2005 (NSW) ('UCPR'), r 36.17).
On 18 February 2014, a registrar of the Local Court stayed the Local Court proceedings until the determination of the District Court proceedings ([42] of his Honour's reasons).
The primary judge records (at [43]) that on 11 April 2014, Optima filed a notice of motion in the Local Court at Woy Woy seeking orders that the proceedings be transferred from the Small Claims List to the General List in the Court; that the Registrar's orders made in chambers on 18 February 2014 (i.e., that there be a stay of the Local Court proceedings until the appeal to the District Court had been determined) be vacated; that the judgment "entered on 24 September 2013 be re-instated" and that pursuant to UCPR r 36.17 judgment for Optima be entered in the amount of $18,470.26 by an application of the slip rule. His Honour noted (at [44]) that that amended sum comprised $8,679.80 as liquidated damages pursuant to the statement of claim filed, $218.00 for service and filing fees, $745.36 for solicitors' costs to 24 September 2013, contractual interest to 18 December 2013 of $827.10, and indemnity costs to 18 December 2013 of $8,000.
The primary judge noted (at [45]) that:
The purpose of the transfer of the proceedings between divisions related to jurisdictional limits. There was no impediment to entry of judgment beyond the applicable limit, recovery of an amount in excess of the limit is another matter: Richards v Cornford [2010] NSWCA 99. In order for there to be recovery of an amount in excess of the applicable limit, the proceedings had to be transferred to the General Division of the Local Court. That was an extra-curial administrative matter to be determined by the Court. The Magistrate's notes confirms [sic] this to be so: Exhibit "1", pages 22-24.
It is not clear to what "Magistrate's notes" this paragraph of his Honour's reasons refers. No such notes were in evidence before this Court.
What next followed, as noted by the primary judge (at [46]-[47]), was that the second applicant in the present proceedings wrote to the Local Court and then directly to his Honour Magistrate Day (on 22 and 27 April 2014 respectively) conveying her view that Optima's motion was an abuse of process. His Honour extracted in his reasons part of the letter to his Honour Magistrate Day in which Ms Bechara informed his Honour of the pending District Court appeal from his Honour's judgment on 18 December 2013 and that "the Defendants consider that it would be prejudicial to their position to appear before [his Honour] on 28 April 2014 [sic] and accordingly there will be no appearance by or on behalf of either Defendants".
On 29 April 2014, the matter came back before his Honour Magistrate Day. There was (as had been foreshadowed by Ms Bechara) no appearance by or on behalf of the applicants. On that occasion, the transcript records that Optima's legal representative informed his Honour that there was some doubt as to his Honour's power at the time to make the costs order due to a conflict between the rules relating to the Small Claims Division and s 98 of the Civil Procedure Act 2005 (NSW). (I interpose to note that in the present proceedings Optima's same legal representative concedes that there is no doubt as to this issue, i.e., that there is no power in the Local Court, sitting in its Small Claims Division, to award indemnity costs. That concession is clearly correct - see s 37 of the Local Court Act, read with r 2.9 of the Local Court Rules 2009 (NSW). It is unfortunate that this was not appreciated or conveyed to his Honour at an earlier time.)
Optima's legal representative then explained that, rather than run an argument on that issue, "what we seek to do is ask your Honour to transfer it to the General Division where there can be absolutely no doubt about your Honour's powers in relation to costs including indemnity costs". At first, his Honour expressed some doubt as to whether it was too late to transfer the matter to the General Division, there having already been a final judgment. Optima's legal representative submitted that there was power to do so pursuant to r 36.17 of the UCPR (the slip rule) on the basis that this "probably should have happened on the day" and that neither his Honour nor Optima's legal representative had perceived the problem at the time - thus there was "some sort of act or omission that some sort of error or omission that falls within the slip rule". The error which his Honour appears to have understood Optima's legal representative to be identifying as the basis for the applicability of the slip rule (and which its representative conceded) was that there should have been an application made to transfer the matter to the General Division (once it was realised that the amount exceeded $10,000).
The transcript records that his Honour said:
Well I must admit I proceeded on the basis that we were, I didn't avert my thinking to small claims necessarily and the limitation on costs because quite plainly I was not inclined to limit your client's right to recover his costs where there had been quite plainly and blatantly a vexatious defence.
In the course of debate, his Honour himself noted that the other way of looking at the matter was that he was simply acting ultra vires when making the indemnity costs order.
His Honour proceeded to give oral reasons for granting Optima's motion, including its application for the proceedings to be transferred to the General Division. Those reasons commenced with reference to the slip rule, included the statement that the judgment given was a summary (not default) judgment because the defence was completely lacking in merit and was vexatious and an embarrassment; and went on as follows:
Because of the conduct of the defendant it seemed to me that it was appropriate to order indemnity. That order was an exercise of my discretion. It is plain that in coming to that conclusion that there should be an indemnity cost order. I was in fact transferring the matter out of the Small Claims Division and into the General Division so that I could make that order because that was my intention. It was a matter that should be subject to an order under s 98 of the Civil Procedure Act (2005) [sic] , because of the conduct of the defendant in those proceedings and the need to indemnify the plaintiff who had been completely successful and the need to ensure that the plaintiff, having been subject to a vexatious and embarrassing defence, should at least recover as much as possible of his costs as I could order.
Accordingly I formed the view that I had exercised my discretion at that time to transfer the matter but failed to make a formal order doing so.
I was aware at that time and I remain aware that it is not a proper exercise as a slip rule where I would need to exercise my discretion now. I am not doing that now, I am considering that it must have been the case. That even though it does not appear in the transcript, that I would exercise to do so.
Further, it is plain that there were arithmetical errors and/or clerical errors in the entry of the summary judgment in the calculation of the interest and there is a plain error in the minute of judgment with respect to the indemnity cost order. Indemnity cost [sic] not ordered under the provisions of the Legal Profession Act they were ordered under the Civil Procedure Act. For an indemnity cost order to be made it can only be made under that provision.
His Honour then made orders in the following terms:
(1) The matter be transferred to the General Division of [the Local] Court with effect from 24 September 2013.
(2) The correct sum in the summary Judgement no [sic] $9,643.16 and not $9,843.16.
(3) The correct sum for interest is $827.10 and not $781.00.
(4) That indemnity costs were awarded under section 98 of the Civil Procedure Act 2005, and not assessed under s.208 of the Legal Profession Act of 2004.
(5) That Further [sic] interest arises under the contract from 24 September 2013, to be calculated by the Registrar.
(6) Respondent pay the applicants [sic] costs of the motions as agrees [sic] or assessed.
(7) Stay set aside.
The notice of orders made on that date that was issued by the Local Court Registry included an order for judgment in the sum of $18,966.35, which included interest of $1,323.19 and costs in the amount of $8000.00.
Following this decision an amended summons was filed in the District Court adding to the decisions appealed from the decision on 29 April 2014.
[2]
Proceedings in the District Court
The applicants' appeal from the various Local Court decisions was heard over the course of four different days, there being delay in the provision of transcript as well as delay on the part of the appellants in that court (see [4]-[5] of his Honour's reasons).
His Honour noted that the grounds of appeal were limited to a complaint as to lack of jurisdiction for the decision under appeal and a complaint as to the alleged denial of procedural fairness ([7]) and that certain other appeal grounds were abandoned by the applicants (grounds 5, 6 and 11(b); see [53] and [54]).
His Honour concluded that the complaints of denial of procedural fairness were without merit: that the applicants had left it too late to arrange timely representation on 24 September 2013; that they had failed properly to instruct their legal representative for the 18 December 2013 hearing; and that they had chosen not to attend the hearing on 29 April 2014 (see [57] - [65]). There is no challenge on this judicial review application to any aspect of his Honour's determination of that issue.
As to the question of jurisdiction, his Honour considered that there was jurisdiction under UCPR r 36.17 for the making of the orders on 29 April 2014 "to correct matters of record relating to the orders on 18 December 2013". His Honour noted that the Local Court had power to transfer proceedings from one division to another and stated that the magistrate had "determined that such a transfer was necessary to give effect to the orders that had been made" ([68]). His Honour considered that this was "a mechanical exercise that did not affect the validity of the orders made" ([69]). His Honour did not accept the submission that the transfer represented a material change that was ultra vires and void ab initio. His Honour dismissed the appeal with costs.
[3]
Prefatory remarks
As noted earlier, the jurisdictional limit of the Local Court sitting in its Small Claims Division is $10,000 (s 29(1)(b) of the Local Court Act). By s 30(4) of the Local Court Act, interest up to judgment pursuant to the Civil Procedure Act is to be disregarded for the purposes of the ascertainment of the amount of the claim. The applicants' claim when the Local Court proceedings were commenced was thus within the jurisdictional limit of the Small Claims Division and there was no suggestion that the proceedings were not properly commenced in that division.
Section 37 of the Local Court Act provides that, except as provided by the rules, the Local Court sitting in its Small Claims Division has no power to award costs. Rule 2.9(3) of the Local Court Rules provides that the maximum amount of costs that may be awarded to a party under sub-rule (2) (which permits the making of orders for costs where, inter alia, proceedings are discontinued or dismissed, or a defence is struck out, at a pre-trial review or at a hearing) is the amount of costs that would be allowable on entry of default judgment in the proceedings. That amount is $872 (see Sch 2 Pt 3 of the Legal Profession Regulation 2005 (NSW)). Section 98 of the Civil Procedure Act cannot be relied upon as permitting the award of costs for a greater amount than provided under the Local Court Rules in the Small Claims Division because it is an excluded provision with respect to civil matters in that division (see Sch 1 to the UCPR).
In the present proceedings Optima now concedes, as noted earlier, that there is no power for a Local Court magistrate to make an award of indemnity costs in a matter heard in the Small Claims Division. It follows that the indemnity costs order was not made within jurisdiction unless the slip rule was enlivened and the order made on 29 April 2014 transferring the proceedings to the General Division with effect from 24 September 2013 was valid.
Optima concedes that if the slip rule could not be relied upon to permit the order to transfer the proceedings to the General Division with effect from 24 September 2013 then its position in this judicial review application is untenable and the applicants' challenge to the District Court decision in these proceedings must succeed. In that event, however, Optima would seek for the matter to be remitted to the District Court solely for determination of the issue as to what orders should be made for the costs of those proceedings. The applicants' position, in that event, is that they are bound by the 24 September 2013 judgment (which is no longer the subject of any challenge).
As can be seen from the above, the subject matter of the dispute in the present proceedings is solely costs: whether the indemnity costs order made on 18 December 2013 can stand and, if not, what should be the appropriate orders in respect of the costs of the District Court proceedings. So understood, this is unfortunately yet another case where the dispute as to costs appears to have completely overshadowed any dispute there was as to the original claim. (I say "any" dispute because the correspondence to which both the magistrate and the primary judge referred did not suggest that there was any dispute as to indebtedness; rather, the suggestion in that correspondence was that the applicants were experiencing a cash flow difficulty.)
Neither party is blameless in this respect. The applicants chose to plead the defence as they did; did not apparently assert any substantive defence; and they seem to have taken a cavalier attitude to attendance at court hearings - conduct that led the magistrate to conclude that their defence was vexatious and embarrassing and that an indemnity costs order was warranted. Although they concede that they are bound by the orders made on 24 September 2013, it seems that no attempt has been made to comply with those orders (or, as could have occurred, for the undisputed debt to be paid into court pending determination of the District Court or these proceedings). For its part, Optima seems to have led his Honour into error in making a costs order that (as its lawyer should have realised and is now conceded) was outside the jurisdiction of the Local Court sitting in its Small Claims Division.
[4]
Determination
The determination of the present proceedings can be relatively shortly dealt with.
Unless and until an order was made to transfer the proceedings to the General Division, it is clear that there was no power to make the indemnity costs order. The relevant provisions in relation to the transfer of proceedings between divisions in the Local Court are to be found in Div 2 of Pt 2 of the Local Court Rules:
Division 2 Transfer of proceedings
2.2 Transfer of proceedings from Small Claims Division to General Division: jurisdictional limit exceeded
Proceedings are to be transferred to the Court's General Division if a cross-claim is made in the proceedings for an amount exceeding the jurisdictional limit of the Court's Small Claims Division.
Note. As at the commencement of these rules, the jurisdictional limit of the Court sitting in its Small Claims Division was $10,000.
2.3 Transfer of proceedings from Small Claims Division to General Division: complexity, difficulty or importance of matters in dispute
(1) The Court may, on the application of a party or of its own motion, transfer proceedings to the Court's General Division if, at any time before judgment is given, the Court is of the opinion that the matters in dispute are so complex or difficult, or are of such importance, that the proceedings ought more properly to be heard in the Court's General Division.
(2) The Court may, on the application of a party or of its own motion, transfer proceedings that have been transferred to the Court's General Division under subrule (1) back to its Small Claims Division if the Court considers it appropriate to do so.
(3) An application for proceedings to be transferred under subrule (1) or (2) may not be made by a party to the proceedings later than 28 days before the day fixed for the trial of the proceedings.
Optima concedes that r 2.2 could not apply on the facts of this case, as there was no cross-claim made in the proceedings for an amount exceeding the jurisdictional limit of the Small Claims Division.
The time in which an application by Optima to transfer the proceedings could have been made had effectively expired as at both 18 December 2013 (when it says it omitted to make a transfer application) and 29 April 2014 (the date on which the transfer order was made) having regard to r 2.3(3) which precludes the making of such an application by a party any later than 28 days before the matter is fixed for trial. Once judgment had been given in the proceedings (as it was either on 24 September 2013 or, more likely, on 8 October 2013 when it was formally entered) there remained nothing to be listed for trial. In any event, one of the pre-conditions for the making of a transfer order (r 2.3(1)) was that the Court form the requisite opinion (as to the complexity, difficulty or importance of the matters in dispute) at a time before judgment was given. It is hard to see any complexity or difficulty in what was before his Honour on 24 September 2013.
What the rules contemplate is the transfer of "proceedings", not some separate question (such as costs) in proceedings that have otherwise already been determined. Any other conclusion would subvert the statutory limitations on the power of the Local Court to make costs orders in the Small Claims Division (see in this regard Clarke v Bailey (1993) 30 NSWLR 556).
Optima, however, argues that it was open to the magistrate to make a transfer order nunc pro tunc with effect on and from 24 September 2013.
The applicants contend that an order may be made nunc pro tunc only if the Court is satisfied that it is only doing now what it would have done then (referring to what was said by Lord Eldon in Donne v Lewis (1805) 11 Ves Jun 601 at 601; 32 ER 1221 at 1222 and by members of the High Court in Emanuele v Australian Securities and Investments Commission [1997] HCA 20; (1997) 188 CLR 114. In Donne v Lewis, Lord Eldon did not, however, say that this was the only circumstance in which such an order might be made; simply that in such a circumstance an order would be made. More support for the applicants' position can be gleaned from Emanuele. There, Dawson J, at 125, distinguished between matters that were procedural and matters which went to jurisdiction (see also Kirby J at 142).
Reference is also made by the applicants to Star-Kist Foods Inc v Canada (Register of Trade Marks) (1988) 20 CPR (3d) 46 for the proposition that the procedure is not available to permit amendment of the record to show an action which did not occur at a previous date.
It has not been suggested that there would have been any basis as at 24 September 2013 for the matter to be transferred to the General Division. There was nothing said to be complex or difficult (or of importance) about the short form money claim for work done and materials provided. No application for indemnity costs was adverted to or made on that occasion.
Had such an application been made on 18 December 2013 (after the entry of summary, or perhaps default, judgment on 24 September 2013) this would have required the existing judgment first to have been set aside and then for the magistrate to have turned his mind to whether he was satisfied of the matters required by r 2.3(1) and to have exercised his discretion on that date. There is nothing (other than his Honour's later ex post facto observations) to suggest that that occurred.
The difficulty in the present case is that his Honour relied on the slip rule to make the transfer order. To the extent that reference can be made to the transcript of the proceedings on 29 April 2014, it is tolerably clear that the purpose of making the transfer order was solely in order to cloak the Local Court in jurisdiction to make the indemnity costs order. There is no statutory provision (as there is in relation to the jurisdictional limit of the General Division pursuant to s 31 of the Local Court Act) whereby the jurisdiction of the Small Claims Division may be increased (the equivalent provision in the District Court Act having been considered in Richards v Cornford [2010] NSWCA 99; (2010) 76 NSWLR 572).
The validity of the indemnity costs order turns on whether the slip rule was enlivened or properly exercised in the present case. In my opinion it is clear that it was not.
True it is that there was at least one arithmetical error in the judgment pronounced on 18 December 2013 (that being the principal debt component which was overstated by $200). True is it also that his Honour's reference to an assessment under s 208 of the Legal Profession Act must have been in error (since that section does not relate to the assessment of costs). The description of the 24 September 2013 judgment as a default judgment in the October 2013 minute of order was also pointed to by Optima in this regard. However, the relevant error identified by Optima (and apparently accepted by the magistrate) was an error in failing to make a transfer application (or the omission to make such an order).
The submission by Optima that the actions of the magistrate "were implied and mechanical" amounts to nothing more than a submission that, because there was no jurisdiction to make an indemnity costs order in the Small Claims Division, it must be inferred that his Honour intended on that occasion, before making such a costs order, to transfer the matter to a Division in which there would be jurisdiction to make such an order.
Although Optima's solicitor disavowed any suggestion that the slip rule permits correction to cloak the court with jurisdiction to make an order that the magistrate had decided to make, that is precisely the manner in which the slip rule was utilised in this case.
There was no dispute between the parties as to the relevant principles applicable to and limitations on the exercise of jurisdiction under the slip rule or its common law equivalent. Both sides referred (as did the magistrate in his reasons on 29 April 2014) to Storey & Keers Pty Ltd & Anor v Johnstone (1987) 9 NSWLR 446. There, McHugh JA (at 449) referred to the inherent power of the Courts of Common Law and the Court of Chancery to correct any clerical mistake or error in a judgment or order if it was the result of an accidental slip or omission (referring to Lawrie v Lees (1881) 7 App Cas 19 at 34-35). His Honour there noted that:
The dividing line between a mistake or error which is the result of an accidental slip or omission and a mistake or error which is the product of a deliberate decision has often been difficult to draw.
What is also accepted by both parties in the present case is that the slip rule is not applicable where it involves the exercise of an independent discretion not exercised at the time in question. In Storey & Keers, (at 453) McHugh JA said that the rationale of the slip rule requires that an omission or mistake should not be treated as accidental if the proposed amendment requires the exercise of an independent discretion or is a matter upon which a real difference of opinion might exist.
Optima places weight on what was said by the magistrate in his oral reasons on 29 April 2014 as establishing that the slip rule was correctly exercised, namely the statement that it was his intention to award indemnity costs and that he was "in fact transferring" the matter at that time.
However, as was made clear in Newmont Yandal Operations Pty Ltd v J. Aron Corporation & The Goldman Sachs Group, Inc & 3 Ors [2007] NSWCA 195; (2007) 70 NSWLR 411 (at [91]), what is required to be determined is the objective intention of the relevant decision maker. There, Spigelman CJ (at [95]), referring to ex post facto observations made by the judge who had made the orders there in question, emphasised that "[a]nything a judge, even the same judge, says about what s/he would do to correct the original orders is no more than evidentiary and may not even be admissible over objection".
In the present case, transcript of what was said on 29 April 2014 was admitted, subject to relevance, without objection. To the extent that what was said is relevant at all in determining the objective intention of the magistrate on 18 December 2013, when the oral reasons are read in the light of the preceding debates it is difficult to avoid the conclusion that this was an ex post facto justification for what had earlier been done and was by then recognised to have been done beyond the jurisdiction of the Court. This is the kind of ex post facto justification for exercise of the slip rule of the kind recognised in Mutual Shipping Corp of New York v Bayshore Shipping Co [1985] 1 All ER 520, at 530 as impermissible. Donaldson MR there said that:
It is the distinction between having second thoughts or intentions and correcting an award or judgment to give true effect to first thoughts or intentions, which creates the problem. Neither an arbitrator nor a judge can make any claim to infallibility. If he assesses the evidence wrongly or misconstrues or misappreciates the law, the resulting award or judgment will be erroneous, but it cannot be corrected … The remedy is to appeal, if a right of appeal exists. The skilled arbitrator or judge may be tempted to describe this as accidental slip, but this is a natural form of self-exculpation. It is not an accidental slip. It is an intended decision which the arbitrator or judge later accepts as having been erroneous. (my emphasis)
The slip rule does not permit the making of a correction solely for the purpose of expanding jurisdiction. In the context of considering the power of correction in the Arbitration Act 1889 (UK), which permitted correction of errors "arising from any accidental slip or omission", Rowlatt J in Sutherland & Co v Hannevig Bros Ltd [1921] 1 KB 336 held that the addition of particular words to the arbitrator's award to make clear that a particular amount was included within the amount covered by the award was an impermissible assumption of jurisdiction to expound the award and said:
Here we get upon ground which is almost metaphysical. An accidental slip occurs when something is wrongly put in by accident, and an accidental omission occurs when something is left out by accident. What is an accident in this connection, an accident affecting the expression of a man's thought?
…
I cannot pretend to give a formula which will cover every case, but in this case there was nothing omitted by accident: the arbitrator wrote down exactly what he intended to write down, though it is doubtful what that really meant when considered from a legal point of view. But what the arbitrator has really done here is to assume a jurisdiction to expound what he had purposely written down, and that, I think, he cannot do. … A man may inadvertently put down a word which if he had thought more about the matter he would have put down differently, but that means that he has merely gone wrong. I think that in substance the arbitrator took upon himself to insert an exposition of his words, because he found the words he had used not so well chosen as they might have been if chosen deliberately. The motion must be allowed and the award set aside. (my emphasis) (at 341)
In Bentley v O'Sullivan [1925] WN 95, in a not dissimilar fact situation, the exercise by a special referee of the English equivalent of the slip rule to amend a judgment to add the words "on the High Court scale", when he had not originally certified that costs were to be taxed on the High Court scale, was held to be outside the slip rule because the referee had acted deliberately in making the relevant order and had only later realised that in making his original order it was not carrying out his intention.
The objective intention of the magistrate as at 18 December 2013 was to make an indemnity costs order. There is nothing to suggest that his objective intention at that time was, first, to set aside the existing judgment and then to transfer the matter to the General Division for hearing (nor that he adverted on the earlier occasion to the jurisdictional limit on costs orders in that division). This is not a case where the slip rule was enlivened. The orders made on 18 December 2013, insofar as they went beyond correcting the numerical error in the 24 September 2013 orders, were beyond the power of the Local Court in its Small Claims Division and the orders made on 29 April 2014 purporting to correct the problem (once it was realised that there was in fact no jurisdiction in the Small Claims Division to make such an order) were also beyond jurisdiction.
Accordingly, the primary judge made an error of law that is evident on the face of his reasons in dismissing the applicants' appeal.
The judgment of the District Court should be quashed. In light of the acknowledgment of the applicants that they are bound by the September 2013 judgment (on which interest at Court rates will have run since September 2013), and the small amount of money involved, the matter should only be remitted to the District Court on the question of the costs of the District Court proceedings and of the Local Court proceedings.
As to the costs in this Court, Optima submitted that in the event that the application for judicial review were to succeed, it should nevertheless not be ordered to pay the whole of the costs of the application because, as originally framed, these proceedings sought leave to appeal from the District Court decision inter alia on the question of procedural fairness. In the circumstances, the appropriate way to recognise the history of the proceedings in this Court is to dismiss the summons seeking leave to appeal with costs and to make an order that Optima pay the applicants the costs of their application for judicial review (which has succeeded). If there is a dispute as to the quantum of costs incurred in the proceedings as first constituted that would necessarily have been incurred in the defence of the proceedings as ultimately constituted, that is a matter for the assessment of the costs in due course.
The orders I therefore propose are as follows:
1. Dismiss the applicants' summons seeking leave to appeal with costs.
2. Order that the decision made on 19 December 2014 by his Honour Judge Levy in the District Court be quashed.
3. Order that the proceedings be remitted to the District Court solely on the question as to the costs of the proceedings in the District Court and of the Local Court proceedings.
4. Direct that otherwise the appeal from the decisions of his Honour Magistrate Day made on 18 December 2013 and 29 April 2014 (with the exception of the correction to the amount of the principal damages from $9,843.16 to $9,643.16) be allowed.
5. Order that the respondent pay the applicants' costs of their summons seeking judicial review of the decision made on 19 December 2014.
LEEMING JA: Ward JA has concluded that the judgment of the District Court dismissing the applicants' appeal from the Local Court must be quashed for error of law on the face of the record. I agree with her Honour's reasons and proposed orders. In particular, I agree that the District Court's judgment discloses error of law on the face of the record for failing to find that the Local Court lacked power retrospectively to transfer the proceedings from the Small Claims Division to the General Division, months after a final judgment had been entered, for the purpose of supplying power for orders which it had not been authorised to make.
Two matters prompt me to provide the following supplementary reasons. First, I have concluded that there are errors, including jurisdictional error, additional to that found by Ward JA. Secondly, the misconceptions advanced by the parties and their lawyers in the courts below, some of which found favour in the Local Court and District Court, are of general importance and may be recurring, perhaps because it is relatively seldom that civil proceedings in the Local Court are reviewed in this Court.
This application is ultimately founded upon an order for costs in the amount of $8,000. There is no dispute now that such an order could not be made in the Small Claims Division of the Local Court in which Optima had commenced proceedings, although Optima had sought the order and later submitted, wrongly, that "you could argue either way" whether or not there was power. There also seems to be no dispute that the applicants owed, and have not paid, a debt of $9,643.16 which was the subject of the original judgment against them. The fact that it has taken until now for that level of consensus to be reached, after days of hearings in the Local Court and the District Court, not to mention a failed application for security for costs in this Court - in the extraordinary amount of $100,000 (see Tonab Investments Pty Ltd v Optima Developments Pty Ltd [2015] NSWCA 205 at [8]) - says much about the disregard of the obligations imposed by s 56 of the Civil Procedure Act 2005 (NSW) upon the parties and the lawyers retained by them in the Local Court and the District Court.
[5]
The Local Court's orders of 24 September 2013
Optima commenced proceedings in the Small Claims Division of the Local Court. On 24 September 2013, Optima moved to strike out the defence and thereafter enter judgment and costs against Tonab and Ms Bechara. The defence was struck out as being without merit, in the absence of an appearance on behalf of the defendants. A judgment certificate, signed by the registrar, and stating, "Default judgment entered", was issued in the amount of $9,643.16 on 8 October 2013. The certificate states that the orders were made on 24 September 2013.
Perhaps surprisingly, there was a live debate in this Court as to precisely what occurred on 24 September 2013. The transcript was to the effect that the defence was struck out and no other orders made. That said, there are references in the evidence to a motion seeking default judgment (which might be a consequence of the striking out of the defence), which is consistent with what is stated on the certificate. However, it was said by Optima that in fact what had occurred was a successful application for summary judgment.
None of this debate was necessary. The discrepancies between the transcript and the certificate signed by the registrar were at all times obvious. Both provided merely secondary evidence of the Local Court's orders. The orders made by the Local Court were taken to be entered when recorded in the court's computerised record system: UCPR r 36.11(2). Neither party sought to tender what had been recorded in that system, nor the notice of motion on which Optima had moved.
[6]
The Local Court's orders of 18 December 2013
An application to set aside the judgment entered in the absence of the defendants was dismissed on 18 December 2013. The learned Magistrate was persuaded to order costs in the amount of $8,000. Although the Magistrate was told that there was an extant certificate of judgment, his order was:
"I give verdict the judgment for the plaintiff in the sum of $10,624.16. I award costs to the plaintiff after assessment under the Legal Profession Act in the sum of $8,000. Which is a total of $18,624.16."
On that day, a letter from the Local Court headed "Notice of Orders Made" and signed by the Registrar, was sent to the solicitors acting for the applicants advising as follows:
"Judgment:
Maria Bechara, First Defendant
Tonab Investments Pty Limited, Second Defendant
are to pay
Optima Developments Pty Ltd, First Plaintiff
the sum of
Claim amount: $9,843.16
Interest claimed: $781.00
…
Other Costs: $8,000.00
TOTAL: $18,624.16
Costs in the amount of $8,000.00 awarded to the Plaintiff after assessment under s 208 LPA
Interest is contractual in the amount of $781.00."
Those orders were replete with errors, both minor and major, in respect of which the Magistrate did not receive the assistance of the parties to which he was entitled. There were at least two minor errors. First, there was a typographical error, in that the "claim amount" was stated to be $9,843.16, rather than the $9,643.16 in fact claimed by Optima. Secondly, it seems that there was a calculation error in the interest, which should have been $827.10, not $781.00.
Seemingly the first major error is that the orders proceeded on the basis that there could be two judgments issued from the same court between the same parties in relation to the same debt. Following the orders made on 18 December 2013, the Local Court's record appears to have shown Optima as a judgment creditor against Tonab and Ms Bechara in the amounts of $9,643.16 and $18,624.16. The latter amount, putting to one side the typographical error, included the earlier judgment debt.
Mr Maroya, who appeared for Tonab and Ms Bechara in this Court, but not below, acknowledged that there was an "irregularity", but submitted that the earlier judgment remained in force. I would not accept that submission. Instead, I would accept the submission of Mr Gallego, who has appeared at all times for Optima, that the December judgment must be read as impliedly setting aside any judgment which had been entered on 8 October 2013.
An unsuccessful application to set aside orders or a judgment made in the absence of a party will result in the dismissal of the motion, perhaps with an adverse costs order. It would not ordinarily result in a new judgment comprising the original judgment amount and a further amount attributable to costs. However, the court may, in a proper case, vary the orders or judgment made in the absence of a party. If indeed judgment had been entered on 24 September 2013, then that judgment must be taken to have been set aside - albeit impliedly - on 18 December 2013, having regard to the near identicality of the principal debt, the inclusion of amounts for interest and costs, and the impossibility of there being two valid judgments in respect of the same debt on the Local Court's record. Alternatively, if all that had occurred on 24 September 2013 was the striking out of a defence, then the issue does not arise. Either way, after 18 December 2013 there was but one judgment, namely that entered on that date in the amount of $18,624.16.
The second major error was the Court's reliance upon s 208 of the Legal Profession Act 2004 (NSW). That provision does not confer power to make a costs order.
The third major error, which was related to the second, was that there was no power to make an order for costs in the amount of $8,000, or anything like that amount. Optima had chosen to commence proceedings in the Small Claims Division of the Local Court. Section 37 of the Local Court Act 2007 (NSW) denied power to the Court to award costs, subject to what was provided by the rules. The rules made very limited provision for a costs order. Section 98 of the Civil Procedure Act did not apply to the Local Court in its Small Claims Division (s 98 was an "excluded provision" in Schedule 1 of the UCPR which was disapplied by UCPR r 1.6 in the exercise of the power contained in s 4(2) of the Civil Procedure Act).
However, the judgment in the amount of $18,624.16 was used to found a statutory demand dated 20 December 2013. When the appeal was heard, the Court was told that there had been proceedings to set aside that statutory demand, which had been resolved, but that even so, the underlying debt remained unpaid.
Appeals lie to the District Court as of right from judgments or orders of the Local Court, but their nature depends on whether the Court was sitting in its General Division or in its Small Claims Division (as to which see below). Tonab and Ms Bechara exercised their right of appeal in January 2014, and contended that the Local Court lacked jurisdiction and that they had been denied procedural fairness. The appeal was heard over a number of days between 19 June and 9 December 2014. At least some of its duration was attributable to delays in obtaining transcript from the Local Court.
[7]
The Local Court orders of 29 April 2014
Notwithstanding that the proceedings in the Local Court had been completed and an appeal to the District Court was pending, Optima, by notice of motion filed in the original proceedings in the Small Claims Division, sought orders that the proceedings be transferred from the Small Claims List to the General List. I would infer, in light of the clear articulation of error in the notice of appeal, that this was done at least in part so as to improve Optima's prospects of defending the appeal.
Optima's motion was heard on 29 April 2014, without the participation of Tonab and Ms Bechara (who wrote to the Local Court's registrar advising their view that the Local Court lacked power to determine the motion and that they would not appear). A certificate of orders made on 1 May 2014 recorded that pursuant to r 36.17 of the UCPR, "[t]he matter be transferred to the General Division of this Court with effect from 24 September 2013". Various other corrections were made (to the amount of principal judgment, to the amount of interest, and to assert that the indemnity costs were awarded under s 98 of the Civil Procedure Act, rather than being assessed under s 208 of the Legal Profession Act).
For the reasons already given, neither s 208 of the Legal Profession Act nor s 98 of the Civil Procedure Act supported the making of the costs order.
More importantly, as Ward JA has explained, the power to correct orders under UCPR 36.17 (the "slip rule") was not available so as to support a retrospective transfer of the proceedings from the Small Claims Division to the General Division. In order fully to explain why, it is helpful to turn to the way in which the Local Court has been constituted.
[8]
The jurisdiction of the Local Court
The Local Court of New South Wales is a court of record, constituted by the Local Court Act. Despite its name, it is now a single court exercising State-wide jurisdiction. (Contrast the Local Courts established pursuant to the Local Courts Act 1982 (NSW), themselves replacing Courts of Petty Sessions.) The jurisdiction of the Local Court is divided, by s 9, into a "civil jurisdiction", a "special jurisdiction" and a "criminal jurisdiction". It is the civil jurisdiction which is presently relevant. The Court is divided, by s 10, into the General Division and the Small Claims Division for the purpose of exercising its civil jurisdiction.
The Act proceeds on the basis that there are important jurisdictional differences between the exercise of civil jurisdiction in the General Division and in the Small Claims Division. First, the jurisdictional limit of the Court is $100,000 when sitting in its General Division and $10,000 when sitting in its Small Claims Division: s 29(1).
Secondly, the subject matter jurisdiction within the Court's General Division is as stated in s 30(1), while in its Small Claims Division it is as stated (more narrowly) in s 30(2). Money claims not exceeding the jurisdictional limits fall within the subject matter jurisdiction of both Divisions.
Thirdly, there are different rights of appeal. Section 39(1) gives an appeal, confined to questions of law, to the District Court from judgments in the General Division. Section 39(2) confers a more limited right of appeal, confined to lack of jurisdiction or denial of procedural fairness, from decisions of the Court's Small Claims Division.
Each of those three distinctions may fairly be described as jurisdictional. Each directly affects the Court's authority finally to decide controversies brought before it.
There are also marked differences in the Court's power. Importantly, because the subject matter of these proceedings has principally been costs, as stated above, there is only limited power to order costs when the Court is sitting in its Small Claims Division. Moreover, no judgment or final order may be made when the Court is sitting in that Division unless a magistrate or assessor has brought, or used his or her best endeavours to bring, the parties to the proceedings to a settlement acceptable to them: s 36(1).
Finally, the Act provides for a different procedural regime in the Small Claims Division. Beazley P has summarised the relatively informal procedure in the Small Claims Division of the Local Court in Charafeddine v Morgan [2014] NSWCA 74 at [5]-[7] and [30]-[31]. Without being exhaustive, the rules of evidence do not apply and there may be no cross-examination except in limited circumstances: s 35(3) and (4). Unsurprisingly, the filing fees for an originating process differ. In the second half of 2013, for a plaintiff which was a corporation, the filing fees were $444 in the General Division, and $180 in the Small Claims Division: Civil Procedure Regulation 2012, Sch 1, Pt 4.
The legislative policy is clear: relatively small claims brought in the Small Claims Division should be resolved efficiently, cheaply, relatively informally, and finally in that Division. Otherwise the legal costs will swamp the original claim.
Optima's claim fell within the subject matter jurisdiction of both the General Division and the Small Claims Division. Section 30(3) states that nothing in subsection (2) prevents proceedings falling within the jurisdiction of the Small Claims Division from being heard and determined in the Court sitting in its General Division. Contrary to what was said on its behalf when the appeal was heard, Optima had a choice. It could commence in the relatively informal and costs-free Small Claims Division, or in the General Division. It chose the former, paying a smaller filing fee, and invoking a less formal procedure.
The dispute between the parties has come about because, after succeeding in its claim, Optima sought to obtain the benefit of a costs order not available in the Division of the Local Court in which it chose to commence, contrary to the legislative policy reflected in the provisions referred to above.
[9]
The power to transfer proceedings between Divisions in the Local Court
Ward JA has reproduced rr 2.2 and 2.3 of the Local Court Rules, which govern the transfer of proceedings between the Small Claims Division and the General Division.
Contrary to Optima's submissions, the Court had no power in April 2014 to transfer the proceedings from the Small Claims Division into the General Division. Optima disavowed reliance on r 2.2 but relied on r 2.3. The exercise of power under that rule, when exercised on the application of a party, required (a) an application being made no later than 28 days before trial, (b) the Court forming the opinion that the matters in dispute were "so complex or difficult, or are of such importance, that the proceedings ought more properly to be heard in the Court's General Division", and (c) the transfer order being made "at any time before judgment is given". At no time were any of those three preconditions to the exercise of power satisfied. I would be prepared to accept that the entry of a default or summary judgment, which was subsequently set aside, would not of itself prevent the operation of the rule. But a final judgment was entered after a hearing on 18 December 2013. The application was not made until months after. There was no suggestion that the Court ever formed the requisite opinion of complexity, difficulty or importance warranting transfer, and even if it had, there was no proper basis for such an opinion.
The argument in this Court was confined to powers exercised pursuant to the rules. For completeness, I would add that, as presently advised, there could be no implied power to transfer the proceedings from the Small Claims Division to the General Division in the circumstances of this case. It is to be recalled that final orders had been entered, steps had been taken to execute those orders, and an appeal pursuant to s 39(2) had been brought. There were no pending proceedings in the Local Court which could be the subject of any power existing outside the provisions of the rules. Moreover, any such power would be inconsistent with the legislative policy reflected in the provisions governing proceedings in the Small Claims Division.
Such powers as existed in April 2014, well after the proceedings had been finally disposed of by the Local Court, were in accordance with very limited and familiar exceptions (broadly speaking, where a judgment had been procured by fraud, or pursuant to the slip rule): see Bailey v Marinoff (1971) 125 CLR 529 and Katter v Melhem [2015] NSWCA 213 at [69]-[80]. Optima relied on the "slip rule" in UCPR r 36.17. That power was available to cure the arithmetical errors in the amounts of the principal debt and interest. Each of those errors plainly amounted either to a "clerical mistake" or an "error arising from an accidental slip or omission". However, for the reasons given by Ward JA, the slip rule was not available to supply power to support the order for indemnity costs and its inclusion in the judgment amount.
[10]
The appeal to the District Court
Tonab's and Ms Bechara's appeal to the District Court included complaints that they were denied procedural fairness. That complaint was rejected by the primary judge, and no challenge was taken to that aspect of his Honour's decision in this Court.
However, the absence of power to make a costs order for $8,000 was squarely and separately advanced in the grounds of appeal in the District Court (which were amended following the orders made on 29 April 2014). The grounds included grounds 8 and 9:
"8. On 18 December 2013 the Court below made an order for costs outside its jurisdiction and is ultra vires, because the order is contrary to Rule 2.9 of the Local Court Rules.
9. On 18 December 2013 the Court below made an order for costs in the amount of $8000.00 which is outside its jurisdiction and is ultra vires, because the order is contrary to Rule 2.9(3) of the Local Court Rules which provides that the maximum amount of costs that may be awarded to a party is the amount of costs that would be allowable on entry of default judgment in the proceedings."
The grounds, as amended, also included ground 13:
"13. On 29 April 2014 the Court below entered judgment, orders and/or directions which materially changed the final judgment and orders entered by the same Court below on 18 December 2013 (which is the subject of this appeal)".
The primary judge addressed these (and cognate) grounds very concisely at [66]-[70]:
"The jurisdictional questions that arise for consideration in the appeal are contained in grounds 8, 9, 10, 11(a), 11(c), 11(d), 11(e), 11(f), 12, 13 and 14 of the amended summons filed on 12 June 2014.
Those grounds all relate to the procedural steps taken by the Court to correct matters of record relating to the orders made on 18 December 2014.
The jurisdiction of the Court to make such orders is founded upon UCPR r 36.17. The Court had power to transfer proceedings before it from one Division of the Court to another. The presiding Magistrate determined that such a transfer was necessary to give effect to the orders that had been made.
That was a mechanical exercise that did not affect the validity of the orders made. I do not accept the submission that the transfer represented a material change that was ultra vires and void ab initio, as contended by the appellants. The transfer orders made on 29 April 2014, which corrected the amounts involved to reflect the orders that were intended, was clearly within the power of the Court conferred by UCPR r 36.17.
For the above reasons, the grounds of appeal raising jurisdictional issues should be dismissed."
In the course of his Honour's reasons, there is also the following statement (at [45]):
"The purpose of the transfer of the proceedings between divisions related to jurisdictional limits. There was no impediment to entry of judgment beyond the applicable limit, recovery of an amount in excess of the limit is another matter: Richards v Cornford [2010] NSWCA 99. In order for there to be recovery of an amount in excess of the applicable limit, the proceedings had to be transferred to the General Division of the Local Court. That was an extra-curial administrative matter to be determined by the Court."
[11]
The exercise of this Court's supervisory jurisdiction
In this Court, Tonab and Ms Bechara relied on both error of law on the face of the record and jurisdictional error, but primarily the former. The two are "separate and distinct" bases for the making of orders in the nature of certiorari: Wingfoot Australia Partners Pty Ltd v Kocak [2013] HCA 43; 252 CLR 480 at [26]. No party gave appropriate regard to the limitations of the "record" for the purpose of the primary ground. Material was tendered without objection which on no view could fall within the record of the District Court, expanded as it is by reason of s 69(4) of the Supreme Court Act 1970 (NSW). However, for the reasons given by Ward JA, the failure by the primary judge to conclude that there was no power under the slip rule to make the orders on 29 April 2014 is an error of law on the face of his Honour's reasons. That error of law warrants quashing the District Court's order dismissing the appeal. (There is no privative clause which prevents a decision of the District Court in the exercise of its appellate jurisdiction from the Local Court from being quashed on this basis: see Boele v Rinbac Pty Ltd [2014] NSWCA 451; (2014) 88 NSWLR 351 at [6] and [76]; cf District Court Act 1973 (NSW), s 176 and see for example Garde v Dowd [2011] NSWCA 115; 80 NSWLR 620 at [10].)
I would add that further errors of law are apparent from the statements by the primary judge that the transfer "was a mechanical exercise that did not affect the validity of the orders made" and that the transfer "was an extra-curial administrative matter to be determined by the Court". A transfer of proceedings from the Small Claims Division to the General Division is neither a "mechanical exercise" nor an "administrative matter". A transfer of proceedings affects the procedure of the Court, the extent of its subject matter jurisdiction, the powers it has to make orders and the nature of an appeal. It has a direct impact upon the jurisdiction and powers of the Local Court the exercise of which will bind the parties to the particular proceedings. The Local Court has power to make orders when sitting in its General Division that it lacks power to make when sitting in its Small Claims Division; the order for $8,000 costs is an example. The restriction in r 2.3 on the power to transfer proceedings from the Small Claims Division to the General Division no later than 28 days prior to trial reflects, in part, an acknowledgment that it can be unfair to a party to become exposed to the different regime in the General Division in circumstances where a hearing has been set down in the Small Claims Division.
I also respectfully disagree with the statement by the primary judge that "[t]here was no impediment to entry of judgment beyond the applicable limit, recovery of an amount in excess of the limit is another matter". Richards v Cornford [2010] NSWCA 99; 76 NSWLR 572, on which his Honour relied, deals with the District Court, where statute has provided for increasing the monetary jurisdictional limits by consent. The reasoning does not apply to the Local Court, where there is no comparable statutory provision. More fundamentally, I do not agree with the posited distinction between entry of judgment and enforcement. An inferior court has no power to enter judgment in an amount exceeding its jurisdictional limits. If it did so, it would be apt to be set aside for jurisdictional error. It is not necessary to address whether any part of any such judgment could be enforced, or whether the whole is a nullity, something which was not argued in this Court, but cf Pelechowski v Registrar, Court of Appeal [1999] HCA 19; 198 CLR 435.
The District Court had jurisdiction, in determining the appeal, to make errors of law. In this country, it is clear that a court may make errors of law without constituting jurisdictional error. "[T]he ordinary jurisdiction of a court of law encompasses authority to decide questions of law, as well as questions of fact, involved in matters which it has jurisdiction to determine": Craig v South Australia (1995) 184 CLR 163 at 179; Kirk v Industrial Relations Commission (NSW) [2010] HCA 1; 239 CLR 531 at [68]. As much is apparent from the separate and distinct bases of judicial review for error of law on the face of the record and for jurisdictional error referred to above.
No substantial submissions were addressed to whether the errors of law identified above amounted to jurisdictional errors. It is not necessary to express a concluded view on that issue in order to resolve this proceeding. Even so, I have concluded that the District Court judgment discloses jurisdictional error.
In their appeal in the District Court, Tonab and Ms Bechara squarely asserted that there was no power to make orders for costs in the amount of $8,000. They relied in terms on r 2.9 of the Local Court Rules. It is plain from the transcript of the hearing on 19 June 2014 that the submission was pressed on appeal. The submission was correct.
I would accept Tonab's and Ms Bechara's submission that the failure by the primary judge to address the absence of power to make the order as to costs amounts to jurisdictional error.
In Baker v David [2015] NSWCA 235 at [24] Meagher JA said, with the agreement of McColl JA and Sackville AJA, that:
"In Whisprun Pty Ltd v Dixon [2003] HCA 48; 77 ALJR 1598 at [62]-[63] Gleeson CJ, McHugh and Gummow JJ described the trial judge's obligation properly to consider a party's case as a "paramount judicial duty". That does not mean that the judge has to deal with every argument and issue that might arise in the course of a case. However, "where an argument is substantial or an issue is significant, it is necessary to refer to and assign reasons for the rejection of the argument or the resolution of the issue": per Nettle JA (Batt and Vincent JJA agreeing) in Hunter v Transport Accident Commission [2005] VSCA 1; 43 MVR 130 at [21]."
The reason for this protracted litigation has been the order for $8,000 in costs made on 18 December 2013. The order was at all times beyond power, in a way that was readily demonstrable, which was plain on the face of the notice of appeal to the District Court and was put in submissions. Contrary to what the primary judge said at [67], the grounds of appeal did not all relate to procedural steps subsequently taken to correct matters of record after 18 December 2013. Accepting as I do that there may be difficult questions of degree, this is a case where a substantial component of the appeal was not addressed in the reasons of the primary judge at all. A failure to address a substantial component of a party's case can amount to jurisdictional error: see for recent examples Rodger v De Gelder [2015] NSWCA 211 at [89]-[96] and Buttrose v Attorney General of New South Wales [2015] NSWCA 221 at [25]. Given the prominence and importance in the circumstances of this case of the absence of power to make the $8,000 costs order, I would conclude that the decision of the court below was attended by jurisdictional error.
[12]
Orders
I agree with the orders proposed by Ward JA. So far as I can see, there is little if anything that could be said against the District Court allowing the appeal to that court in part, setting aside the judgment of 18 December 2013 to the extent that it included the $8,000, and in lieu thereof entering judgment in favour of Optima in the amount of the principal debt plus interest.
The costs of this litigation, whose subject matter is itself an order for costs, in a relatively small sum, must be many times greater than the original debt, or indeed the original costs order. That has come about in part because of the attitude of Ms Bechara (a solicitor) and her company Tonab in relying on a defence which it is now accepted does not withstand scrutiny, and advancing claims of procedural unfairness which were not established. However, it has also come about in part because Optima and its solicitor have repeatedly led the Local Court and the District Court into error.
Spending the limited public resource which is constituted by time in court, as well as the parties' private resources, in further dispute over the costs of a lengthy appeal whose subject matter was itself a small order for costs, must be avoided if it is at all possible. There is a great deal to be said, as Mr Gallego candidly acknowledged, in the parties bearing their own costs of the litigation in the District Court. But that is something which this Court cannot order, not least because what occurred over most of the four days' hearing in the District Court is not disclosed by the materials. That said, should it prove necessary for yet further time to be taken to resolve the question of costs, then it will be plain to the parties and the legal practitioners appearing for them that it is essential to bear in mind the obligations to which they are subject imposed by ss 56-59 of the Civil Procedure Act.
[13]
Amendments
25 September 2015 - Formatting
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 September 2015
(2011) 80 NSWLR 620
Katter v Melhem [2015] NSWCA 213
Kirk v Industrial Relations Commission (NSW) [2010] HCA 1; (2010) 239 CLR 531
Lawrie v Lees (1881) 7 App Cas 19
Mutual Shipping Corp of New York v Bayshore Shipping Co [1985] 1 All ER 520
Newmont Yandal Operations Pty Ltd v J. Aron Corporation & The Goldman Sachs Group, Inc & 3 Ors [2007] NSWCA 195; (2007) 70 NSWLR 411
Pelechowski v Registrar, Court of Appeal [1999] HCA 19; (1999) 198 CLR 435
Richards v Cornford [2010] NSWCA 99; (2010) 76 NSWLR 572
Rodger v De Gelder [2015] NSWCA 211
Star-Kist Foods Inc v Canada (Register of Trade Marks) (1988) 20 CPR (3d) 46
Storey & Keers Pty Ltd & Anor v Johnstone (1987) 9 NSWLR 446
Sutherland & Co v Hannevig Bros Ltd [1921] 1 KB 336
Tonab Investments Pty Ltd v Optima Developments Pty Ltd [2015] NSWCA 205
Wingfoot Australia Partners Pty Ltd v Kocak [2013] HCA 43; (2013) 252 CLR 480
Category: Principal judgment
Parties: Tonab Investments Pty Limited (First Applicant)
Maria Bechara (Second Applicant)
Optima Developments Pty Limited (First Respondent)
District Court of New South Wales (Second Respondent) (submitting appearance)
Representation: Counsel:
A Maroya (Applicants)
M Gallego (Solicitor) (First Respondent)
Solicitors:
Bechara and Company (Applicants)
Gallego Solicitor (First Respondent)
File Number(s): 2015/00014017
Publication restriction: Nil
Decision under appeal Court or tribunal: District Court of New South Wales
Jurisdiction: Civil
Citation: [2014] NSWDC 241
Date of Decision: 19 December 2014
Before: Levy SC DCJ
File Number(s): 2014/7719
[This Headnote is not to be read as part of the judgment]
The applicants (Tonab Investments Pty Ltd and Maria Bechara) were the defendants in proceedings brought by the first respondent, Optima Developments Pty Ltd ('Optima'), in the Small Claims Division of the Local Court at Woy Woy. Optima, a town planning consultancy, claimed an amount of $8, 879.80 for work done and materials provided to the applicants at their request. The jurisdictional limit of the Local Court sitting in the Small Claims Division was $10,000.
On 24 September 2013, a Local Court Magistrate struck out the applicants' defence filed in those proceedings as being totally without merit. On 8 October 2013, an order for judgment was entered in favour of Optima in an amount in excess of $9,000 which recorded the date of judgment as 24 September 2013.
On 18 December 2013, further orders were made in the proceedings including: the entry of judgment for Optima in an amount in excess of $9,000, interest on that amount, and an order for indemnity costs in the sum of $8,000. On 29 April 2014, on application by Optima, the magistrate who had heard the proceedings ordered that they be transferred from the Small Claims Division to the General Division of the Local Court with effect from 24 September 2013. In so doing, the magistrate purported to exercise power under rule 36.17 of the Uniform Civil Procedure Rules 2005 (NSW) (the slip rule).
The applicants appealed to the District Court, contending that the magistrate had acted outside the jurisdiction of the Court, first, by ordering indemnity costs and, second, by ordering that the proceedings be transferred after judgment was given. Their appeal was dismissed with costs. The primary judge held that the magistrate had jurisdiction under the slip rule to make the orders transferring the proceedings.
The applicants applied to the Court of Appeal for judicial review pursuant to s 69 of the Supreme Court Act 1970 (NSW), seeking an order in the nature of certiorari to quash the decision in the District Court and to remit the matter to the District Court, or alternatively, the Local Court, for determination according to law. The applicants contended that the primary judge, in dismissing their appeal, committed either a jurisdictional error or an error of law on the face of the record.
On hearing of the judicial review application, Optima conceded that there was no power for the Local Court to order indemnity costs in a matter heard in the Small Claims Division and that, if the slip rule was not enlivened, the District Court appeal should have been allowed. In turn, the applicants conceded that they remained bound by the initial judgment made against them.
Held, quashing the decision and remitting the proceedings to the District Court solely on the question of costs:
1. The power to correct orders under the slip rule was not enlivened retrospectively to permit the transfer of the proceedings (per Ward JA at [58],[69]; Meagher JA agreeing at [1]; Leeming JA agreeing at [107]). The slip rule does not permit the making of a correction solely for the purpose of expanding jurisdiction (per Ward JA at [67]).
Sutherland & Co v Hannevig Bros Ltd [1921] 1 KB 336 referred to.
1. The primary judge made an error of law evident on the face of the record in dismissing the applicants' appeal. The orders made on 29 April 2014 purporting retrospectively to transfer the proceedings from the Small Claims Division to the General Division were beyond jurisdiction (per Ward JA at [69], [70]; Meagher JA agreeing at [1]; Leeming JA agreeing at [74]).
2. The primary judge made errors of law evident from statements that the transfer of proceedings from the Small Claims Division to the General Division is a "mechanical exercise" and an "administrative matter." A transfer of proceedings from the Small Claims Division to the General Division affects the procedure of the Court, the extent of its subject matter jurisdiction, the powers to make orders and the nature of an appeal. It has a direct impact upon the jurisdiction and powers of the Local Court (Leeming JA at [114]; Meagher JA agreeing at [1]).
3. The primary judge fell into jurisdictional error in failing to address the absence of power of the Local Court in the Small Claims Division to make the indemnity costs order, that being a substantial component of the appeal (Leeming JA at [119], [122]; Meagher JA agreeing at [1]).
Baker v David [2015] NSWCA 235; Rodger v De Gelder [2015] NSWCA 211; Buttrose v Attorney General of New South Wales [2015] NSWCA 221 referred to.