Verhagen & Anor v Millard [2013] QCA 122

SUPREME COURT OF QUEENSLAND

CITATION: Verhagen & Anor v Millard [2013] QCA 122

PARTIES: PETER EDWARD ANTHONY VERHAGEN (first applicant) WILLHELMINA VERHAGEN (second applicant) v WAYNE STANLEY MILLARD (respondent)

FILE NO/S: Appeal No 8129 of 2012 DC No 3647 of 2010

DIVISION: Court of Appeal

PROCEEDING: Application for Leave s 118 DCA (Civil)

ORIGINATING COURT: District Court at Brisbane

DELIVERED ON: 21 May 2013

DELIVERED AT: Brisbane

HEARING DATE: 20 February 2013

JUDGES: Margaret McMurdo P and Atkinson and Martin JJ Separate reasons for judgment of each member of the Court, each concurring as to the order made

ORDER: Leave to appeal is refused with costs.

CATCHWORDS: APPEAL AND NEW TRIAL – APPEAL - PRACTICE AND PROCEDURE – QUEENSLAND – WHEN APPEAL LIES – BY LEAVE OF COURT – GENERALLY – where the present applicants were granted judgment in a prior proceeding for a debt owed to them by the present respondents under a business sale contract – where the applicants contended that they were entitled to indemnity costs – where the presiding judge in the prior proceeding held that the applicants were entitled to costs on the standard basis only – where the applicants did not seek leave to appeal that costs order – where the applicants and respondent subsequently entered into a compromise agreement pursuant to which the respondent agreed to pay into trust the difference between the costs on the standard basis and indemnity costs and then to litigate as to the entitlement to that amount – where the respondent subsequently disputed the enforceability of the compromise agreement – where the applicants commenced fresh proceedings – where the primary judge held that the compromise agreement was, in part, void as contrary to the public interest in finality of litigation as it required the respondent to re-litigate an issue already determined in the prior proceedings – where the applicants seek leave to appeal the judgment of the primary judge – where the applicants contend that the appeal raises important issues of law about the similarities and differences between costs orders made by a court and antecedent contractual arrangements concerning the cost of legal work – whether leave to appeal should be granted / District Court of Queensland Act 1967 (Qld), s 118 / Uniform Civil Procedure Rules 1999 (Qld), pt 5 / Abigroup Limited v Sandtara Pty Limited [2002] NSWCA 45, distinguished ACI Operations Pty Ltd v Bawden [2002] QCA 286, cited Cooper & Anor v Jezer Construction Group Pty Ltd [2003] QCA 335, cited D'Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1; [2005] HCA 12, cited Millard v Verhagen & Anor [2008] QDC 182, related Millard v Verhagen & Anor, unreported, District Court of Queensland, Tutt DCJ, DC No 1398 of 2007, 3 October 2008, related Vertzayias v King [2011] NSWCA 215, distinguished

COUNSEL: P Hackett for the applicants N H Ferrett for the respondent

SOLICITORS: Colwell Wright Solicitors for the applicants Forbes Dowling Lawyers for the respondent

1. MARGARET McMURDO P: This application for leave to appeal under s 118 District Court of Queensland Act 1967 (Qld) has its genesis in an earlier action before his Honour Judge Tutt in 2008. Although that proceeding was commenced by the present respondent, the present applicants claimed the respondent owed them a debt under a business sale contract secured by a mortgage over the respondent's real property. Judge Tutt gave judgment for the applicants in the sum of $16,382 plus interest and dismissed the respondent's counterclaim.¹ The applicants contended that they were entitled as the successful parties to indemnity costs of the action on either of two bases. First, they were entitled to indemnity costs under the terms of the contract and mortgage. Alternatively, they were entitled to indemnity costs under the Uniform Civil Procedure Rules 1999 (Qld) (UCPR) because of their solicitors' correspondence with the respondent's solicitors exchanging offers to settle.²

2. Judge Tutt found that:

"On a review of the submissions made and in the exercise of my discretion I find that [the applicants] are entitled to their costs of and incidental to the proceeding on the standard basis only as I am not satisfied that the terms of the business contract and/or mortgage are sufficiently clear to enable the court to find, that the costs incurred by the [applicants] in claiming relief under the terms of the business contract and/or mortgage, should be awarded on the indemnity basis."³

3. His Honour also found that any offer contained in the correspondence between the parties did not satisfy the requirements of pt 5 of the UCPR.⁴ His Honour ordered that the respondent pay the applicants' costs, but only on the standard basis.

4. The applicants did not seek leave to appeal from that costs order. On 22 October 2008, the applicants' solicitors wrote to the respondent's solicitors in these terms:

"… As the time for our client can Appeal [sic] ends 30 October 2008, our client's [sic] have elected to exercise their rights pursuant to the loan agreements rather than incur further costs, and considerable delays to take the above course."⁵

5. The applicants' solicitors again wrote to the respondent's solicitors on 22 October 2008 in terms which included:

"Our clients maintain their right [to] have all of the costs they incur, to recover the debt, pursuant to the Sale of Business Contract and the Mortgage, (The loan agreements) payable on the basis pursuant to a client agreement we have with our client. (Full indemnity costs)

Our client is prepared to allow your client to refinance or sell the property, (providing of course there is sufficient to pay the first, and second mortgagee). On the following basis:

1.Your client pays our clients judgment [sic] and the interest as per the Order.

…"⁶

6. In these negotiations relating to the release of the applicants' mortgage over the respondent's property, the applicants continued to assert a contractual entitlement to a full indemnity for their costs in relation to the proceedings before Judge Tutt. The respondent accepted⁷ the applicants' written offer to release the mortgage which contained the following relevant terms:

"2.[The respondent] arranges and pays for an assessment of the costs of proceedings on the District Court Scale. (The scale costs).

3.[The respondent] pays all other costs on the Full indemnity costs basis.

4.The difference between the scale costs and the full indemnity costs for the proceedings is paid on settlement into the Trust account of [the applicants' solicitors]. (The retained amount).

…

6.[The respondent] will then [be] at liberty to give Notice and commence further proceedings pursuant to the Trust Act. For a determination as to whether the [respondent is] entitled to the retained amount."⁸

7. The respondent disputed the enforceability of those terms and denied any obligation under them. The disputed amount of $35,290.75 was paid into trust and the applicants provided a release of the mortgage. The applicants brought a fresh action against the respondent which was heard by Judge Andrews over two days in late May 2011 with written submissions delivered on 10 June 2011.

8. His Honour delivered his reasons in July 2012 and on 9 August 2012 made orders declaring that the amount due and owing by the respondent to the applicants as at 16 September 2009 was $6,803.16 and that the amount of $35,290.75 paid by the respondent into the applicants' solicitors' trust account, plus accretions, is held on trust:

"(a)for the [applicants] to the extent of $6,803.16 being the amount owing to them by the [respondent] together with 19.28% of any accretions; and

(b)otherwise for the [respondent]."⁹

9. The applicants contend that they should have leave to appeal from those orders under s 118 because their proposed grounds of appeal raise important issues of law about the similarities and differences between costs orders made by a court and antecedent contractual arrangements concerning the cost of legal work. This Court heard submissions addressing the merits of the proposed grounds of appeal at the hearing of the application for leave.

10. If granted leave to appeal, the applicants' grounds of appeal would be:

"1.The learned Judge erred in law in determining that terms 4 and 6 of the 'compromise agreement' constituted an agreement by the parties to re-litigate the costs issue between them previously determined by Judge Tutt, and accordingly contravened a public policy, because the decision of Judge Tutt did not determine the appellants' rights as to costs under the antecedent business sale contract and mortgage between the parties.

2.The learned Judge erred in determining that the respondent was willing and able to tender the amount due on 31 March 2009 because:

(a)as a result of the error identified in ground 1 the learned Judge failed, by omitting from his assessment any amount required to be paid under term 4 of the 'compromise agreement', to assess the respondent's willingness and ability by reference to the correct amount of money he was required to pay;

(b)had the respondent's willingness and ability been assessed on that basis, the evidence established that the respondent was not willing and able, or alternatively was insufficient to establish such a willingness and ability.

3.The learned Judge's [sic] erred in fact in finding that the respondent was willing and able to tender the amount due on 31 March 2009.

4.As a result of the errors identified above, the learned Judge erred in finding that legal costs incurred by the appellants after 31 March 2009 were not recoverable by the appellants pursuant to clause 4 of the mortgage."¹⁰

11. It is therefore necessary, in considering the merits of proposed grounds 1, 2 and 4, to review Judge Andrews' reasons as to the construction of terms 4 and 6 of the compromise agreement.¹¹ Judge Andrews identified the central issue as whether the compromise agreement between the parties was void on a public policy basis.¹² Although the applicants were not asking for indemnity costs of the earlier proceeding before Judge Tutt, if the terms of the compromise agreement required the parties to re-litigate a point previously decided by a court, the compromise agreement was void.¹³

12. Judge Andrews construed term 6 of the compromise agreement in this way:

"A proper inference from term 6 is that the [respondent] loses access to the funds placed in trust unless and until he obtains relief from a court establishing the [respondent's] title to those funds, for example, by a declaration that the [applicants] are not entitled to the funds. The only arguable defence against the [respondent's] claim to those funds can have been that the [applicants] have a better title because they have a contractual right to have the costs of the earlier proceeding assessed on an indemnity basis and paid to them. That issue has been determined against them by Judge Tutt. By term 6 the parties created a means for the [applicants] to reargue their right to the funds in spite of the decision against them, and in spite of their election to abandon an appeal against that decision."¹⁴

13. After referring to the High Court's observations in D'Orta-Ekenaike v Victoria Legal Aid,¹⁵ Judge Andrews accepted the respondent's submission that there is a public interest in the finality of litigation and that litigants should not be permitted to re-litigate a decided issue. The practical effect of terms 4 and 6 of the compromise agreement was that the only way the respondent could retrieve from the trust fund the difference between standard and indemnity costs of the proceedings before Judge Tutt was to re-litigate that point which Judge Tutt had already determined in the respondent's favour.¹⁶ Terms 4 and 6 of the compromise agreement contravened public policy.¹⁷

14. Ordinarily, leave to appeal under s 118 will be granted only to correct an error of law resulting in an injustice or where some other issue warranting the grant of leave is identified, such as important question of law engaging the public interest: see ACI Operations Pty Ltd v Bawden¹⁸ and Cooper & Anor v Jezer Construction Group Pty Ltd.¹⁹

15. The applicants have not persuaded me that their proposed grounds of appeal 1, 2 and 4²⁰ can be made out. Judge Tutt's reasons²¹ make sufficiently clear that his Honour was rejecting the applicants' claim for indemnity costs both under the contract and mortgage and in exercising his general discretion as to awarding the costs of the action before him. For that reason, cases such as Vertzayias v King²² and Abigroup Limited v Sandtara Pty Limited²³ and the authorities there cited are plainly distinguishable. The applicants elected not to seek leave from Judge Tutt's order. Perhaps they were cognisant that, whilst the order was unusual in light of the terms of the contract and mortgage, it is notoriously difficult to succeed in an appeal from a costs order, even if leave to appeal is granted. But in any case, they did not appeal and Judge Tutt's 2008 order stands until set aside. As Judge Andrews identified, terms 4 and 6 of the compromise agreement amounted to an attempt by the applicants to circumvent Judge Tutt's order and offended against the public policy interest in the finality and authority of court orders. The applicants have not demonstrated that their proposed grounds of appeal 1, 2 and 4 have real prospects of success.

ORDER:

Leave to appeal is refused with costs.

18. ATKINSON J: I agree with the reasons of the President and the order she proposes.

19. MARTIN J: I agree with the President.

Footnotes

1. Millard v Verhagen & Anor [2008] QDC 182. ↩

2. Millard v Verhagen & Anor, unreported, District Court of Queensland, Tutt DCJ, DC No 1398 of 2007, 3 October 2008, [3]-[4]. ↩

3. Above, [6]. ↩

4. Above, [7]. ↩

5. AB 235. ↩

6. AB 236. ↩

7. AB 238. ↩

8. AB 236. ↩

9. AB 448. ↩

10. Amended proposed Notice of Appeal, handed up at the appeal hearing. ↩

11. Set out at [6] of these reasons. ↩

12. Verhagen & Anor v Millard [2012] QDC 196, [99]. ↩

13. Above, [110]. ↩

14. Above, [114]. ↩