Chapman v Colson

1. [1]

   HER HONOUR: The plaintiff seeks to appeal the whole of the decision made by her Honour Magistrate Mary Ryan in the Moss Vale Local Court on 22 May 2014.

2. [2]

   By amended summons dated 10 February 2015 (filed at the hearing), the plaintiff seeks an order firstly, that if necessary, leave be granted to appeal from that part of the decision below relating to costs, in addition to the appeal by right as to the balance of the decision; secondly, that the appeal be allowed; thirdly, that the orders made by the Local Court in proceedings 2013/1886898 on 22 May 2014 be set aside, and in lieu thereof, judgment for the defendant in the Local Court proceedings and that the plaintiff in those proceedings pay the defendant in those proceedings costs.

3. [3]

   The plaintiff in these proceedings is Richard Gregory Chapman who was the defendant in the Local Court proceedings. The defendant in these proceedings is Robert Thomas Colson who was the plaintiff in the Local Court proceedings. Mr Chapman relied upon two affidavits of his solicitor, Geoffrey Walkom dated 16 June 2014 and 30 July 2014. Mr Colson relied on an affidavit of his solicitor, Richard Reading, dated 9 February 2015. As the plaintiff in these proceedings was the defendant in the Local Court and the defendant was the plaintiff in the Local Court, for convenience I shall refer to the parties by name.

4. [4]

   On 22 May 2014, the Magistrate ordered Mr Chapman to pay $50,000 to Mr Colson plus interest from 30 November 2012 to date.

The appeal

1. [5]

   Section 39 of the Local Court Act 2007 (NSW) provides that a party who is dissatisfied with a judgment or order of the Local Court may appeal to the Supreme Court, but only on a question of law.

2. [6]

   Section 40(1) of the Local Court Act provides that a party who is dissatisfied with a judgment or order of the Local Court may appeal to the Supreme Court on a ground that involves a question of mixed law and fact, but only by leave of the Supreme Court.

3. [7]

   Section 41(1) of the Local Court Act provides that this Court may determine an appeal either (a) by varying the terms of the judgment or order, or (b) by setting aside the judgment or order, or (c) by setting aside the judgment or order and remitting the matter to the Local Court for determination in accordance with the Supreme Court’s directions, or (d) by dismissing the appeal.

The Local Court proceedings

1. [8]

   On 18 December 2013, Mr Colson filed an amended statement of claim in the Local Court, Moss Vale. It pleaded:

2. [9]

   On 17 January 2014, Mr Chapman filed an amended defence. At [5] Mr Chapman pleaded:

3. [10]

   This amended defence was prepared by his solicitor, Harry Couchman of Southern Legal. Mr Chapman had raised a limitation defence. It was an issue in dispute to be determined at trial.

The limitation period – the correct position

1. [11]

   It was not in dispute that Mr Colson made the loan of $50,000 in 1999. What was in dispute was who Mr Colson made the loan to. Mr Colson’s case is that he made the loan solely to Mr Chapman. Mr Chapman denies this and asserts that Mr Colson made the loan to his now ex-wife, Janet Colson, not to him. Janet Colson is Mr Colson’s daughter. The undisputed evidence is that the monies were advanced in 1999.

2. [12]

   Section 14 of the Limitation Act 1969 (NSW) relevantly reads:

3. [13]

   It is settled law that a loan expressed to be repayable on demand is repayable at once, without the need for any demand. Further, a demand is not a condition precedent to a right to an action for recovery of the debt and accordingly, the limitation period commences on the date when the loan was made.

4. [14]

   In Young v Queensland Trustees Limited [1956] HCA 51; (1956) 99 CLR 560, the High Court said at [10]:

5. [15]

   In Woodward v McGregor [2003] NSWSC 672, Master McLaughlin said at [83]:

6. [16]

   Master McLaughlin continued at [85]:

7. [17]

   In Ki Bun Kwon v Kun Il Cha [2013] NSWSC 1372 at [17], White J applied the decision of Young v Queensland Trustees Limited. His Honour stated:

8. [18]

   It is common ground between the parties that a person who claims repayment of a loan, payable upon demand, has only six years from the date of the loan in which to bring proceedings for its recovery. As the loan funds were advanced in 1999, Mr Colson’s cause of action became statute barred by the end of 2005 at the latest. Had Mr Chapman argued his limitation defence at trial, the Magistrate may have held that Mr Colson’s cause of action was not maintainable at law and that Mr Chapman was entitled to judgment in his favour.

The hearing in the Local Court on 14 May 2014

1. [19]

   At the Local Court hearing, which took place before the Magistrate at the Local Court Moss Vale on 14 May 2014, Mr Colson relied on his affidavit dated 4 March 2014 and the affidavit of his daughter Janet Lee Colson sworn 7 March 2015. Mr Chapman relied on his affidavit dated 8 April 2014. This affidavit had also been prepared by his solicitor.

2. [20]

   The Magistrate identified what were the issues to be resolved. They were firstly, whether there was a loan of $50,000 made to Mr Chapman and/or to Janet Colson by Robert Colson for the purpose of assisting in the purchase of a home in 1999; secondly, how that loan was paid; thirdly, how the consent orders made between Ms Colson and Mr Chapman on 17 December 2008 were significant; and finally, whether Mr Colson’s claim was statute barred.

3. [21]

   Mr Colson was represented at the hearing by his solicitor Mr Reading. When the matter was first called, Mr Harry Couchman initially appeared on behalf of Mr Chapman but sought leave of the Court to withdraw. The Magistrate granted Mr Couchman leave. Mr Chapman appeared before the Court without legal representation (Aff, Mr Reading 10/02/2015 at [8] to [11]).

4. [22]

   In order to examine what happened to Mr Chapman’s limitation defence at the hearing in the Local Court, it is necessary to reproduce some of the transcript.

5. [23]

   At the outset, the parties outlined their cases at (T 1-4) as follows:

6. [24]

   Both Mr Colson’s affidavits were then tendered into evidence and admitted without objection. Mr Colson was cross examined. Janet Colson was not required for cross examination (although Mr Chapman was given the option of an adjournment in order for Ms Colson to come to court for cross examination). Mr Chapman’s affidavit was read in evidence (except paragraphs 5, 6, 8 and 16 which were rejected). Mr Chapman was cross examined.

7. [25]

   There was only one further mention of the limitation period. It occurred towards the end of the hearing when Mr Reading was making submissions (T 51.27-30). He asked:

8. [26]

   Neither party made any closing submissions on the limitation ground.

9. [27]

   On 22 May 2014, the Magistrate delivered judgment. She stated:

10. [28]

    The limitation ground referred to in this appeal was not mentioned in the Magistrate’s reasons for her decision.

The grounds of appeal

1. [29]

   Mr Chapman appeals from the whole of the decision of the Magistrate on four main grounds:

   1. (1)

      That the Magistrate erred in law by failing to give any reason for rejecting his reliance on s 14(1) of the Limitation Act as a defence to Mr Colson’s claim (“the limitation ground”);

   2. (2)

      That the Magistrate erred in law by failing in her reasons to identify the limitation ground as an issue to be determined in the case despite the fact it had been pleaded in the defence;

   3. (3)

      That the Magistrate erred in law by failing to dismiss the proceedings as not being maintainable as a result of the limitation ground in circumstances where on Mr Colson’s own case and on the facts found by the Magistrate: (a) the agreement relied upon to ground his cause of action was oral; (b) the agreement was entered into in 1999; (c) the agreement constituted a simple loan repayable on demand; and (d) the proceedings in the Local Court were not commenced until 2013; and

   4. (4)

      The Magistrate denied the plaintiff procedural fairness.

2. [30]

   It is convenient that I deal with Grounds 1 to 3 together and then Ground 4, which all involve the limitation issue.

(1) The limitation issue

1. [31]

   In oral submissions before this Court, counsel for Mr Colson highlighted two passages of the transcript, namely, where the Magistrate told Mr Chapman that Mr Reading “is an officer of the Court and he will assist the Court as best he can”, and then where the Magistrate asked Mr Reading for his submissions on the limitation defence. Mr Reading submitted at T 3.38 that:

2. [32]

   The Magistrate agreed with this proposition by saying, “Well that’s immediately, that has come to my mind, is the cause of action couldn’t possibly start when the loan was made, or if it was in fact a loan.”

3. [33]

   Counsel for Mr Chapman submitted that both the submissions at the hearing, (relating to the law applicable to the limitation defence made by Mr Colson’s solicitor) and the Magistrate’s comments were clearly erroneous, and misled Mr Chapman so that he was not put in a position to make an effective choice. Counsel submitted that it was most improbable that the Magistrate, if aware as to the correct application of the law relating to the running of the limitation period, would have taken Mr Chapman to have conceded the issue if that is what this Court finds occurred from the exchange referred to in the transcript.

4. [34]

   Counsel for Mr Chapman asserts that he [Mr Chapman] responded at T 4.21:

5. [35]

   Counsel for Mr Chapman further submitted that a fair minded observer would come to the view that in the circumstances of this case, the interests of justice dictate that Mr Chapman should be allowed to rely on the limitation ground pleaded in his amended defence.

6. [36]

   Counsel for Mr Colson submitted that, contrary to counsel for Mr Chapman’s submissions, it was clear that Mr Chapman had long held that position about his defence, and was not influenced by Mr Reading’s submission on the bases that:

7. [37]

   Consequently, counsel for Mr Colson submitted that it was not necessary for the Magistrate to give any further consideration to Mr Chapman’s reliance on the limitation ground. The Magistrate was entitled to accept Mr Chapman’s statement to the Court as a clear statement of how he wished to conduct his defence, and it is clear that she did so. It was for this reason that the Magistrate did not require Mr Reading to address her on the limitation ground. As the Magistrate made no decision to reject Mr Chapman’s reliance on the limitation ground, counsel for Mr Colson said it was not incumbent on her to give any reasons, as she had made no decision that required reasons, and that this ground of appeal must fail.

8. [38]

   Mr Chapman had received legal advice in relation to the limitation issue from his solicitor when the defence was drafted. That solicitor also prepared the affidavit that Mr Chapman relied upon at the hearing. It was only at court on the morning of the hearing before the Magistrate that the solicitor ceased to act for him.

9. [39]

   Before the limitation issue was raised by the Magistrate, Mr Chapman had outlined his case in a nutshell as: “the money was gifted to Janet, my ex-wife, by her father” and “there was money given but it was not given or lent to me, it was entirely to Janet”. When Mr Chapman was asked whether he had a copy of s 14 of the Limitation Act, he replied, “I feel like I’m a boat with no sail out in the ocean at the moment.” A copy of the relevant section was given to him.

10. [40]

    The Magistrate explained to Mr Chapman, “the Court will do their best to assist you but I’m not a lawyer in respect to I don’t assist anybody that appears before me with legal advice” and that she could only tell him “the best [she] could the processes involved.” The Magistrate informed Mr Chapman that Mr Reading was an officer of the Court and that he would assist the Court as best he could, given that Mr Chapman was unrepresented. It was after these statements were made that the two passages highlighted by counsel for Mr Chapman took place. The solicitor and the Magistrate’s view as to when time started to run was uninformed by legal authority and as it turns out, was incorrect.

11. [41]

    Mr Chapman then was asked whether he had his amended defence in Court. He acknowledged that he did not have either his defence or amended defence with him. Mr Chapman informed the Magistrate that his former solicitor had advised him that he (his then solicitor) wanted to rely on the limitation period to “make the case go away”. Critically, Mr Chapman then said, “And I said to him at the time, which I’ll say now, ‘To me that looks like we’re just trying to avoid something through legality. I don’t want to avoid it through some legal loophole like a statute of time, it’s not’.” Mr Chapman then reiterated what he told the Magistrate at the outset, “it didn’t happen, I didn’t get a loan.” Mr Chapman then said, “So why am I trying to find a loophole to get rid of it. So if it pleases you I’m happy to just get rid of that right now, go on evidence.” The Magistrate then stated, “All right. Well we’re not then going to rely on that particular cause.”

12. [42]

    In my view, Mr Chapman, informed by legal advice, made an election to abandon his limitation issue. He was aware that his solicitor had advised him to rely upon it yet chose not to do so. At the hearing, the Magistrate confirmed that “we” [being the Court and the parties] are not going to rely on the limitation “cause”. The hearing proceeded on the basis that the limitation point was no longer in issue.

13. [43]

    The comments of Basten JA in Moon v Mun [2013] NSWCA 217 have particular relevance. According to Basten JA at [11]:

14. [44]

    As the limitation issue was abandoned, it is my view that it was not incumbent on the Magistrate to identify it in her reasons as an issue to be determined (Ground 2). It follows that the Magistrate is not required to give specific reasons for rejecting Mr Chapman’s reliance on s 14(1) (Ground 1). Her Honour was not obliged to dismiss the proceedings on the basis of the limitation issue that was not fully argued (Ground 3). These grounds of appeal fail.

(4) Procedural fairness

1. [45]

   The fourth ground is that the Magistrate denied Mr Chapman procedural fairness in that she failed to inform him (an unrepresented litigant) that:

Procedural Fairness in the Local Court

1. [46]

   In relation to procedural fairness, in Kioa v West [1985] HCA 81; (1985) 159 CLR 550 Mason J (at 584-585) made the well-known statements that the law had developed to a point where it may be accepted that there is a common law duty to act fairly, in the sense of according procedural fairness, in the making of administrative decisions which affect rights, interests and legitimate expectations, subject only to the clear manifestation of a contrary statutory intention. Procedural fairness is a notion of a flexible obligation to adopt fair procedures, which are appropriate and adapted to the circumstances of the particular case. Whether there is a denial of procedural fairness depends on the circumstances in each case.

2. [47]

   In Re Minister for Immigration & Multicultural Affairs; Ex parte Lam [2003] HCA 6; (2003) 214 CLR 1, the High Court discussed the manner in which procedural fairness cases are approached by the courts. Gleeson CJ (at 14, [37]) stated:

3. [48]

   In Kojima Australia Pty Ltd v Australian Chinese Newspapers Pty Ltd [2000] NSWSC 1153 and Wakim v Mathiew Pty Ltd t/as Dove Migration Services [2002] NSWSC 405, O'Keefe J (as 23-24 and at 20-21 respectively) made essentially identical observations on natural justice, now referred to as procedural fairness. His Honour in referring to the Local Court stated:

4. [49]

   Mr Chapman referred to the comments of Beazley JA in Hamod v State of New South Wales [2011] NSWCA 375 at 309 where her Honour stated:

5. [50]

   Mr Chapman further submitted that the comments made by Mr Colson’s solicitor and the Magistrate were such so as to not provide him with an “effective choice” when given the option to press his limitation ground defence.

6. [51]

   It was also argued under this ground of appeal that the comments of Mr Reading and the Magistrate mislead Mr Chapman into withdrawing a defence that he would otherwise have relied upon.

7. [52]

   According to Mahoney JA in The Commonwealth v Dixon (1988) 13 NSWLR 601 at 619:

8. [53]

   In McKain v RW Miller and Company (South Australia) Pty Ltd [1991] HCA 56; (1991) 174 CLR 1, Gaudron J stated at 57 that the effect of limitations is that “It affords protection to a defendant to the extent that it is called in aid and made out …”.

9. [54]

   It is my view that the comments of Mr Reading or the Magistrate did not have the effect of misleading Mr Chapman. As referred to earlier, Mr Chapman made it clear that he had instructed his solicitor not to pursue grounds of defence that involved “…some legal loophole like a statute of time…”. It is clear that Mr Chapman therefore never intended to rely upon a defence of limitation grounds and made a positive decision to abandon it.

10. [55]

    During the highlighted exchange, the Magistrate gave Mr Chapman the opportunity to rely on the limitation ground as a valid defence.

11. [56]

    Mr Chapman’s informed decision to abandon the limitation ground from his defence eliminates the protection referred to by Gaudron J that would otherwise be afforded. While the Court has an obligation to afford procedural fairness as outlined above, it does not extend to ensuring that a party makes the correct decision. It is my view that, in all the circumstances, the Magistrate acted judicially; dealt with the matter for decision without bias; gave each party the opportunity to adequately present their case; observed the procedural and other rules provided for in the relevant statute and came to her decision with that sense of responsibility that is the necessary accompaniment of the duty to do justice.

Should this Court on appeal entertain the limitation ground of defence?

1. [57]

   In Metwally v University of Wollongong [1985] HCA 28; (1985) 60 ALR 68 at 71, the High Court (in the joint judgment of Gibbs CJ, Mason, Wilson, Brennan, Deane and Dawson JJ) stated:

2. [58]

   The High Court cited this principle with approval in Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1 and Whisprun Pty Ltd v Dixon [2003] HCA 48; (2003) 200 ALR 447.

3. [59]

   So far as an appeal from a decision of the Local Court is concerned, in Tanwar Enterprises Pty Ltd v Bradshaw [2013] NSWSC 1276, Bellew J at [105] said:

4. [60]

   Counsel for Mr Chapman submitted that it would be in the interest of justice to allow Mr Chapman to now rely on that defence in this appeal given the following circumstances:

5. [61]

   Counsel for Mr Colson contended that Mr Chapman is not entitled to raise, in this appeal, the limitation ground because the Magistrate did not err and the statutory provisions conferring the appellate powers do not extend to the running of a ground not pursued at the trial. Counsel for Mr Colson further submitted that all the authorities assert that it would only be in truly exceptional circumstances that, if the Court has jurisdiction to do so under the Act conferring the right of appeal, an appeal court may allow a party to raise a point that was available but was not taken at the trial.

6. [62]

   According to Mr Colson, the present case is not such an exceptional circumstance that would justify this court allowing Mr Chapman to raise the limitation ground at this time and, that Tanwar Enterprises at [27] does not advance Mr Chapman’s case. He argued that this is not a case where a simple submission was not put in the court below. The entirety of the limitation ground point was conceded at the hearing in the Local Court, and this is a strong factor tending against allowing the ground to be raised on appeal: see Robinson v Campbell (No 2) (1992) 30 NSWLR 503.

7. [63]

   The Magistrate understood that Mr Chapman had abandoned his limitation point and said so. The hearing proceeded on the basis that the limitation point was not an issue at the hearing. No questions were asked on the limitation issue. It was only briefly mentioned in closing submissions by the solicitor for Mr Colson to confirm that the point had been abandoned.

8. [64]

   Mr Chapman did not simply forget to make a submission to the Court. He made a positive decision to abandon the limitation ground. The hearing proceeded on that basis.

9. [65]

   Had the limitation issue remained, counsel for Mr Colson submitted that his case may have been run differently. He may have relied upon s 54(1) and s 68A of the Limitation Act. So far as s 54(1) of the Limitation Act is concerned, Mr Colson said he may have argued that the limitation period had been postponed. S 54(1) reads:

10. [66]

    Mr Colson submitted that he could have argued that the parties had a conversation which acknowledged the existence of the debt. At [5.7] of Mr Colson's affidavit he deposed to the following conversation with Mr Chapman.

11. [67]

    At the hearing in the Local Court, Mr Chapman’s counsel may have elected to cross examine Mr Colson about this conversation and the evidence given may have assisted.

12. [68]

    Mr Colson's argument is that the limitation period that ran prior to this confirmation would not count towards the overall limitation period. However, in order to raise such an argument, the acknowledgement has to be in writing and signed by the maker under s 54(4), and this does not appear to have occurred.

13. [69]

    As previously stated, Mr Chapman raised the limitation defence in the amended defence at [5]. Essentially, it pleads that if he [Mr Chapman] is determined to be indebted to Mr Colson (as he was), then any action by Mr Colson to recover any moneys owed is statute barred by s 14(1) of the Limitation Act.

14. [70]

    In response Mr Colson says he could have argued in the Local Court that s 14(1) of the Limitation Act operates to bar a cause of action, but does not confer an automatic right of extinguishment upon the Court. The actual extinguishment of a cause of action is achieved through s 63(1) of the Limitation Act.

15. [71]

    Section 63(1) reads:

16. [72]

    Mr Colson’s argument continues that in order to achieve this extinguishment, s 63(1) must be read in conjunction with s 68A of the Limitation Act.

17. [73]

    Section 68A(1) reads:

18. [74]

    It is Mr Colson's submission that the effect of s 68A is that a party will not get the benefit of s 63 unless it has "pleaded or otherwise appropriately claimed" that the relevant right or title has been extinguished.

19. [75]

    In order to comply with s 68A, rule 14.29 of the Uniform Civil Procedure Rules 2005 (NSW) provides that a claim may be made by affidavit or by notice.

20. [76]

    Mr Colson says he would have argued that given that neither the statue bar under s 14(1), nor extinguishment under s 63 (1), operate automatically, Mr Chapman's failure to invoke either or both of these provisions would have permitted the Magistrate to consider Mr Colson’s claim without regard to any limitation defence.

21. [77]

    While these arguments appear to be weak, I am not in a position to say with certainty that Mr Colson would not have run his case differently had the limitation point remained in issue at the hearing in the Local Court.

22. [78]

    It is my view that in these circumstances, Mr Chapman cannot now rely on the limitation defence. The result is that the appeal is dismissed.

23. [79]

    The decision of her Honour Magistrate Ryan dated 22 May 2014 is affirmed. The amended summons filed 10 February 2015 is dismissed.

24. [80]

    Costs are discretionary. Costs usually follow the event. The plaintiff is to pay the defendant’s costs as agreed or assessed.