Clutch & Brake Australia Pty Ltd v Khamis

1. [1]

   HER HONOUR: By summons filed 8 December 2017, the plaintiff seeks orders firstly, that leave be granted to appeal from the whole of the decision below; secondly, the appeal be allowed; thirdly, that the determination of the Review Panel dated 29 September 2017 be set aside; and fourthly, that the determination of the costs assessor made on 8 April 2017 be substituted and determine that the plaintiff’s costs are $16,161.47.

2. [2]

   The plaintiff is Clutch & Brake Australia Pty Ltd. The first defendant is Monica Khamis. The second defendant is Old No 7 Transport Pty Limited. The third defendant is Matthew Damian Cornwall. The fourth defendant is Alexandra Hutley. The fifth defendant is Michael Robinson. The fourth and fifth defendants constituted the costs review panel (“the costs review panel”) and they have filed submitting appearances.

The appeal

1. [3]

   The plaintiff seeks leave to appeal the decision of the costs review panel dated 29 September 2017 pursuant to s 89 of the Legal Profession Uniform Law Application Act 2014 (NSW). It reads:

2. [4]

   The judgment amount is $14,600, so arguably this appeal should have been brought in the District Court, not in this Court. Counsel for the plaintiff stressed that the appeal was not about the monetary amount. According to counsel for the plaintiff, this is an important matter for practitioners and therefore it needs to be decided by a court of record.

3. [5]

   The parties agreed that this Court has jurisdiction. As the parties had already incurred costs in preparing for this hearing and were ready to proceed, I reluctantly decided not to remit it to the District Court as it would further increase legal costs over what is, on any view, a modest amount in dispute.

Whether leave to appeal should be granted

1. [6]

   The first issue to be determined is whether the plaintiff should be granted leave to appeal.

2. [7]

   The approach to be applied in determining whether to grant leave is not in dispute. The relevant principles are helpfully summarised in the Court of Appeal decision of Gibson v Drumm [2016] NSWCA 206 (“Drumm”). In Drumm, the Court (per Beazley P and Simpson JA) at [19] stated that there are no exhaustive or rigid rules of practice or criteria governing the grant of leave to appeal. However, it has been consistently stated that leave should only be granted where there are substantial reasons that call for appellate review and, in particular, where there is an error of principle, a matter of public importance or injustice, which is reasonably clear in the sense of going beyond what is merely arguable.

3. [8]

   In Metziya Pty Ltd v ICR Engineering Pty Ltd; ICR Engineering Pty Ltd v Metziya Pty Ltd; ICR Engineering Pty Ltd v Blayney Cold Storage Distribution Pty Ltd [2016] NSWSC 1703, Schmidt J noted at [12].

4. [9]

   As McCallum J explained in Secure Parking Pty Limited v Ralan Property Services Pty Limited (No 1) [2018] NSWSC 660 at [12] (“Secure Parking”), cases involving small sums are no less susceptible to error of principle and often entail complexity disproportionate and even inversely proportionate to the amount at stake. In Secure Parking, her Honour did not approach that case on the basis that leave should be refused for that reason alone, as it was her view that it was a relevant factor and, indeed, an important factor.

5. [10]

   In this current appeal, both the amount of the judgment and costs are very modest. I accept that it is a relevant factor in determining whether to grant leave to appeal.

The plaintiff’s submissions on leave

1. [11]

   The plaintiff submitted that the modest amount of its own should not preclude a grant of leave.

2. [12]

   According to counsel for the plaintiff, the appeal has good prospects of success. He emphasised that the appeal is of importance due to the application of Part G of the Local Court Practice Note Civ 1, headed “Maximum Costs Orders in the General Division” (“the Practice Note”) which is the general rule as to the assessment of costs for matters between $10,000 and $20,000 being a recurring issue in the Local Court. The plaintiff further submitted that the appeal raises the important issue of the status Part G of the Practice Note and its application in circumstances where matters are resolved without a hearing on the merits, without reference to the Practice Note or a costs cap.

3. [13]

   While Part G of the Practice Note has been the subject of decisions of this Court on previous occasions, they concerned the application of the Practice Note in circumstances where a Magistrate had exercised her or his discretion on costs and made orders following a contested hearing. In these cases the Practice Note had been taken into consideration in the exercise of the Court’s discretion.

4. [14]

   The plaintiff relied upon the affidavit of William Robert Richey affirmed 14 May 2018, and the affidavit of Bryan Geoghegan affirmed 17 May 2018. I shall briefly refer to their contents here.

5. [15]

   Mr Richey is a solicitor instructed by the plaintiff’s insurer, Allianz Australia Ltd (“Allianz”). He has been employed at Gells Pty Ltd trading as Gells Lawyers (“Gells”) since 2012 and he has access to the practice management records at Gells. During the course of his employment he has been responsible for the conduct of about 900 matters in the Local Court. A review of Gells’ records show that since 2011, approximately 50 of their matters every year were for claims under $20,000 and commenced in the General Division of the Local Court.

6. [16]

   It has been Mr Richey’s experience that proceedings in the Local Court for claims under $20,000 will often settle on agreed terms that do not expressly refer to Part G of the Practice Note as either applying or not applying. In those matters, the question of whether Part G should apply to the question of costs is usually resolved by negotiation between parties after orders have been entered.

7. [17]

   Mr Geoghegan is employed by Allianz as a recovery officer/litigation consultant. His role is to instruct Allianz’s lawyers in relation to litigation conducted all over Australia. He exclusively deals with motor vehicle property damage claims where Allianz is seeking a recovery. He conducted a search of Allianz’s records to determine the number of claims that have been for recovery of amounts less than $20,000. Allianz’s records show that in the last 12 months they referred about 350 new motor claims in New South Wales to solicitors to commence recovery proceedings for amounts less than $20,000. About one quarter (80) of those claims were between $10,000 and $20,000. He has not included active recovery files that were already on foot as active litigation. Most of Allianz’s motor claims in the General Division of the Local Court that are below $20,000 settle without proceeding to hearing.

8. [18]

   In summary, the solicitor acting for Allianz has received about 50 cases where the claims are under $20,000 and of those, the claims often settle without reference to the Practice Note. Costs are dealt with by way of negotiation after the orders have been entered. The Allianz recovery/litigation consultant says that during the last 12 months Allianz referred about 350 new motor claims in New South Wales to solicitors to commence recovery proceedings for amounts less than $20,000. Most of Allianz’s motor claims are filed in the General Division of the Local Court as they are below $20,000. They settle without proceeding to hearing.

9. [19]

   This information, to my mind, does not go so far as to establish that the application of the Practice Note is a recurring issue.

The first, second and third defendants’ submissions on leave

1. [20]

   The first, second and third defendants submitted that leave to appeal should be refused for the following reasons:

2. [21]

   I shall briefly set out the history of these proceedings and consider whether there are substantial reasons that call for appellate review and in particular whether there is an error of principle, a matter of public importance or injustice that is reasonably clear in the sense of going beyond what is merely arguable.

The Local Court proceedings

1. [22]

   The costs decision arises out of 2015 proceedings commenced in the Local Court General Division concerning a motor vehicle property damage claim.

2. [23]

   The proceedings were settled. Short minutes of order were made by consent between the parties. On 31 October 2016, the orders were made as follows:

The Practice Note

1. [24]

   At the time the orders were entered in the Local Court, namely 31 October 2016, the Practice Note applied to the proceedings, including Part G.

2. [25]

   The Practice Note reads as follows:

3. [26]

   Counsel for the plaintiff agrees that the Practice Note provides guidance as to the costs orders that should be made. This approach accords with what Bergin J stated in Baulderstone Hornibrook Pty Limited v HBO+DC Pty Limited [2001] NSWSC 821 in relation to the earlier decision of Mason P in Atkins v Abigroup Ltd (1998) 43 NSWLR 53. Bergin J at [14] stated:

The costs assessment

1. [27]

   The plaintiff lodged an application for the assessment of its ordered costs under Part 7 of the Legal Profession Uniform Law Application Act. The matter was referred to costs assessor, John Sharpe (“the costs assessor”).

2. [28]

   In his reasons at [14] and [15], the costs assessor stated:

3. [29]

   Hence, the costs assessor at [15] took into account the Practice Note and capped the plaintiff’s costs at a maximum of 25% of the amount claimed by it.

The costs review panel

1. [30]

   On 1 June 2017, the plaintiff appealed the costs assessor’s decision to the costs review panel.

2. [31]

   The costs review panel comprised of Michael Robinson and Frances Hutley. In its reasons dated 29 September 2017, the costs review panel stated at [28]:

3. [32]

   The costs review panel affirmed the costs assessor’s decision.

The grounds of appeal

1. [33]

   The issue in this appeal is whether or not by virtue of the Practice Note the costs orders in the short minutes of order made by the Local Court include or are subject to a maximum costs cap.

2. [34]

   The plaintiff contends the Practice Note is a guide as to the usual practice of the Local Court and cannot operate to limit the otherwise express consent orders made by the Local Court.

3. [35]

   The grounds of appeal are that the costs review panel erred by:

The plaintiff’s submissions

1. [36]

   The plaintiff submitted that:

2. [37]

   The parties again referred to Secure Parking which involved an appeal in relation to a costs order made in the Local Court where the judgment amount was $10,873.93. In Secure Parking, McCallum J stated at [24] and [27]:

3. [38]

   I agree that the Practice Note does not fetter the Court’s discretion under the statute or rules.

4. [39]

   The Practice Note needs to be read in conjunction with the Uniform Civil Procedure Rules. It governs or guides the way in which proceedings are expected to be administered.

5. [40]

   If a party does not want the Practice Note to be applied, there is provision in the Practice Note for that party to seek an “otherwise” costs order from the Court. Alternatively, the amount of costs payable can be negotiated between the parties. They can agree that the costs are not to be capped in accordance with the Practice Note. The plaintiff did not avail itself of either of these alternatives.

6. [41]

   In the proceedings in the Local Court, defences had been filed. Judgment had been entered against the first defendant in the sum of $6,800 plus interest in the sum of $500; and similarly against the second and third defendant in the sum of $6,800 plus interest in the sum of $500. Those amounts when added together total less than $20,000. Costs orders were made that the first defendant pay 50% of the plaintiff’s costs as agreed or assessed on the ordinary basis; and that the second and third defendant pay 50% of the plaintiff’s costs as agreed or assessed on the ordinary basis. When assessing the plaintiff’s costs the costs assessor was guided by the Practice Note and applied the cap on costs.

7. [42]

   The evidence in this appeal does not go so far as to establish that the operation of the Practice Note is a recurring issue in the Local Court. The amounts in dispute are modest. Legal costs have already been expended in the costs assessment process and before the review panel. There are no substantial reasons that call for appellate review and, in particular, there is no error of principle, no matter of public importance or injustice that is reasonably clear. It is my view that the plaintiff’s chances of success on appeal are, at best, poor. Taking these circumstances into account, in the exercise of my discretion, leave to appeal should be refused.

8. [43]

   The result is that leave to appeal is refused. The summons filed 8 December 2017 is dismissed.

9. [44]

   Costs are discretionary. Costs usually follow the event. The plaintiff is to pay the first, second and third defendant’s costs on an ordinary basis.

   1. (1)

      Leave to appeal is refused.

   2. (2)

      The summons filed 8 December 2017 is dismissed.

   3. (3)

      The plaintiff is to pay the first, second and third defendant’s costs on an ordinary basis.