GoldenGrove Building Group Pty Ltd v Gunnedah Legal Services Pty Ltd t/as Gunnedah Grow and Mow

1. [1]

   HER HONOUR: This is an appeal of the decision of his Honour Magistrate Breton dated 7 June 2018 in relation to costs.

2. [2]

   By amended summons filed 6 August 2018, the plaintiff seeks firstly, leave to appeal from the whole of the decision of Magistrate Breton dated 7 June 2018 in the Gunnedah Local Court; secondly, leave to file the appeal out of time; thirdly the appeal be allowed; fourthly, an order that the decision of Magistrate Breton in relation to costs be set aside; and fifthly, an order that the defendant pay the plaintiff’s costs of the proceedings in the Local Court on an indemnity basis or, in the alternative, on a party and party basis as agreed or assessed.

3. [3]

   The plaintiff in these proceedings is GoldenGrove Building Group Pty Ltd (“GoldenGrove”), who was the defendant in the Local Court proceedings. The defendant in these proceedings is Gunnedah Legal Services Pty Ltd, t/as Gunnedah Grow and Mow (“Grow and Mow”), who was the plaintiff in the Local Court proceedings. For convenience, I shall refer to the parties by name. GoldenGrove relied on its court book (Ex A).

Appeals generally

1. [4]

   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. [5]

   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. [6]

   Section 40(2) provides that a party who is dissatisfied with an order as to costs of the Local Court may appeal to the Supreme Court, but only by leave of the Supreme Court.

4. [7]

   Section 41 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.

5. [8]

   GoldenGrove seeks firstly, an extension of time to appeal; secondly, leave to appeal; and finally, the hearing of the appeal.

Grounds of appeal

1. [9]

   GoldenGrove appeals from the whole of the decision of the Magistrate on the following grounds:

   1. (1)

      the Local Court, by failing to admit into evidence the affidavit of Richard Allan Morris dated 12 April 2018, made an error of law;

   2. (2)

      the Local Court made an error of law by failing to read the affidavit of Richard Allan Morris dated 12 April 2018 before rejecting it, thus denying itself of the opportunity to properly consider the evidence;

   3. (3)

      the Local Court below made an error of law by failing to consider without prejudice any correspondence before making a determination on costs, despite the defendant’s counsel seeking to tender the documents;

   4. (4)

      the Magistrate denied GoldenGrove procedural fairness in that the Court refused to consider evidence with respect to costs that had come into existence following the first call over of the matter; and

   5. (5)

      the Magistrate denied GoldenGrove natural justice in that the Court refused to consider evidence with respect to costs that had come into existence following the first call over of the matter.

Extension of time

1. [10]

   It is common ground that GoldenGrove lodged its application to appeal one day out of time and requires an extension of time to appeal.

2. [11]

   The parties referred to Gallo v Dawson (1990) 93 ALR 479; [1990] HCA 30 (“Gallo”), in which McHugh J at [2] stated:

3. [12]

   GoldenGrove’s explanation for delay in filing the summons is set out in the affidavit of GoldenGrove’s solicitor Richard Morris, dated 30 July 2018.

4. [13]

   Mr Morris deposed that on 29 June 2018, he contacted Andrew Hadden, the General Manager of Group Operations for GoldenGrove and requested that funds be paid into trust for the Supreme Court’s filing fee of $3,014 as it was not his practice to fund such disbursements. Mr Hadden told Mr Morris that he instructed GoldenGrove’s accounts manager to pay the funds. However, Mr Morris’ firm did not receive these funds until 6 July 2018. Once the funds were received, the summons was immediately filed in this Court (Aff, [5] and [6]).

5. [14]

   Grow and Mow submitted that GoldenGrove’s application for an extension of time does not meet the requirements outlined in Gallo because, firstly, there has been no evidence adduced as to the injustice that GoldenGrove will suffer if strict compliance with the rules is required. Secondly, there has been no adequate explanation for the delay. The affidavit of Richard Allan Morris deposed 30 July 2018 and read in this Court on 31 July 2018 at [6] reveals that the reason the appeal is out of time was due to a conscious choice to not file any appeal until funds had been paid into a solicitor’s trust account. Thirdly, when the history and nature of the litigation is considered, there is no injustice in requiring strict compliance with the rules. In fact, given the small nature of the claim in the Local Court, the fact that the decision appealed against is a costs decision, and the fact that GoldenGrove has already been awarded costs, the principles of finality and proportionality weigh in favour of strict compliance with the rules being enforced. Finally, the judgment had already vested before any summons was filed. As such, GoldenGrove’s application offends against the principles of finality in litigation and inherently prejudices Grow and Mow.

Consideration

1. [15]

   The decision as to whether or not to grant an extension of time to lodge the summons seeking leave to appeal is discretionary. The summons was filed one day out of time, and it appears to have been the solicitor’s oversight in not ensuring the filing fee was received from GoldenGrove, rather than a conscious decision to file the appeal out of time. I accept the amount in dispute is a modest one. There is no real prejudice to Grow and Mow. In these circumstances and in the exercise of my discretion it is my view that GoldenGrove should be granted an extension of time to lodge the appeal to 7 July 2018.

Whether leave to appeal should be granted

1. [16]

   The next issue is whether leave should be granted. GoldenGrove requires leave to appeal in accordance with s 40(2) of the Local Court Act. Grow and Mow opposes leave being granted.

2. [17]

   Two cases which deal with the principles governing leave to appeal are BE Financial Pty Ltd v Das [2012] NSWCA 164 (“BE Financial”), and Lee v New South Wales Crime Commission (2012) 224 A Crim R 94; [2012] NSWCA 262 (“Lee”).

3. [18]

   In BE Financial, the Court of Appeal set out the principles to be considered in deciding whether leave to appeal should be granted. At [32], [33] and [35], Basten JA stated:

4. [19]

   Similarly in Lee, Bathurst CJ at [12] outlined the principles relevant to the granting of leave as follows:

5. [20]

   It should also be borne in mind that leave ought not be denied where there has been a clear injustice, even when relatively small amounts are involved: He v Yeung [2015] NSWCA 392 per Bergin CJ at [49].

6. [21]

   GoldenGrove also referred to Coulter v R [1988] HCA 3; (1998) 164 CLR 350 at 359, Deane and Gaudron JJ noted the requirement for leave:

7. [22]

   These submissions seem to rely on the same submissions for both the application for leave to appeal and the appeal itself. So far as the appeal is concerned, the parties agree that the test on appeal is set out in House v The King (1936) 55 CLR 499 at 504-5. It is common ground that the test in relation to a discretionary judgment is stated definitively in a short passage in the joint judgment of Dixon, Evatt and McTiernan JJ in that case. It is, I think, useful to re-state the passage as follows:

8. [23]

   GoldenGrove submitted that this is a case in which the refusal of the Court to accept evidence gives rise to a prima facie injustice, in that a party who sought to be heard on an issue was refused because of the failure to file an application by 23 November 2017.

9. [24]

   GoldenGrove says that much of the evidence in support of the notice of motion did not come into existence until after the first return date. The material is a combination of offers and rejections including after 23 November 2017 and some negotiations on the first day of hearing. All of the correspondence is marked “Without Prejudice”, and as the Magistrate observed, it was to be filed according to the practice note. This would have been impossible, as most of the relevant materials for the application and in respect to a maximum cost order occurred after 23 November 2017. According to GoldenGrove, the refusal to accept affidavit evidence on the notice of motion was a denial of procedural fairness.

10. [25]

    It is and was the obligation of GoldenGrove to establish that there was a prima facie case to rebut the practice note direction with respect to costs of a matter below $20,000. To put it simply, his Honour needed to receive the evidence and then rule, but instead he chose to refuse all the evidence and rule to dismiss the notice of motion.

11. [26]

    GoldenGrove did not file a notice of motion more than two weeks prior to the first review date 6 December 2017 (as per clause 36.3 of the practice note), despite having pleaded that the Building Construction Industry Security of Payments Act 1999 (NSW) had not been engaged and despite having made some offers as to resolution of the proceedings. However, his Honour correctly accepted that the practice note is rebuttable.

12. [27]

    Following the hearing of evidence but before the Magistrate gave judgment, GoldenGrove filed a notice of motion seeking to displace the practice note order as to costs.

13. [28]

    The supporting affidavit explained that the practice direction should be varied for several reasons: that Grow and Mow had sought to use a statutory instrument which required technical interpretation of a concept determined by the High Court; that Grow and Mow had filed and served extensive affidavits in the Local Court which were either not read or rejected, with the effect that Grow and Mow offered no evidence; and that the matter required two full days of hearing.

14. [29]

    On 12 April 2018, GoldenGrove prepared a further affidavit, which was served on Grow and Mow on 7 June 2018. It contained correspondence passing between the parties and some observations as to the admission of evidence which was not controversial.

15. [30]

    GoldenGrove identifies that the Magistrate made two distinct errors. The first error was accepting, correctly, that the practice note is rebuttable and then determining, incorrectly, that Grow and Mow’s failure to comply with the practice note was fatal to the application.

16. [31]

    The second error was refusing to accept the affidavit in support of the notice of motion on the basis of non-compliance with the practice note. This is in the face of an application that had been made properly by notice of motion, as is required by the UCPR, supported by affidavit evidence. The practice note had no operation on the notice of motion and the Magistrate rejected it because it failed to comply with the practice note. The Magistrate, in refusing to read the evidence on the motion, therefore fell into error.

17. [32]

    GoldenGrove accepts that ordinarily, an appeal court should not grant leave to appeal from costs orders unless there is some clear error of principle or manifest injustice. The error of principle must be of the kind described in House v The King.

18. [33]

    GoldenGrove submitted that this case is one where, as set out in the affidavit of Richard Allan Morris 12 April 2018, the likely costs would far outweigh the actual amount claimed. Mr Morris also raises the conduct of Grow and Mow as a significant factor to be considered. Specifically, that they sought to replead on the run at hearing, and further, that they put on evidence which was irrelevant to the proceedings.

19. [34]

    Grow and Mow’s position is that leave should not be granted and the appeal dismissed. GoldenGrove has invoked the appellate jurisdiction of this Court in an attempt to re-agitate a costs order arising from a $12,000 Local Court claim. In these circumstances, the appeal ought to be dismissed for two reasons:

    1. (1)

       Leave should not be granted given the subject matter of the appeal. GoldenGrove has failed to point to any matter of public importance or general principle so as to justify a grant of leave

    2. (2)

       No clear House v The King error has been identified, and as such the appeal lacks substantive merit.

20. [35]

    Grow and Mow referred to Ashi Pty Ltd v Karasco Investments Pty Ltd [2009] NSWSC 780, where Davies J stated at [34]:

21. [36]

    Grow and Mow submitted that given the appeal is in relation to a costs order, GoldenGrove needs to clearly identify some other matter which in justice requires that leave to appeal be granted. No such matter has been identified, because no such matter exists in this case.

22. [37]

    Grow and Mow further submitted that in this case, GoldenGrove has failed to address on what basis, other than the Magistrate being in error, leave to appeal ought to be granted. There is no relevant issue of principle, question of general public importance, or injustice beyond the possibility that the Magistrate fell into error present in this case. The fact that GoldenGrove may have, as a result of the decision, been denied the possibility of obtaining a more favourable costs order is not a requisite injustice for the purposes of leave, especially in circumstances where it has already been granted the benefit of a costs order. It must not be forgotten that this is an appeal from the exercise of judicial discretion in relation to a costs order. For this reason alone, leave ought to be refused and the appeal dismissed.

23. [38]

    Grow and Mow referred to recent decisions that have been critical of situations in which litigation is conducted in such a way as to let “the costs tail wag the substantive dog”: see Lease Collateral v Johnson [2018] NSWSC 452 at [9]; Lakis v Lardis (No 3) [2018] NSWSC 1296 at [142]; McGlashan v QBE Insurance (Australia) Ltd (No 4) [2014] NSWSC 882 at [27]. According to Grow and Mow, these proceedings are the ultimate example of such a situation. The costs that have been, and will continue to be, incurred on this appeal far outweigh the amount of the claim, which was only $12,000. The appeal itself is in direct opposition to the overriding principles of civil litigation in this State. This of itself provides a strong reason for the Court to refuse leave to appeal.

24. [39]

    Furthermore, there are public policy grounds that weigh in favour of refusing leave to appeal: the principle of finality in litigation, and a public interest in discouraging parties from bringing appeals from costs decisions of the Local Court to the Supreme Court in future.

25. [40]

    Grown and Mow referred to Johnson v Gore Wood and Co [2002] 2 AC 1 where Lord Bingham of Cornhill at 31 stated:

26. [41]

    Grow and Mow further submitted that this Court, and in particular this division, has a sizeable case load. The requirement for leave to appeal a costs decision from the Local Court is in itself a reflection of Parliament’s intention to discourage such appeals, and to give this Court the ability to refuse leave to hear them. In this day and age, the interest of other users of the Court ought to also be factored into the decision regarding leave. In this case, there is nothing remarkable about the decision from which leave to appeal is sought. It does not possess any significant issue of principle beyond the contention that the Magistrate may have fallen into error, which renders it inappropriate for such leave to be granted.

27. [42]

    Grow and Mow says that GoldenGrove’s grounds of appeal are misconstrued. There is no principle of natural justice/procedural fairness that requires a judicial officer to admit evidence, or in this case, read it into evidence. In this case, the Magistrate considered both of the affidavits sought to be relied upon, and gave counsel adequate opportunity to address why they should be read into evidence despite their non-compliance with the practice note.

28. [43]

    However, despite the benefit of counsel’s submissions on this point, due to non-compliance with the relevant practice note, his Honour refused to read into evidence the two affidavits and dismissed the notice of motion. A refusal to “read” into evidence an affidavit does not equate to a refusal to read and consider the affidavits, or to provide a party the opportunity to be heard on them. These things were done, as the transcript reveals. What ultimately occurred is that his Honour refused to read the affidavits formally, such that they did not become evidence on the motion. His Honour did so discretionary grounds, including prejudice to Grow and Mow by reason of late service and the failure to comply with the time limits required by the practice note, which has the force of a rule of Court. As such, to be successful on this appeal, GoldenGrove would have to identify House v the King error in his Honour’s discretion to not excuse non-compliance with the practice note. GoldenGrove has not identified such a discrete error, and as such there is no merit in the appeal.

The proceedings in the Local Court

1. [44]

   In the Local Court proceedings, the submissions provided by both parties did not provide a chronology. As best I can understand, in the statement of claim, Grow and Mow sought to recover the sum of $12,386 pursuant to the Building & Construction Industry Security of Payment Act. The primary dispute raised by the defence concerned a reference date in the contract. The court review date took place on 6 December 2017. That means GoldenGrove’s notice of motion seeking to vary the costs order should have been filed in accordance with the Practice Note Civ 1, clause 36.3, by 23 November 2017. GoldenGrove’s notice of motion was filed on 13 February 2018 after the hearing that took place on 9 February 2018. After the hearing was finalised, the Magistrate required submissions from both parties.

2. [45]

   On 7 June 2018, the Magistrate gave an extempore judgment in relation to the substantive proceedings. His Honour entered judgment in favour of GoldenGrove against Grow and Mow in the sum of $12,386 (a transcript of that decision is not before the Court). Then the Magistrate addressed Grow and Mow’s notice of motion.

Costs

1. [46]

   The starting point is s 98 of the Civil Procedure Act 2005 (NSW), which relevantly reads:

2. [47]

   Section 69 of the Local Court Act reads:

The practice note

1. [48]

   Practice Note Civ 1 is issued pursuant to s 15 of the Civil Procedure Act and pursuant to s 27 lf the Local Court Act. Case management of civil proceedings in the Local Court comprises parts A to H.

2. [49]

   Part G reads:

3. [50]

   It is common ground that the Magistrate accepted that the practice note was not mandatory.

The decision of the Magistrate

1. [51]

   Both the application to appeal and the appeal itself centre upon whether the Magistrate did consider the contents of the affidavits of Mr Morris dated 13 February 2018 and 12 April 2018, although I note that GoldenGrove only complain in relation to the latter affidavit.

2. [52]

   The relevant contents of the affidavit of Mr Morris dated 13 February 2018 are at [5] to [11]. They read:

3. [53]

   The affidavit dated 12 April 2018 does refer to offers of compromise for the period of 3 October 2017 up until the date of hearing on 7 June 2018. I accept that there was one offer made after the review date, namely 6 December 2017, and an offer on the morning of the hearing.

4. [54]

   The Magistrate’s reasons have not been put in summary form because at T14.27-28 counsel for the defendant stated:

5. [55]

   Hence it is necessary to reproduce excerpts from the transcript of the hearing of GoldenGrove’s notice of motion seeking costs on 7 June 2018.

6. [56]

   The Magistrate stated at T4 to T15:

Conclusion

1. [57]

   The Magistrate actually considered and referred to the contents of the affidavits when deciding whether or not they were to be admitted into evidence and read. Grow and Mow objected to them being read into evidence. As the Magistrate stated, much of the content of the affidavits was known to GoldenGrove’s legal representatives prior to the review date. There were only two offers made after the review date, and they are the only relevant documents which came into existence after the review date.

2. [58]

   The focus of GoldenGrove’s submission to this Court is that much of the evidence in support of the notice of motion dated 13 February 2018 did not come into existence until after the review date. As the Magistrate did not take into account that the material did not exist before the review date, it was denied procedural fairness and the Magistrate made an error of law. However, this submission is not the submission that was actually made before the Magistrate. In the Local Court, GoldenGrove’s counsel admitted that the non-compliance with the practice note and the late filing of the notice of motion and affidavits were because his client was actually offering to pay some money. His Honour stated that GoldenGrove had hedged its bets until the day of the hearing. He also referred to the objectives of ss 56 and 60 of the Civil Procedure Act and the objects of the practice note, in particularly the issue of proportionality.

3. [59]

   The sum in dispute is a modest amount of about $12,000. Grow and Mow was ordered to pay $3,096.50 costs in relation to its successful $12,000 claim. GoldenGrove has the benefit of a costs order in its favour, albeit in its mind, it is not enough. In these circumstances, his Honour exercised his discretion to reject the affidavits and dismiss the notice of motion. While I do not have to deal with the appeal itself, it is my view that there was no denial of procedural fairness nor was there an error of law.

4. [60]

   As far as leave to appeal is concerned, the appeal does not raise a matter of public importance, nor is it reasonably clear that there has been an injustice, in the sense of going beyond what is reasonably arguable, that the primary judgment was in error. In these circumstances and in the exercise of my discretion, the application for leave to appeal should be refused. If I am wrong and leave to appeal should have been granted, for the reasons I have given above, the appeal should be dismissed.

Costs

1. [61]

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

The Court orders that:

1. [62]

   I certify that this and the 23 preceding pages are a true copy of the reasons for judgment herein of the Honourable Associate Justice Harrison.