Abbott v Garber trading as Nerd Shop
[2018] WASCA 96
•18 JUNE 2018
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: ABBOTT -v- GARBER trading as NERD SHOP [2018] WASCA 96
CORAM: MAZZA JA
MITCHELL JA
BEECH JA
HEARD: 15 JUNE 2018
DELIVERED : 15 JUNE 2018
PUBLISHED : 18 JUNE 2018
FILE NO/S: CACV 41 of 2017
BETWEEN: DAVID ABBOTT
Appellant
AND
JACK GARBER trading as NERD SHOP
Respondent
ON APPEAL FROM:
Jurisdiction : DISTRICT COURT OF WESTERN AUSTRALIA
Coram: EATON DCJ
Citation: GARBER t/as THE NERD SHOP -v- ABBOTT [2017] WADC 38
File Number : APP 87 of 2016
Catchwords:
Practice and Procedure - Award of costs in the Magistrates Court - Where case falls within the minor cases jurisdictional limit
Legislation:
Magistrates Court (Civil Proceedings) At 2004 (WA), s 19, s 25, s 31
Result:
Appeal allowed
Category: B
Representation:
Counsel:
| Appellant | : | Mr J Cianfrini |
| Respondent | : | Mr C P Stokes |
Solicitors:
| Appellant | : | JNC Legal |
| Respondent | : | Chris Stokes & Associates |
Case(s) referred to in decision(s):
Christovao v John Horton & Associates [2012] WASCA 12
Defendi v Eden Hill Plasterers [2008] WASCA 269
REASONS OF THE COURT:
At the conclusion of the hearing of this appeal, the court made the following orders:
(1)The respondent's application in an appeal filed on 24 July 2017 is dismissed.
(2)The appeal is allowed.
(3)The orders made by the District Court on 22 March 2017 are set aside and substituted with the following orders:
(a)the respondent's appeal to the District Court is dismissed;
(b)the respondent pay the appellant's costs of the respondent's appeal to the District Court fixed in the sum of $5,000, payable within 28 days.
(4)The respondent repay to the appellant any costs of the District Court appeal already paid by the appellant to the respondent.
(5)The respondent pay the appellant's costs of this appeal fixed in the sum of $10,000, payable within 28 days.
Our reasons for making those orders follow.
Factual background
On 6 October 2014, the appellant attended the 'Nerd Shop', a computer repair business operated by the respondent. The appellant asked for a computer virus to be removed from his computer. The respondent charged a fee of $199 for that service.
The appellant returned his computer to the Nerd Shop on 22 November 2014, complaining about its performance. On 7 January 2015, the appellant returned to collect his computer and was informed of a new invoice for $149. The appellant refused to pay this amount, contending that he had already paid for the repair of his computer. The respondent refused to return the computer without further payment, claiming a lien.
On 21 January 2015, the appellant commenced minor case proceedings in the Joondalup Magistrates Court, seeking the return of his computer. On 12 February 2015, the respondent lodged a counterclaim seeking an unpaid fee of $100. On 30 July 2015, the appellant's claim was dismissed. There was a subsequent dispute between the appellant and respondent as to whether the counterclaim was also dismissed at the same time.
It appears that the appellant then sought to retrieve his computer from the Nerd Shop, but was met with a contention that the computer was subject to a lien to the extent of the respondent's costs of the counterclaim in the minor case proceedings.
On 8 December 2015, the appellant commenced further proceedings in the Magistrates Court, on this occasion as a general procedure claim. The appellant sought an order for the return of his computer, a refund of the $199 that he paid for its repair, damages of $938 (being the costs of the purchase of a new computer) and any other orders the court deemed appropriate.[1] Although the amount of this claim was within the minor cases jurisdictional limit of $10,000, the appellant did not elect to have the claim dealt with under that procedure.
[1] Garber t/as The Nerd Shop v Abbott [2017] WADC 38 (Primary decision) [2] - [3].
A pre-trial conference, of which the respondent was notified on 30 March 2016, was held at the Magistrates Court on 3 May 2016.[2] The respondent did not attend the pre-trial conference. The appellant, who was represented by a legal practitioner, did attend. The court entered default judgment in the amount of $1,368.30 and ordered the respondent to return the computer to the appellant.[3]
[2] Primary decision [9] - [10].
[3] Primary decision [11].
On 3 June 2016, the respondent applied to have the default judgment set aside. He deposed that he forgot to enter the appointment for the pre-trial conference in his diary. On 21 July 2016, a magistrate granted the application to set aside the default judgment and adjourned the case to a further pre-trial conference. The magistrate also made an order that:
The costs of the Pre-Trial Conference appearance on 31(sic) May 2016 and costs of today awarded to the [appellant], to be taxed if not agreed.
After the matter failed to settle at a pre-trial conference held on 16 August 2016, the respondent applied to dismiss the appellant's claim on the basis of res judicata, issue estoppel, Anshun estoppel and/or abuse of process. That application was granted on 6 October 2016.
On 5 September 2016, the magistrate refused an oral application by the respondent to set aside the costs order made on 21 July 2016.
On 11 October 2016, the appellant's costs of the pre-trial conference of 3 May 2016 and the hearing of 21 July 2016 were assessed and allowed at $1,160.65.
On 8 November 2016, the respondent filed an appeal notice in the District Court against the costs order made on 21 July 2016. The appeal notice incorporated an application for an extension of time in which to appeal.
In a further attempt to retrieve his computer, the appellant sought to have the respondent's counterclaim in the minor case hearing brought on for determination. On 5 January 2017, that application was refused by the magistrate who had heard the minor case claim on the basis that both the claim and the counterclaim had been dismissed on 30 July 2015.
The appeal to the District Court was heard by the primary judge on 20 February 2017, and allowed on 22 March 2017. In his written reasons, the primary judge indicated that the time for filing a notice of appeal was extended.[4] For reasons which are discussed in greater detail below, the primary judge held that the making of the costs order on 21 July 2016 'was an error of law'.[5] The orders made by the District Court were that the appeal be allowed, the costs order made on 21 July 2016 be set aside and the appellant pay the respondent's costs of the respondent's appeal to the District Court to be taxed if not agreed.
[4] Primary decision [32].
[5] Primary decision [56].
On 11 April 2017, the appellant filed an appeal notice in this court against the orders made by the primary judge. The appeal notice was lodged within time.
On 25 July 2017, the respondent lodged an application in the appeal, relevantly seeking an order that the appeal be dismissed pursuant to r 43(2)(g)(i) of the Supreme Court (Court of Appeal) Rules 2005 (WA) on the basis that none of the appellant's grounds of appeal have a reasonable prospect of success. On 28 July 2017, Murphy JA referred that application to the hearing of the appeal.
Statutory provisions
The proceedings are governed by the Magistrates Court (Civil Proceedings) Act 2004 (WA) (Act). Part 3 of the Act provides for the general procedure for civil claims in the Magistrates Court, while pt 4 of the Act provides for the minor cases procedure. Relevantly, a minor case is a case within the jurisdiction of the Magistrates Court where the value of the claim or of the relief claimed is not more than the minor cases jurisdictional limit of $10,000,[6] and the claimant has elected to have the claim dealt with under the minor cases procedure.[7] The second proceedings commenced by the appellant, although within the minor claims jurisdictional limit, were not a minor claim as the appellant did not make the relevant election.
[6] See s 3(1) of the Act (definition of 'minor cases jurisdictional limit').
[7] Section 26 of the Act.
Rule 39 of the Magistrates Court (Civil Proceedings) Rules 2005 (WA) (Rules) provides for a claimant to request, and for a registrar to then list, a case for a pre-trial conference. Rule 41 of the Rules requires that, unless a registrar or the court orders otherwise, a party must attend a pre-trial conference. The respondent's failure to attend the pre-trial conference on 3 May 2016, of which he had notice, was a failure to comply with the Rules.
Under s 19(2) of the Act, where a party does not comply with the Act, rules of court, or an order or direction made by the court, the court may:
(a)order the party to pay the costs occasioned by the non‑compliance irrespective of whether the party ultimately succeeds in the case; or
(b)give judgment against the party without a trial.
Under s 19(3) of the Act:
The Court may set aside a judgment given under subsection (2) and may do so on conditions as to the payment of costs or as to other matters.
Section 25 of the Act contains the following relevant provisions regarding costs:
(1)The Court may order a party to a case to pay the whole or a part of another party's costs in the case.
(2)A successful party is entitled to an order under subsection (1) that the whole of its costs in the case be paid by the unsuccessful party, unless the Court considers there is good reason not to make such an order or subsection (5) applies.
(3)An order may be made under subsection (1) in a case even if the case is outside the Court's jurisdiction.
(4)An order may be made under subsection (1) at any stage of the proceedings in a case.
(5)In a case where -
(a)the value of the claim, or of the relief claimed, by the claimant is not more than the minor cases jurisdictional limit; and
(b)the claimant did not elect to have the claim dealt with under the minor cases procedure or, under section 28(3), the court ordered that the case be dealt with under the general procedure,
the Court may only make an order under subsection (1) in favour of a successful party if the order would be permitted by section 31 were the case being dealt with under the minor cases procedure.
Section 31 of the Act makes the following provision for costs in minor cases:
(1)In this section -
allowable costs means -
(a)the court fees and service fees paid by a successful party; and
(b)the costs of enforcing a judgment.
(2)A successful party to a minor case is entitled to an order under section 25(1) in relation to the party's allowable costs but not in relation to the party's other costs in the case.
Section 31(3) enables the court to make an order under s 25(1) for the payment of the other party's costs in certain circumstances, none of which are applicable to the present case.
Section 40 of the Act allows a party to a case that is not a minor case to appeal to the District Court against an order made by the Magistrates Court in the course of proceedings in the case. Under s 40(3), an appeal cannot be commenced more than 21 days after the date of judgment, unless the District Court gives leave to do so.
Section 42(1) of the Act gives a party to an appeal made to the District Court under s 40 the right to appeal to this court against the District Court's judgment on the appeal.
The powers of this court and the District Court on appeal are defined by s 43 of the Act. Under s 43(3):
The appeal court may strike out the appeal if the likely costs of the appeal to the parties would be disproportionate to the amount of the claim in, or the nature of, the case which is the subject of the appeal.
Under s 43(5), the court may exercise this power on its own initiative.
Under s 43(7) of the Act, this court may relevantly:
(a)confirm, vary or set aside all or a part of the lower court's judgment;
(b)give any judgment and make any order that the Magistrates Court could have given or made; …
(e)make an order as to the costs of the appeal and as to the costs in the Magistrates Court and, in an appeal to the Court of Appeal, as to the costs in the District Court;
(f)make any orders that are necessary as a result of other orders it has made.
Primary judge's approach
The primary judge took the view that, in filing a general procedure claim, the appellant (who was the respondent before the primary judge) invoked the operation of s 25(5) of the Act.[8]
[8] Primary decision [36].
After referring to s 31 of the Act and the history of the respondent's objection to the costs order,[9] the primary judge noted the appellant's submission that the magistrate made no error because the costs were awarded in the context of setting aside a default judgment. The appellant contended that s 19(3) of the Act had application, as the respondent's failure to attend the pre-trial conference was a failure to comply with 'an order or direction made by the Court'. The appellant submitted to the primary judge that s 25(5) of the Act states that it only applies to orders made by a magistrate under s 25(1) of that Act. The appellant contended that the magistrate was exercising power under s 19(3), rather than s 25(1), by setting aside the default judgment and then awarding costs.[10] As will be seen, in our view these submissions were correct and should have been accepted by the primary judge.
[9] Primary decision [38] - [48].
[10] Primary decision [49] - [50].
After summarising the appellant's submissions in the terms described above, the primary judge referred to r 41 of the Rules and said:[11]
It follows that the listing of a pre-trial conference is initiated by a party.
In this matter the [appellant] requested that the registrar list a pre-trial conference. The registrar did so and gave notice to the parties. The failure of the [respondent] to attend the pre-trial conference was not a failure to comply with an order or direction made by the court. In my view s 19 of the Act has no application in this matter.
[11] Primary decision [51] - [52].
The primary judge then observed:[12]
The magistrate, on 21 July 2016, was dealing with the appellant's application to set aside default judgment. He allowed that application and made the contentious costs order in consequence of allowing the application. It would appear that he did not turn his mind to s 25(5) of the Act. It may be that it was not brought to his attention.
[12] Primary decision [52].
The primary judge referred to the appellant's submission that, even if the magistrate was exercising power under s 25(1), there would still be no error as the hearing on 21 July 2016 was of the appellant's application to set aside default judgment. The appellant submitted that, as the default judgment was set aside, the respondent was the successful party and the appellant was the unsuccessful party. Counsel for the appellant had submitted that s 25(5) of the Act only applies to an order under s 25(1) in favour of a successful party and does not mention any restriction of an award of costs in favour of the unsuccessful party.[13]
[13] Primary decision [53] - [54].
The primary judge then said:[14]
Section 25 of the Act gives power to the court to order that a party pay the whole or part of another party's costs in the case. It makes no mention of successful or unsuccessful parties. The matter before me is governed by that part of the Act which deals with costs in the minor cases procedure because it falls within the minor cases jurisdictional limit. Section 31 of the Act deals with 'allowable costs'. The costs dealt with on 21 July 2016 do not fall within the definition of allowable costs. The power to award costs is founded on s 25 of the Act. Costs which are not allowable costs can only be awarded in the circumstances mentioned in s 31(3) of the Act. It would appear, firstly, that no such circumstances existed and, secondly, that that no such circumstances were raised before the magistrate.
It must follow that the making of the costs order on 21 July 2016 was an error of law. I allow the appeal. (emphasis added)
[14] Primary decision [55] - [56].
Grounds of appeal
The appellant appeals to this court on three grounds.
Ground 1 contends that the primary judge erred in law by ruling that s 19 of the Act did not apply, such a ruling being against the statutory text of s 19 of the Act with reference to r 41 of the Rules. The appellant contends that s 25(5) of the Act only applies to an award of costs under s 25(1) of the Act.
Ground 2 contends that the primary judge erred in law by ruling that s 25 of the Act does not make reference to a successful or unsuccessful party, such a ruling being against the statutory text of the section. The appellant contends that the primary judge erred in failing to rule that the restriction on awarding costs contained in s 25(5) of the Act only applies in relation to a costs order made in favour of a successful party.
Ground 3 contends that the primary judge erred in law and denied the appellant natural justice and procedural fairness, by determining the respondent's appeal to the District Court in circumstances where:
(a) The Respondent required leave from the District Court to commence their Appeal;
(b) Leave to appeal was never actually sought by the Respondent or given by his Honour;
(c) The matter was not conducted in accordance with the [Rules] and thereby contrary s 40(4A) [of the Act].
Disposition of grounds 1 and 2
It is clear that the primary judge erred in two respects as alleged in grounds 1 and 2.
Firstly, the primary judge erred in holding that s 19 of the Act did not apply to the orders made by the magistrate on 21 July 2016.
In the passage quoted at [30] above, the primary judge held that s 19 of the Act did not apply because the respondent's failure to attend the pre-trial conference was not a failure to comply with an order or direction made by the court. It may be accepted that the failure was not a failure to comply with an order or direction made by the court. However, as noted above, it was a failure to comply with r 41 of the Rules and, as such, enlivened the court's discretion under s 19(2) of the Act. Judgment was entered on 3 May 2016 in the exercise of the power conferred by s 19(2)(b) of the Act.
On 21 July 2016, the magistrate set aside the default judgment which had been entered on 3 May 2016 under s 19(2)(b) of the Act. The power to set aside the default judgment, and to do so 'on conditions as to the payment of costs', was expressly conferred by s 19(3) of the Act.
Secondly, the primary judge erred in stating that s 25 does not refer to a successful party or an unsuccessful party. Section 25(2) provides for the general rule that a 'successful party is entitled to an order under [s 25(1)] that the whole of its costs in the case be paid by the unsuccessful party'. In its terms, s 25(5) only restricts when the court may make an order under s 25(1) 'in favour of a successful party'.
The question which then arises is whether the restriction against the award of costs contained in s 25(5) applies to the order made on 21 July 2016 under s 19(3) of the Act. On its terms, it does not, as the restriction in s 25(5) only applies to a 'successful party'.
In the context of the Act, the undefined term 'successful party' refers to the party who is ultimately successful at the conclusion of the case. The general rule that a 'successful party' have the whole of its costs in the case only makes sense if the reference is to the party who is ultimately successful in the whole case.
The appellant was not the successful party in the proceedings conducted under the general procedure. His case had not been finally determined when the costs order was made on 21 July 2016, and his claim was ultimately dismissed. Nor could the appellant be regarded as the successful party in the application to set aside the default judgment (which he opposed unsuccessfully), if that were relevant. Contrary to a suggestion made by the respondent's counsel, the appellant cannot be regarded as a successful party merely because the costs order was made in his favour. The restriction in s 25(5) did not apply to the appellant in its terms. Even if the order of 21 July 2016 was authorised by a combination of s 19(3) and s 25(1), it was not an order made 'in favour of a successful party' within the meaning of s 25(5) of the Act.
That is not a surprising result. The Act provides that, when a claim of less than $10,000 is dealt with as a minor case where the parties have no right to legal representation,[15] only court fees and enforcement costs are to be the subject of a costs order. That same rule applies when making an award of costs in favour of a successful party in a general procedure claim which could have been a minor case, notwithstanding that legal representation is generally permitted for that type of case. However, the position may be seen as different where a party fails to comply with the Act, the Rules or an order or direction made by the court. Where a party, by such a default, causes another party who is legally represented to incur legal costs, then it is an entirely sensible policy to empower the court to allow the other party to recover the costs caused by the default without the limitations imposed by s 31.
[15] Section 30 of the Act.
Therefore, grounds 1 and 2 are established. As a result, the appeal to this court must be allowed and the respondent's appeal to the District Court must be dismissed.
Ground 3
There is no merit in ground 3. In the appeal notice filed in the District Court, the respondent applied for an extension of time in which to appeal. The primary judge decided that the time for filing an appeal notice should be extended.[16] In substance, there was an application by the respondent for leave to commence the appeal to the District Court more than 21 days after the date of judgment, and a decision by the primary judge that leave should be granted. Although the District Court did not make a formal order in terms of s 40(3) of the Act, the failure to do so does not involve any miscarriage of justice.
[16] Primary decision [32].
Costs
The parties reached agreement as to the appropriate amount at which the costs of this appeal and of the appeal to the District Court should be fixed. That agreement is reflected in the orders noted at [1] above.
In the manner described above, a dispute over a $149 computer repair bill has been eclipsed by a dispute over a much larger costs order. The costs of $1,160.65 which are the subject of the appeals to this court and the District Court have themselves been dwarfed by the costs of the appeals. In our view, notwithstanding its initial success, the appeal to the District Court was misconceived and should not have been brought.
Reasonable people in the position of the appellant and respondent would have reached some compromise regarding the dispute about the $149 computer repair bill at an early stage. If compromise were not possible, then a reasonable person in the position of the respondent, acting in his or her own interests, would have forgone the $149 before significant legal costs were incurred. Unfortunately, rather than taking such an approach, both parties adopted entrenched positions as to what they perceived to be their legal rights. They have both engaged and persisted with curial proceedings in multiple courts. The result has been the incurring of legal costs which are grossly disproportionate to the original disputed amount of $149.
We note that it may have been open to the District Court, in dealing with the appeal to that court, to have made an order under s 43(3) of the Act. That provision empowers an appeal court to strike out an appeal if 'the likely costs of the appeal to the parties would be disproportionate to the amount of the claim in, or the nature of, the case which is the subject of the appeal.'[17] Such an order could have been made, at least in the early stages of the District Court appeal, either on the court's own initiative or on application.[18] However, it was not appropriate for this court to exercise the power under s 43(3) at the hearing of the appeal, even assuming that the power was still available at that time. By then, the parties had already incurred substantially all of the costs of the appeal to this court. There would have been be no significant saving in costs to the parties in striking out the appeal to this court at that late stage. Further, it would be unfair to the appellant to strike out his appeal to this court when the same course could have been, but was not, taken in the respondent's appeal to the District Court. In addition, it is relevant that the appellant's success in this appeal avoids his liability for the respondent's costs incurred in the District Court appeal that was imposed as a result of the erroneous success of the respondent in that court.
[17] As to the operation of that provision, see Defendi v Eden Hill Plasterers [2008] WASCA 269 and Christovao v John Horton & Associates [2012] WASCA 12.
[18] Section 43(5) of the Act.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CR
ASSOCIATE TO THE HONOURABLE JUSTICE MITCHELL18 JUNE 2018
0
3
1