Aretzis & Anor v Larwood & Anor No. Scciv-02-1171

ARETZIS & ANOR v LARWOOD & ANOR
[2002] SASC 367
Magistrates Appeals: Civil

DOYLE CJ: The defendants in an action brought in the Civil Division of the Magistrates Court have appealed against the amount of costs allowed and certified by a Magistrate on a taxation of costs under r 108(1) of the Magistrates Court (Civil) Rules 1992 (“the Rules”). The taxation of costs was consequent on a costs order made by another Magistrate after the defendants in the action had consented to judgment being entered for the plaintiffs for damages, representing the cost of remedying defects in building work carried out by the defendants for the plaintiffs.
The Magistrate gave written reasons for the making of the costs order. In his reasons he expressed his decision as follows:
“I therefore fix the costs of this action in favour of the plaintiffs, which costs are to be agreed or taxed and are to be on Scale No.2 of the Third Schedule to the Magistrates Court (Civil) Rules 1992 and being in the band of $20,001 to $60,000.”
The plaintiffs subsequently filed an itemised Bill of Costs. The costs claimed (not including the costs of taxation) amounted to $16,674. The costs were allowed, after the taxation but not including the costs of the taxation, at $13,446.79, a deduction of about 19%. The costs of the taxation were fixed at $2 682.90. The total allowed was therefore $16,129.69.
The plaintiffs did not challenge the defendants’ right to appeal. After I had reserved judgment, it appeared to me that the defendants might require leave to appeal. I allowed the parties to provide written submissions on the point. The defendants then submitted that there is no right of appeal, and that if an appeal lies with leave, leave should not be granted.
Section 40(1) of the Magistrates Court Act 1991 (SA) (“the Act”) gives a right of appeal against “any judgment given in the action.” Section 3(1) of the Act defines “judgment” widely. That term “means a judgment, order or decision and includes an interlocutory judgment or order.”
In my opinion the process of taxing and allowing costs results in an order of the Magistrates Court. If it did not, it is not easy to see how the successful party would enforce the decision to allow costs at a particular amount. I have no difficulty in treating the decision as an order. Perry J expressed the same view in Lyberopoulos v State Government Insurance Commission [1999] SASC 47.
By r 96B.02 of the Supreme Court Rules, an appeal against an interlocutory judgment is subject to leave, except in circumstances not presently relevant. I consider that the order made allowing the costs at the stated figure is an interlocutory judgment for the purposes of the Rule. The order does not finally dispose of the rights of the parties. Accordingly, leave to appeal is required.
I would grant leave to appeal. As will appear, the appeal raises two points of principle which make it appropriate to grant leave. If the order is not, for the purposes of r 96B.02 an interlocutory judgment, there is then no need for leave to be granted.
The points argued on appeal are as follows.
The Magistrate who taxed the Bill of Costs allowed as part of the costs the costs attributable to items referable to the plaintiffs’ claim against another defendant. The plaintiffs had discontinued their claim against this defendant fairly early in the proceedings. No order as to costs was made on that discontinuance. The defendant argued on the taxation, and on appeal, that the order for costs does not provide for the payment of these costs. That is the first issue argued on appeal.
The second issue arises under r 108(5) of the Rules, which provides as follows:
“Where costs taxed off represent 10%, or more, of the costs allowed and certified on a taxation, the successful party is not entitled to any costs in respect of the taxation.”
The difference between the amount claimed ($19,580.63) and the amount allowed on taxation ($16,129.69), that is, the amount taxed off, is about 17% of the costs allowed and certified. Nevertheless, the Magistrate ordered that the defendants pay the plaintiffs’ costs of the taxation, subject to a proportionate reduction on account of the costs disallowed.
The Magistrate said in her reasons that for the purpose of r 108(5), items not pursued by the plaintiffs at the taxation, and items conceded during the taxation should be disregarded. The items actually disallowed or taxed off, as distinct from items withdrawn or conceded during the taxation, apparently amounted to less than 10% of the costs allowed. Accordingly, the Magistrate held that r 108(5) did not apply. That is the second issue.
The meaning of the costs order
The first issue turns on the meaning of the costs order.
The Magistrate said that the case of Kelly’s Directories v Gavin and Lloyds (No.2) [1901] 2 Ch 763 was indistinguishable and (by implication) held that it established a principle or practice to the effect that if a defendant is ordered to pay the plaintiff’s costs, and the plaintiff has been unsuccessful against another defendant, there being no specific order for payment of that defendant’s costs, the unsuccessful defendant must, in the absence of any such special order, pay the whole of the plaintiff’s costs, and is not entitled to any deduction on account of the joinder of the other defendant. I agree that the decision in that case appears to support such a principle or practice.
The Magistrate was not referred to the unreported decision of the Court of Appeal of the Supreme Court of Victoria in Dimos v Willetts [2000] VSCA 154. I am indebted to Ormiston JA for his thorough and learned analysis, in his reasons in that case, of the standing of Kelly’s Directories. He refers to the few cases in which Kelly’s Directories has been referred to, and to statements in practice books dealing with costs. He concludes that Kelly’s Directories reflects a practice followed in the Chancery Division, not followed in the King’s Bench Division, and in any event abandoned in England in 1985, in favour of the different practice of the King’s Bench and Queen’s Division.
Ormiston JA summarises the position as follows:
“Where, as in the present case, the Court dismisses a claim against a second or other defendant with costs, that should be construed as dealing with the costs of that claim, if no contrary order is made. Likewise, again as in the present case, an order for costs against an unsuccessful defendant should be construed upon the basis that the Court was dealing with the claim or claims made against that defendant, so that, in the absence of any contrary order, it should be construed as dealing with only the costs necessarily and properly incurred by the plaintiff in prosecuting that claim or those claims. The words ‘of the action’ used here, as in so many court orders, should be read as having implicitly added to them the words ‘as against the first defendant’, but that is strictly unnecessary because the proceeding or event prima facie under consideration was that against the first defendant, who was thereby ordered to pay those costs.”
His reasoning is persuasive. I respectfully agree with his conclusion, as did the other members of the Court.
Ormiston JA notes that the result might be different if there is only one cause of action involving several defendants, or if the plaintiff was obliged to join the added defendant for conformity’s sake. Neither such situation arises here.
I agree also with Ormiston JA that when a costs order is made in a case like the present case, it is desirable that the order should deal specifically with the costs of parties not directly affected by the order. It is the responsibility of the parties to raise the matter with the Judge or Magistrate who makes the order. It appears that that was not done in this case. Neither party chose to apply to the Magistrate who made the costs order for clarification of the intent of the order.
I conclude that the Magistrate erred, although as she was not referred to the decision in Dimos it is not surprising that she reached the conclusion she did. The Magistrate should have disallowed item 103 and related items. The parties should now identify the amount to be deducted from the amount allowed for costs, and should incorporate the variation in the amount to be allowed in Minutes of Order disposing of this appeal.
The costs of the taxation
I was informed by the parties that when the taxation began, the plaintiffs indicated that they conceded or did not pursue certain items amounting to about $1,325. Other items were conceded or abandoned as the taxation progressed.
The defendants argue that any items shown on the taxed Bill as disallowed or taxed off are to be counted for the purposes of r 108(5). I acknowledge that literally an amount conceded at the beginning of the taxation is “taxed off”, because it will be shown as such in the taxed Bill. But in my opinion the defendants approach to r 108(5) is too literal and too rigid. I consider that r 108(5), when it refers to “costs taxed off”, can and should be read as referring to costs disallowed once the taxation has begun. Costs disallowed will include costs disallowed because of an adverse ruling made by the taxing officer, and also costs disallowed as a result of a concession or withdrawal once the taxation is underway. But, in my opinion, costs disallowed as a result of concessions or withdrawals made at the very outset of the taxation should not be treated as “costs taxed off.”
Mr Cogan, counsel for the defendants, made the point that it may be convenient to indicate, as the taxation progresses, which items are not pursued, rather than to do so at the outset. I understand that. But the opponent of a claim for costs can protect the opponent’s position by stating, before the taxation is actually underway, which items are no longer pursued, and so the approach that I favour will not cause any injustice.
It needs to be borne in mind that to accept Mr Cogan’s approach would give rise to the possibility of the opponent conceding items during the taxation if and when it becomes apparent that the argument on the items is not going well for the opponent, and then arguing that such amounts should not be treated as “costs taxed off.” That would not be a satisfactory outcome.
In this respect I consider that the Magistrate erred. It is common ground that if she did err in this respect, the costs taxed off exceeded 10% of the costs allowed, and the plaintiffs were not entitled to the costs of the taxation. Bearing in mind that I am of the view that other costs also should have been disallowed, it was not in issue, as I understand it, that if the defendants succeeded on appeal on the first point the operation of r 108(5) was attracted.
Rule 108(5) is rather hard in its operation. But in my opinion it is clear. It might be better if some flexibility were built into it. That, however, is a matter for the rule-making authority.
I do not accept Mr Cogan’s submission that the Magistrate had a discretion to decline to apply r 108(5). Mr Cogan submitted that the Magistrate had a general discretion not to apply r 108(5), or alternatively could decline to do so when dealing with an itemised Bill of Costs rather than a Bill drawn by reference to the lump sum scale for which the Rules provide. Section 37(1) of the Act provides as follows:
“Subject to this Act and the rules, costs in any civil proceedings will be in the discretion of the court and may be awarded against any person (whether a party to or a witness in the proceedings or not).”
I consider that r 108(5) is a rule contemplated by s 37(1) of the Act, and so is a rule that encroaches on the otherwise general discretion of the court. It is a rule that makes a particular provision for a particular situation. Mr Cogan relied on the decision of this Court in Copping v ANZ McCaughan Ltd (1995) 63 SASR 523. That case dealt with r 101.02(1) of the Supreme Court Rules, which provides that subject to the Rules, the costs of proceedings are to follow the event unless the Court otherwise orders. The Court there held that that rule should not be construed as removing the general discretion as to costs vested in the Court by s 40 of the Supreme Court Act 1935 (SA), which provides that subject to Rules of Court, the costs of proceedings are in the discretion of the Court. But the difference in that case was that the relevant rule, if taken literally, provided generally that costs should follow the event, and so if taken literally replaced the general rule that costs should be in the discretion of the Court with an equally general rule that costs should follow the event. It was in that context that the Court interpreted the rule as expressing nothing more than a general expectation that a successful party would obtain an order for costs, nevertheless leaving to the unfettered discretion of the Court the appropriate order as to costs in any particular case. As the Court pointed out, it is doubtful whether a rule could validly reverse the effect of the relevant statutory provision. That reasoning is not applicable to r 108(5), which does not purport to reverse the general principle that costs are in the discretion of the court, but merely to make a specific provision for a specific situation. Rule 108(5) does not undermine or reverse the general principle embodied in s 37. Nor, in my opinion, is there any basis for holding that r 108(5) is not applicable to an itemised Bill of Costs.
For those reasons I do not accept the submission that it was within the discretion of the Magistrate to depart from r 108(5) in this case. But even if such a discretion existed, it seems to me that it would not have been appropriate to exercise it in this case, bearing in mind that on my understanding of the situation the amount appropriately to be regarded as the amount of “costs taxed off” is well in excess of 10%. Having held that r 108(5) does apply to the present case, I am not persuaded that it should not be applied in the present case, even if it does express no more than a general expectation as to the kind of order that is appropriate in a case like this.
Conclusions
I grant leave to appeal. The appeal is allowed. The parties should submit within 14 days Minutes of Order reflecting my decision, and reducing the amount to be allowed on the taxation of costs, both by reducing the amount to be allowed for the costs of action and by disallowing the costs of the taxation itself as provided by r 108(5).

[2002] SASC 367

8 November 2002