Brohard Constructions Pty Ltd v Overall - [2005] SASC 429

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
BROHARD CONSTRUCTIONS PTY LTD v OVERALL
Reasons of The Honourable Justice Perry
16 November 2005
PROCEDURE - COSTS - APPEALS AS TO COSTS - DISCRETION
The appellant appealed by leave against a costs order made in the Magistrates Court - the appellant was the respondent to proceedings issued by the respondent to the appeal, who was the applicant in the Magistrates Court, pursuant to s 37 of the Building Work Contractors Act 1995 in which the respondent sought orders obliging the appellant to supply documentation to her as to the state of completion of a dwelling house on land the subject of a contract pursuant to which the respondent agreed to purchase the house and land, the contract being subject to completion of the dwelling - the respondent also sought an order that she and a building consultant be permitted to inspect the premises - the appellant had refused the respondent's requests for the documentation and to allow inspection, but agreed to do so after the proceedings had been issued and before the application for an order came on for hearing - the magistrate ordered the appellant to pay the respondent's costs as between solicitor and client, on the footing that the attitude of the appellant before the proceedings were issued, was "manifestly unreasonable" - consideration of the source of the discretion to award solicitor and client costs - MCR r 106(4), and its reference to "successful party" considered - held that although the magistrate's reliance on MCR 4 106(4) was in error, the order made was correct and could be supported by reference to the general discretion as to costs in s 37(1) of the Magistrates Court Act 1991 - appeal dismissed.
Building Work Contractors Act 1995 s 37; Magistrates Court Act 1991 s 37; Magistrates Court Rules r 2 and r 106, referred to.

BROHARD CONSTRUCTIONS PTY LTD v OVERALL
[2005] SASC 429
Magistrates Appeal: Civil

PERRY J. This is an appeal by leave against a costs order made by a magistrate sitting in the civil jurisdiction of the Magistrates Court.
On 31 October 2005, at the conclusion of argument on the hearing of the appeal, I made an order that the appeal be dismissed with costs. I reserved the right to publish reasons at a later date.
The respondent, who was the applicant in the Magistrates Court, entered into a contract with the appellant, a builder, to purchase land and a house, then being constructed on the land by the appellant, at 24 Yorketown Crescent, Henley Beach for $370,000.
A condition of the contract provided:
This contract is subject to completion of the dwelling and final inspection by the Council. Notification of the completion of the dwelling is to be given to the purchaser.
Initially, settlement was arranged for 17 June 2005.
On 14 June 2005, the respondent inspected the premises. As a result, she entertained some concern about settling without the assistance of an independent building consultant to view the premises.
However, the appellant refused to allow the respondent access to the property with a building consultant.
By letter of 16 July 2005, FRS Legal, solicitors for the respondent, wrote to the appellant, stating that the respondent would not be prepared to settle until she could be satisfied that the dwelling had been completed. In the letter, the solicitors requested a copy of the council-approved working drawings, the council-approved engineering report, and the council-approved building schedule and other specifications.
FRS Legal intimated that they would then submit those documents to the respondent’s consultant, who would then inspect the property the following week with the respondent.
On 20 June 2005, Lynch Meyer, solicitors, acting for the appellant, replied to the letter. They pointed out, inter alia, that the council’s officer had inspected the premises and issued a “final inspection certificate” on 15 June 2005. They denied that the respondent had any right to inspect the premises with a consultant, or even with a friend. They blamed the respondent for any delay in completing the dwelling and in effecting settlement. They denied that the appellant had any obligation to provide the respondent with any “building documentation”. They indicated that settlement was re-arranged for 23 June 2005.
In a subsequent letter they indicated that settlement would be on 8 July 2005.
By letter of 27 June 2005, FRS Legal reiterated the respondent’s request for a copy of the “relevant documentation” and access to the property in the presence of her nominated building consultant in advance of settlement. They intimated that unless the respondent was provided with full working drawings and development approval, together with access to the property in the presence of her building consultant within 72 hours, they would make an application to the court on her behalf pursuant to s 37 of the Building Work Contractors Act 1995 seeking appropriate orders.
On 4 July 2005, the respondent instituted an application in the Magistrates Court seeking orders for the supply of the documentation which she had sought, and further, that she have access to the property no later than Thursday 7 July 2005, the day before settlement was then due to take place.
A little after 5.00 pm on the day upon which the application had been issued, that is, 4 July 2005, the appellant’s solicitors indicated that their client would provide the access and documentation sought. The parties reserved their position as to costs.
On 6 July 2005, an inspection of the property was conducted by the respondent, together with her building consultant, as a result of which, FRS Legal wrote to Lynch Meyer pointing out that in the opinion of the consultant there were a number of items of work still to be completed and stating that settlement would not be effected on 8 July 2005, or at all, until such time as the dwelling was completed. They enclosed a copy of the consultant’s report.
In fact, settlement did not take place until 20 July 2005.
On 6 July 2005, the same day as the inspection, the solicitors for the parties attended before a magistrate. The respondent intimated through her solicitor that the application was no longer pursued, but that the question of costs was still outstanding. The magistrate intimated that he would entertain submissions on the question of costs, and make a ruling which would be posted to the parties.
The parties duly submitted written submissions on the question of costs.
In their written submissions, the respondent’s solicitors contended that, given the attitude of the appellant, the bringing of the application was both necessary and appropriate, and that the concession of the appellant to the orders sought vindicated her action. They sought an order in the respondent’s favour for costs to be taxed as between solicitor and client.
In the course of their submissions they put:
9.There could not be a clearer case for the provision of an order on a solicitor and client basis than the present case. The position adopted by the Respondent was manifestly unreasonable. On the one hand, it threatened to invoke the default provisions under its contract against the Applicant for failing to settle on the contract, but on the other hand it would not allow the applicant reasonable access to documents and to the premises to satisfy herself that the condition which the Respondent had to meet, namely the completion of the building, had been achieved.
10.Further, the Respondent was put on notice on 27 June 2005 of the substantive basis of the application that would be made against it and that in the absence of a timely response that an application would be issued. The Respondent chose to ignore that letter and only responded and ultimately consented to the order sought after the Applicant was put to the cost of issuing the proceedings.
In the appellant’s submissions to the magistrate, the appellant sought an order either that there be no order as to costs, or that costs be reserved, or that costs be awarded on a party and party basis.
The appellant asserted in its submissions that it had provided copies of the documents and access to the premises in a “timely manner”. The appellant maintained that there was a “sale of land contract” but not a building contract. The appellant denied that there was any contractual right on the part of the respondent to the documents or to access to the premises.
After receiving the written submissions, the magistrate made a ruling and forwarded short reasons to the parties.
He ruled that it was “disingenuous of the respondent” to argue that the contract was for sale of land only. He agreed with the respondent’s submission that “there could not be a clearer case for the provision of an order on a solicitor and client basis than the present case. The position adopted by the respondent was manifestly unreasonable”. In the course of his reasons, he referred to MCR r 106(4), the terms of which I set out below.
By endorsement on the file, he made a formal order in the following terms:
HH finds that the respondent is liable to the applicant on the question of costs on an indemnity or solicitor and client basis. The costs of and incidental to the application and the filing of submissions on behalf of the applicant are to be costs that are to be agreed or taxed on the ordinary solicitor and client basis.
The appellant sought and obtained leave to appeal to this Court against the costs order.
In the notice of appeal, the appellant complains, inter alia, that the magistrate erred in finding (by inference) that the respondent was the “successful party” for the purposes of MCR r 106(4). The appellant further complains that the magistrate erred in finding that the position adopted by the appellant was “manifestly unreasonable” and that the respondent was entitled to the documents and access.
On the hearing of the appeal, the parties presented arguments which reflected the points made by them in the written submissions to the magistrate.
On the hearing, I expressed some hesitation as to the applicability of MCR r 106 in the circumstances of the case.
Relevantly, that rule provides:
106(1) Subject to these rules or to an order of the Court, a successful party in an action (other than a minor civil action) is entitled on judgment to costs against an unsuccessful party, or any other party that the Court may order, in accordance with the following principles:
(a)where judgment is in respect of an action for a sum of money;
(i)a successful plaintiff is entitled to costs on the relevant scale in the Third Schedule applicable to the sum actually recovered;
(ii)a successful defendant is entitled to costs on the relevant scale in the Third Schedule applicable to the sum claimed;
(b)where judgment is in respect of any other action – a successful party is entitled to costs on the scale in the Third Schedule specified by the Court;
or
(c)where the action involved unusual difficulty or intricacy, or other proper cause exists – a successful party is entitled to costs on such percentage of the Supreme Court scale as the Court specifies.
(2)In a minor civil action, a successful party is entitled on judgment to costs against an unsuccessful party, or any other party that the Court may order, in accordance with the relevant scale in the Third Schedule.
(3)If, on the hearing of an action (other than a minor civil action), a successful party recovers a sum of money being $3000 or less, that party is, unless for special reasons the Court orders otherwise, entitled to costs only as if it were a minor civil action.
(4)Where proper cause exists, the Court may order that a successful party is entitled to costs on a solicitor and client basis.
(5)…
In my opinion, on a proper construction of the rule, it applies only to a situation where there has been a judgment, that is, a final judgment, and the words “successful party in an action” should be construed accordingly.
Pointers within the rule which suggest that to be the proper construction of the rule include, for example, sub-rule (1)(a) which refers to judgment for a sum of money, the relevant scale then being at the scale applicable “to the sum actually recovered”.
Sub-rule (1)(c) refers to an action which “involved unusual difficulty or intricacy”. The use of the past tense suggests that the rule is invoked when the action has been concluded.
Sub-rule (3) refers to a successful party who “recovers a sum of money being $3000 or less”.
While it is true that sub-rule (4) confers a discretion to order costs on a solicitor and client basis in favour of a successful party “where proper cause exists”, that sub-rule must be construed ejusdem generis with the other parts of r 106.
I do not overlook the fact that in MCR r 2, “judgment” is defined to mean “a judgment, declaration, decree or decision of the Court disposing of an action, and includes an interlocutory judgment or order”. I must say that I regard that definition as somewhat ambiguous. It may mean that the word “judgment” is applicable to describe only a judgment, declaration etc which disposes of an action. On the other hand, the words “interlocutory judgment or order” may identify a judgment or order falling short of that.
In any event, r 106 must be construed according to its terms. For the reasons which I have given, it applies only when an action has been concluded by a judgment. In this case that was not so. Indeed, there was no judgment or order at all; the magistrate simply noted that the “Applicant’s application [is] no longer pursued”.
It follows that insofar as he relied upon r 106, the magistrate erred.
However, that is not an end of the matter.
MCR r 106 is a rule dealing with the entitlement of parties to costs following the entry of judgment of the kind described in the rule. Other situations fall to be considered by reference to other provisions.
There does not appear to be any other provision in the rules.
The source of the general jurisdiction to make an order for costs, is s 37 of the Magistrates Court Act 1991. Section 37(1) provides:
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).
The discretion conferred by that section is expressed in terms which provide a proper basis for the order made in this case.
In my view, the magistrate was correct in the conclusions which he reached as to the entitlement to costs on a solicitor and client basis. Had he referred to s 37(1) instead of to r 106, the result would inevitably have been the same. If I was to exercise the discretion afresh, I would reach the same conclusion.
Even if it had been necessary to characterise the respondent as a “successful party”, in the circumstances, I think it would have been appropriate so to designate her.
However, the exercise of the broad discretion conferred by s 37(1) of the Act does not depend upon a finding that the party successfully applying for costs should be so characterised.
I realise that the exercise of the general discretion as to the award of costs will normally be governed by the outcome of the case, or the result of some interlocutory proceeding, in terms of success or failure. Even then, however, an otherwise unsuccessful party may be entitled to costs if, for example, the party has made an offer before trial exceeding the amount ultimately awarded.
Before parting with the matter, I should say that this Court will, in any event, rarely interfere with an order as to costs alone made in an inferior court.
The appellant was fortunate to obtain leave to appeal.
I considered revoking the grant of leave to appeal, but on the hearing of the appeal I determined, on balance, not to take that step.
For these reasons, I dismissed the appeal.