Canderlori v Process Design

[2004] NSWSC 385

CITATION:	Canderlori & Anor v Process Design [2004] NSWSC 385
HEARING DATE(S):	4 May 2004
JUDGMENT DATE:	11 May 2004
JURISDICTION:	Common Law
JUDGMENT OF:	Master Harrison
DECISION:	(1) The appeal is dismissed; (2) The Magistrate's orders dated 31 July 2003 are affirmed; (3) The summons is dimissed; (4) The plaintiffs are to pay the defendant's costs as agreed or assessed.
CATCHWORDS:	Appeal decision of Local Court Magistrate - calculation of interest, permanent stay
LEGISLATION CITED:	Local Courts (Civil Claims) Act 1970 (NSW) - s 69
CASES CITED:	Allen v Kerr & Anor (1995) Aust Torts Reports 81-354 Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 Devries v Australian National Railways Commission (1993) 177 CLR 472 Re Will of F B Gilbert (decd) 46 SR(NSW) 318 State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) (1999) 160 ALR 588
PARTIES :	Ross Candelori & Gina Candelori (Plaintiffs) Process Design & Fabrication Pty Limited (Defendant)
FILE NUMBER(S):	SC 12255/2003
COUNSEL:	Mr C C Dwyer (Plaintiffs) Mr G Van Der Flag (Defendant)
SOLICITORS:	Mr M Marando, Marando Solicitors (Plaintiffs) Mr A Dicembre, McGrath Dicembre & Co (Defendant)

LOWER COURTJURISDICTION:	Local Court
LOWER COURT FILE NUMBER(S):	789/2001
LOWER COURT JUDICIAL OFFICER :	A A Spence LCM

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

MASTER HARRISON

TUESDAY, 11 MAY 2004

DESIGN & FABRICATION PTY LIMITED
JUDGMENT (Appeal decision of Local Court Magistrate
- calculation of interest, permanent stay)

1 MASTER: By summons filed 28 August 2003 the plaintiffs seek firstly an order that the decision of A A Spence LMC dated 31 July 2003 that the entitlement to interest of the defendant (plaintiff in the court below) be calculated upon as set out in paragraph 30 of the further amended statement of liquidated claim be set aside and in lieu thereof an order that the defendant’s entitlement to interest up to judgment be in an amount to be advised; and secondly an order that the Magistrate’s order imposing a permanent stay on the plaintiff’s right to pursue its cause of action in damages for the defendant’s breach of covenant to keep the plaintiff’s premises in good repair during the currency of the defendant’s lease be lifted. The plaintiffs are Ross Candelori and Gina Candelori (the appellants) (the Candeloris). The defendant is Process Design & Fabrication Pty Limited (the respondent) (Process Design). For convenience I shall either refer to the Candeloris as the plaintiffs and Process Design as the defendant or I shall refer to the parties by name in this judgment.

2 At the outset, it may be helpful to make some brief comments concerning the remedy pursued by the plaintiff. Section 69(2) of the Local Courts (Civil Claims) Act 1970 (NSW) (the Act) permits a party who is dissatisfied with a judgment as being erroneous in point of law to appeal to this Court. The onus lies on the plaintiff to demonstrate that there has been an error of law. What is a question of law (as opposed to a question of fact) was considered, inter alia, in Allen v Kerr & Anor (1995) Aust Torts Reports 81-354 and Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 155-156. It cannot be said that the Tribunal member acted on evidence inconsistent with facts incontrovertibly established by the evidence - see Devries v Australian National Railways Commission (1993) 177 CLR 472 per Brennan, Gaudron and McHugh JJ at 479 and State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) (1999) 160 ALR 588. Section 69(4) of the Act provides that the court may determine an appeal by either (a) setting the judgment or order aside or (b) by varying the terms of the judgment or order or (c) by setting the judgment or order aside and remitting the matter for determination in accordance with the court’s directions or (d) by dismissing the appeal.

Grounds of appeal

3 The grounds of appeal are only those parts of the Magistrate’s decision dealing with the defendant's claim for interest and refusing leave to amend the cross claim and then granting a permanent stay of the plaintiffs’ claim for damages for breach of covenant. The grounds of appeal are that the Magistrate erred in law by firstly, not allowing the plaintiff to amend to add a cause of action in damages for breach of covenant to its cross claim; secondly, by dismissing the plaintiff’s notice of motion, brought in consequence of the refusal of the amendment to its cross claim, seeking to join fresh proceedings which it had in the meantime issued, claiming damages for breach of covenant; and thirdly, by issuing a permanent stay, of his own motion, on the fresh proceedings, and on that basis the Magistrate erroneously considered the claim for damages for breach of covenant was not a separate cause of action properly available to the plaintiff, but merely a head of damage.

4 On 31 July 2003, the Magistrate made the following orders [at page 11].

“In relation to the plaintiff’s Statement of Liquidated Claim, there will be verdict in favour of the plaintiff in the sum of $14,369.59.
In relation to the defendants’ cross-claim, there will be a verdict in favour of the defendant/cross-claimants in the sum of $5,121.23.
There is accordingly a net verdict and judgment in favour of the plaintiff in the sum of $9,248.36, plus issue and service fees.
The plaintiff is entitled to interest on this judgment amount, to be calculated in the registry at the prescribed rate(s).”

Local Court proceedings

5 Process Design leased premises known as Unit 2, 11 Tarrington Place Smithfield from the Candeloris. Since 1992 the parties have entered into four consecutive leases. The first lease commenced on 10 April 1992 and terminated on 9 April 1995. The fourth and last lease was for one year in duration and terminated on 9 April 2000. After 9 April 2000 the plaintiff remained in occupation of the premises on a month-to-month tenancy. On 9 June 2000 the plaintiff vacated the premised. The plaintiff received a cheque in the sum of $1,948.50 from the defendants. The plaintiff claimed it did not receive the return of the entire bond monies due to it, nor any accrued interest on the bond monies. Process Design filed a statement of claim claiming the sum of $14,369.59 as a balance of the bond money and interest figures from the National and Commonwealth Banks on term deposits of $8,600.61 from 2 April 1995 to 30 June 2000.

6 The defendant filed a defence which denied the plaintiff’s claim. The defendant also filed a cross claim seeking an amount of $14,311.45 as damages. These damages were particularised as damages being incurred by them in relation to the loss of rent as a result of the plaintiff leaving the defendants’ premises in a state of disrepair. In their cross claim the defendants alleged that the plaintiff left their property in such a poor state that they were unable to relet the premises for the period 7 August 200 to 1 November 2000.

Calculation of interest

7 All the leases contained a clause which was identical to clause 4.1 in the first lease.

8 Clause 4.1 of the lease provided:

“a Bond of eight thousand six hundred dollars and sixty one cents ($8,600.61) shall be paid by the Lessee to the Lessor upon the signing of this Lease and such Bond shall be invested within fourteen (14) days of the signing of this Lease in an interest bearing deposit AND the bond together with the interest accrued thereon shall be held as security against any failure by the Lessee to comply with any covenants and conditions of this Lease. In the event of any failure or breach of any covenant or condition on the part of the Lessee THEN the Lessor shall be entitled to make a deduction from the Bond to recover any loss or damage sustained.”

9 So clause 4.1 provided for the plaintiffs to invest the defendant’s bond monies in an interest bearing deposit, to be held as security against any failure on the part of the defendant to comply with any of the covenants and conditions of the lease. Mrs Candelori admitted in evidence that she did not place the defendant’s bond monies in any interest bearing account and that she deposited the monies into her cheque account. The plaintiffs conceded that the defendant was entitled to the return of the bond monies subject to the defendant’s claim. The critical issue is whether as submitted the defendant was only entitled to interest being compounded on accrued interest – not interest after the termination of the first lease being calculated on the basis of interest being added to the bond monies. In other words, the plaintiff was only entitled to interest on interest. It was submitted that as the plaintiff was in rightful possession of the principal sum, being the bond, during the currency of the tenancy, the only sum which the defendant could complain it was deprived of during the tenancy was the interest that had accrued on that principal sum; and accordingly the defendant’s entitlement to interest should be calculated as the interest compounding on the interest withheld by the plaintiff, not interest compounding both on the interest withheld and on the principal sum itself.

10 The plaintiffs do not challenge the finding by the Magistrate that at the end of each lease the respondent had an implied contractual right to demand the return of its bond money together with interest accrued during the currency of the lease. But this is not to the point because there was a subsequent agreement between the parties. The Magistrate accepted the evidence of Mr Clive Carlow of the respondent company to the effect that the bond monies were never returned or accounted for; by agreement they were simply rolled over from lease to lease. Thus the parties entered into a subsequent agreement that the bond monies were to be rolled over.

11 The Magistrate did not accept the plaintiffs’ contention and stated [at page 4]:

“Interest that should have been credited to the interest bearing account (which was never opened) was notionally rolled over at the same time. Subject to any contractual rights of the defendants, these were funds that belonged to the plaintiff. It had every legitimate expectation that any accumulated interest would be calculated on the basis of including the principal sum, namely $8,600.61. That is clearly the methodology adopted by any reputable financial institution. I accept the plaintiff’s calculations outlined in its statement of claim.”

12 It was intended that the plaintiff invest the bond monies in an interest bearing deposit. If this had been done, interest would have been calculated on the principal sum and capitalised. It is my view that the Magistrate’s reasoning is correct.

Permanent Stay

13 The plaintiffs submitted that at the time the second application to file a cross claim seeking rectification costs was made on 13 May 2003, the proceedings were part heard and had been adjourned from 17 March 2003 until 11 July 2003. At that point in the proceedings the plaintiff had two witnesses still to give evidence. According to the plaintiff, the evidence that the defendants would have relied upon in support of the proposed amendments to the cross claim had already been filed and served when the plaintiffs first filed their evidence in 2002 (LC t 6.45 17 March 2003) and no further evidence was intended nor needed to be filed. But that cannot be correct because the defendants may have wished to put forward evidence before the court disputing the plaintiffs’ claim in relation to those rectification costs.

14 Additionally, the plaintiffs submitted that the substance of the claim in the new statement of claim, although closely linked on a factual basis to the current proceedings, constitutes a cause of action which stands on its own and it is not merely another head of damage in the current proceedings. The plaintiff submitted that the Magistrate erred in permanently staying the second statement of claim because the plaintiffs had a right to bring it. According to the plaintiff, the issue of the application of Anshun principles is a matter for a party to lead as a defence.

15 On this topic the Magistrate stated [at pages 5-6]:

“The defendants’ cross-claim is based entirely on the alleged loss of rental occasioned by the plaintiff leaving the leased premises in an unfit state for immediate reletting. The defendants have particularised in their evidence the type and degree of harm to the premises, and moreover, they have costed remedial works. But for some extraordinary reason, which is not particularly clear, they did not specifically plead these matters as a head of damages in their cross-claim. On the first day of the hearing on 17 March 2003, the defendants effectively sought to amend their cross-claim to include a claim for rectification work. The plaintiff vigorously opposed that application. For reasons indicated in the transcript, it was held to be too late on the day of the hearing to seek such an amendment. The defendants subsequently made two further attempts by way of notions [sic] of motions on other dates to allow them the opportunity to pursue a claim for rectification work to their premises.
The first application, which was determined on 13 May 2003, was effectively an application of the type previously ventilated on the 17 March 2003; and it was refused on the basis that the proceedings had commenced, and indeed, most of the important evidence had already been received. On 1 July 2003 an application was made by the defendants to seek to have a fresh statement of claim, that they had filed in the court registry on 23 May 2003, heard in the present proceedings. The present proceedings had previously been adjourned to 11 July 2003 on a part heard basis and it was the defendants’ application to vacate that hearing date in order to accommodate their newly filed statement of claim. This fresh statement of claim effectively claimed the cost of the rectification work. The plaintiff once again vigorously opposed that application, indicating, inter alia, that it was an abuse of process. After much argument, the defendants’ notice of motion was refused and an order was made placing a permanent stay on the fresh proceedings. It was held that the defendants’ statement of claim was in essence an abuse of process in that they could have and should have properly raised their claim in the present proceedings: Brisbane City Council v Attorney-General (PC) [1979] A.C. 411 ; Port Melbourne Authority v Anshun Proprietary Limited [1980-1981] 147 CLR 589; Onerati v Phillips Constructions Pty Ltd (1989) 16 NSWLR 730.” (Magistrate’s emphasis added)

16 I should add that on a prior occasion, namely September 2002, this matter had been fixed for hearing but had not been reached. The principles upon which this court is to decide whether the Magistrate’s discretionary decision to amend the name of grant an amendment to a cross claim is stated in In Re Will of F B Gilbert (decd) 46 SR(NSW) 318 where Jordan CJ stated:

“…it is only in the most exceptional circumstances that a Court of Appeal could regard itself as justified in interfering with the exercise of a discretion by a judge of first instance – only where he has misapplied the law, or his order is likely to lead to a miscarriage of justice: Evans v. Bartlam [1937] AC 473 at 480-1, 486-7. In this connection, however, I am of opinion that, as was pointed out by this Court in In re Ryan (1923) 23 SR 354 at 357; 20 Austn Digest 81, there is a material difference between an exercise of discretion on a point of practice or procedure and an exercise of discretion which determines substantive rights. In the former class of case, if a tight rein were not kept upon interference with the orders of Judges of first instance, the result would be disastrous to the proper administration of justice. The disposal of cases could be delayed interminably, and costs heaped up indefinitely, if a litigant with a long purse or a litigious disposition could, at will, in effect transfer all exercises of discretion in interlocutory applications from a Judge in Chambers to a Court of Appeal. But an appeal from an exercise of a so-called discretion which is determinative of legal rights stands in a some-what different position.”

17 The amendment was sought at a late stage in the proceedings. Thus it was open to the Magistrate, in the exercise of his discretion to refuse to grant leave to amend the cross claim. In relation to res judicata, the contract sued on is the entire contract. The defendant sought damages for the breach or breaches of that contract. The cost of rectification of the premises is one head of damage. The Magistrate was correct. There is no error of law.

18 The appeal is dismissed. The Magistrate’s orders dated 31 July 2003 are affirmed. The summons is dismissed.

19 Costs are discretionary. Costs usually follow the event. The plaintiffs are to pay the defendant’s costs as agreed or assessed.

Orders

20 The Court orders:

(1) The appeal is dismissed.

(2) The Magistrate’s orders dated 31 July 2003 are affirmed.

(3) The summons is dismissed.

(4) The plaintiffs are to pay the defendant’s costs as agreed or assessed.
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Last Modified: 05/12/2004