Corradini v O'Brien Lovrinov Crafter P/L No. Scgrg-00-296

[2000] SASC 351

CORRADINI & ANOR  v  O’BRIEN LOVRINOV CRAFTER PTY LTD

[2000] SASC 351

Magistrates Appeal

1................ GRAY J.......................... On 11 February, 2000 following a trial on a number of issues, Judge Lee of the District Court discharged orders for security of costs.  The appellants have appealed with leave against the orders.  A stay pending this appeal has been ordered.

Background

2      The proceedings concern building renovation and reconstruction work performed by the respondent to the appellants’ home.

3      The respondent claims the balance of monies pursuant to a building contract.  The contract was said to have been varied such that the respondent could pay the subcontractors and suppliers, and that the appellants would then reimburse the respondent.  Alternative claims based on quantum meruit and unjust enrichment are pursued.

4      In response, the appellants alleged that the building contract was illegal and unenforceable;  and that it was for a fixed price which did not allow for variation.  It was further submitted that no monies are owing to the respondent or overpayments.  A counterclaim alleging defective work and seeking damages is also pursued.  Additionally reimbursement for overpayment is sought.

The History of the Proceedings

5      An order was made that the matter proceed to trial on the following preliminary questions;  whether there was a contract in existence between the parties;  what its terms were;  whether the contract was vitiated by s 23 of the Builders Licencing Act;  and  whether the plaintiff could claim by way of quantum meruit or unjust enrichment.

6      The trial took place in November of 1999, and Judge Lee made findings[1] in favour of the respondent on the first three issues and then found it unnecessary to decide the fourth issue.

[1]      O'Brien Lovrinov Crafter v Corradini & Corradini Judgment No (1999) SADC 177

7      Judge Lee resolved a number of substantive issues in the action by a final judgment. The Full Court dismissed an appeal and confirmed Judge Lee’s findings subject to minor variation.[2]

[2]      Corradini & Anor v O'Brien Lovrinov Crafter Pty Ltd Judgment No [2000] SASC 224

Remaining Issues

8      By consent, the remaining issues have been referred to arbitration.  These issues include the formal proof of the respondent’s invoices, that is whether the invoices related to work done on the appellants land, and whether the work was authorised by the appellants expressly or impliedly.  They also include the hearing of the counterclaim for defective work.  As to this issue, the respondent is a defendant and so is not required to provide security for costs.

The Orders for Security for Costs

9      On 1 November 1995 the respondent by consent was ordered to provide security for costs up to and including the first day of trial.  That order was complied with by provision of bank guarantees totalling $17,500.

10     On 15 November 1998 the respondent by consent was ordered to provide further security for costs, with bank guarantees totalling $7,500.  The order was understood to be for further security for costs up to and including the first day of trial.  The order is not expressed to be ‘for the action’.

11     At trial, the respondent by consent was ordered to provide further security for the action.  This was in the form of  personal guarantees from the directors of the plaintiff.   These were accepted by the defendant.  The respondent did not seek to have these orders set aside.  The respondent offered to increase the amount of the personal guarantees.

The Arbitration Proceedings

12 On 20 October 1998 a Master referred certain issues arising in the action for trial by an arbitrator pursuant to s 33 of the District Court Act (SA) 1991. Section 33 provides that:

“(1).. The Court may refer an action or any issues arising in an action for trial by an arbitrator.

(2)The arbitrator may be appointed either by the parties to the action or by the Court.

(3)... The arbitrator becomes for the purposes of the reference an officer of the Court and may exercise such of the powers of the Court as the Court delegates to the arbitrator.

(4)The Court will, unless good reason is shown to the contrary, adopt the award of the arbitrator as its judgment on the action or issues referred.  ... ”

13     The section is no more than a part of the machinery of the court for the trial of an action or issues arising in an action.[3]

[3]      Buckley v Bennell Design & Constructions Pty Ltd (1977-1978) 140 CLR 1 per Stephen J at 15

The Appeal

14     Before discussing the merits of the appeal it is convenient to make the following observations.

1      The orders granting security were interlocutory.

2Judge Lee’s decision to discharge certain security orders was a discretionary order.

3In the course of argument, Judge Lee identified the material he considered  in coming to his decision.  However, no reasons were given.

4Leave to appeal was granted by Wicks J.[4]  The appeal is regulated by Supreme Court Rule 97.  Rule 97.17 directs that it is to be by way of re-hearing.  Olsson J discussed the nature of such an appeal in Octocane v SRJ Property Development Pty Ltd[5].  I adopt the following analysis:

[4] Judgment No. [2000] SASC 79

[5] (1999) 74 SASR 471

“... By virtue of SCR 97.17 the appeal is by way of re-hearing.  It is not, however, an appeal de novo.  The effect of the relevant rules is that the appeal is one of fact as well as of law.  I am required to make an independent review of the evidence and am entitled, where necessary, to draw my own inferences from the facts.  (T v Medical Board[6];  Warren v Coombes[7])
In so far as the appeal seeks to place in issue the proper exercise  of discretion by the learned Master then it is incumbent on the appellant to demonstrate error on his part.  As was said in Mullet v Gabriel[8]:

[6] (1992) 58 SASR 382

[7] (1979) 142 CLR 531

[8] (1988-90) 52 SASR 330 at 333

‘... the appellate court is not at liberty to exercise its discretion in preference to that of the learned Master unless and until the latter is shown to have been flawed in its exercise.  The appellants, therefore, face the task of establishing that the learned Master did not pay regard, or did not pay sufficient regard, to the [relevant] factors ... ’ ”

5The questions answered by Judge Lee have been disposed of finally.  The balance of the trial has been referred to arbitration and ultimately must come back to the court for a final order before the trial can conclude.

6The orders providing for bank guarantees provided security up to and including the first day of trial.  The order for personal securities from the directors was security for the action.  The first day of the trial commenced when the issues were first heard by Judge Lee.

7      The orders that have been discharged were made by consent.

The Merits of the Appeal

15     The appellants submitted that the orders for security for costs could not be reversed or varied on the application of a party ordered to give security.  The only authorities cited for this proposition were Woods v Sheriff of Queensland[9] and Gordano Building Contractors Ltdv Burgess[10]. 

[9] (1892-96) 5-6 QLJ 163

[10] (1988) 1 WLR 890 at 894

16     These authorities have little relevance to matters of practice and procedure in South Australia. Rules 84(12) and 100.04 of the District Court Rules enable the court to vary or discharge an order for security for costs.

Rule 84(12) provides:

“The Court may vary or set aside a judgment or order at any time if the justice of the case so requires.”

Rule 100.04 provides:

“The amount of security required by any order for security for costs may be increased or decreased by the Court at any time and from time to time.”

17     It is well established that the court both at common law and under Rule 84(12) always retained jurisdiction to reverse or vary an interlocutory order even if made by consent pursuant to an underlying agreement of the parties.

18     In Mohtar v Mohtar & Seputis[11] von Doussa J said at (391):

“I think the plaintiff is correct in the submission that Rule 84.12 now vests the court with wider power than previously existed, even in fresh proceedings, to vary or set aside a judgment or order entered by consent. The only expressed fetter on the discretion on the court to do so appears in the words ‘if the justice of the case so requires’. It does not follow, however, that all the principles which formerly governed the circumstances in which a court would order the setting aside of a consent judgment have been abandoned. The new Rule is one made pursuant to s.72(1) of the Supreme Court Act 1935 as amended which authorises the making of Rules of Court ‘for regulating the pleading, practice and procedure of the court in any jurisdiction’. The scope and intent of the Rules must be construed against that power. The intent of Rule 84.12 is not, for example, to alter the substantive law of contract. Where a judgment entered by consent embodies an agreement between the parties by which an action is compromised, the long established principle restated in Harvey v. Phillips (supra) that a consent judgment will only be set aside on grounds sufficient to render a simple contract void or voidable will still apply."

[11] (1988) 146 LSJS 377 see also Berriman v Pipeline Engineering Pty Ltd (1988-90) 52 SASR 324

19     The power of the court to vary a security order, made by consent, on the application of the party ordered to give security was addressed by the New South Wales Court of Appeal in Morgan v 45 Flers Avenue Pty Ltd[12].  The court was concerned with extending time for the payment of security.  Kirby P at 579 rejected the submission that the court had no jurisdiction in the following terms:

“It is true that some of the observations in the English cases, if read widely, would suggest a want of jurisdiction in a court to vary a consent order which amounts to a contract between the parties, made for consideration.  Thus in Purcell v F C Trigell Ltd [1971] 1 QB 358 at 365, Winn LJ said, in relation to the facts of that case:

......... ‘... It seems to me that, if a consent order is to be set aside, it can really only be set aside on grounds which would justify the setting aside of a contract entered into with knowledge of the material matters by legally competent persons, and I see no suggestion here that any matter that occurred would justify the setting aside or rectification of this order looked at as a contract.’

See also National Benzole Co Ltd v Gooch [1961] 1 WLR 1489; [1961] 3 All ER 1097; Siebe Gorman & Co Ltd v Pneupac Ltd [1982] 1 WLR 185 at 189; [1982] 1 All ER 377 at 380 and the observations of Powell J in Baines v State Bank of New South Wales (1985) 2 NSWLR 729 at 738.

To the extent that any of these decisions suggest that this Court loses the discretion which is expressly conferred upon it by the rules, I would disagree.  The rules amount to delegated legislation.  They are made, ultimately, with the authority of Parliament.  The agreement between the parties may or may not give rise to private causes of action in contract for a breach.  The terms of that agreement may or may not, in the particular circumstances, be relevant to the exercise of the Court’s discretion conferred by the rules.  To the extent that an order is made pursuant to a contract, that contract may, in turn, impliedly incorporate the power under the rules to vary the order, as the justice of the particular case may require.  However all that may be, it is not possible for the parties, by their agreement, to exclude that jurisdiction which Parliament has expressly conferred upon the Court.  This is a jurisdiction, as Priestley JA pointed out in Southern Cross, expressed in the widest terms.  It clearly entrusts a broad discretion to the Court.”

[12]     (1987) 11 NSW LR 573

20     The same conclusion was reached by the Federal Court in the matter of R D Werner & Co Inc v Bailey Aluminium Products Pty Ltd[13].

[13] (1988) 80 ALR 134

21     More recently, the matter was dealt with by Kiefel J in  JL Holdings Pty Ltd v State of Queensland[14].  There Her Honour said as follows:

“Reliance was placed by the applicant upon the characterisation of the agreement as being in the nature of a binding contract and, therefore one with which the Court would not interfere except on ordinary principles relating to contract: Siebe Gorman & Co Ltd v Pneupac Ltd [1982] 1 WLR 185 at 189; [1982] 1 All ER 377 at 379-380. For the respondents it was submitted that it was the order which ought to be considered. It was interlocutory in nature and the courts always maintained a discretion to vary or alter such an order, as that case also held (at 190).

The order Lord Denning was there concerned with was one expressed to be ‘by consent’. In that connection his Lordship pointed out the difference between an order expressed to be by consent and which does in fact evidence a real contract, and an order which conveys merely the absence of objection to a proposal. In the context of orders made during the course of proceedings and concerning their conduct, it seems to me that they will more commonly fall into the latter category and that it will be difficult to find a truly binding contract. And, in this connection, it might also be observed that the applicant made concessions with respect to the respondent’s application for security for costs only when faced with prospect of an order being made on terms to be determined by the Court. What gives it more of the flavour of a contract is the concession that the respondents would not apply for further security until the commencement of the trial. It suggest some ‘give and take’ on each side. That is not, in my view, to say that a binding and enforceable agreement was entered into. Rather the matter here, it seems to me, falls to be determined by having regard to what has occurred since the parties agreed upon that course of action, what they have done upon the faith of it and whether any prejudice would now result if an order were made. They are matters which will affect the exercise of the discretion to vary an order. The power to do so, with respect to orders for security, however remains with the Court: see s 56(3) Federal Court of Australia Act 1976 (Cth).

That is not to say that the parties’ consent is irrelevant.  That the fact of consent is material to the exercise of the Court’s discretion is clear from the decision in El Du Pont de Nemours & Co v Commissioner of Patents (1987) 16 FCR 423 (and see also the discussion of it by Burchett J in Quad Consulting Pty Ltd v Bleakley & Associates Pty Ltd (unreported, Federal Court, 28 June 1991).  In El Du Pont Burchett J was concerned to point out that the Court retained control over its procedures.  Once it is understood that the parties have invoked the jurisdiction of the Court, their actions fall to be considered in light of that and not by reference to principles relating to private contract (at 435).  I respectfully agree.  And it needs to be recalled that, whilst an order for security for costs requires something of a party and provides a potential benefit for the other, it is made with a view to rendering efficacious orders for costs made by the Court in the proceedings.”

[14] (1996-1997) 71 FCR 545

22     The appellants did not place before Judge Lee or this court any material which related to the circumstances in which the consent order was obtained.  It is not possible by reference to the available material to draw any firm conclusion as to the precise terms of any contract reached.

23     I reject the appellant’s submission that the court lacked jurisdiction to vary or discharge the consent orders for security for costs.

24     It was further submitted by the appellants that there had not been a material change of circumstances sufficient to justify an exercise of discretion to discharge the orders.  I disagree.

25     I consider that there had been a material change of circumstance.  Major issues at trial had been finally resolved in the respondent’s favour.  That resolution has been upheld on appeal.  The orders for security that have been discharged were made with respect to costs up to and including the first day of trial. That occurred before Judge Lee. 

26     The appellants have a measure of protection from the orders for security that remain in respect to the costs associated with the issue of quantum.  The appellants are entitled to seek further and better security in regard to the determination of outstanding issues as the action has not yet been disposed of.

27     The orders of Judge Lee were orders made in the exercise of a discretion.  He has not been shown to have acted unreasonably; to have had regard to any extraneous material or failed to have regard to any relevant material.  No error of law has been identified.  Having considered the material, I am further of the view that the order was appropriate in the circumstances.

28     This appeal is dismissed.

JUDGMENT CITATIONS
LISTED IN ORDER OF APPEARANCE IN JUDGMENT

1...... O’Brien Lovrinov Crafter v Corradini & Corradini Judgment No (1999) SADC 177

2Corradini & Anor v O’Brien Lovrinov Crafter Pty Ltd Judgment No [2000] SASC 224

3Buckley v Bennell Design & Constructions Pty Ltd (1977-1978) 140 CLR 1 per Stephen J at 15

4Judgment No. [2000] SASC 79

5(1999) 74 SASR 471

6(1992) 58 SASR 382

7(1979) 142 CLR 531

8(1988-90) 52 SASR 330 at 333

9(1892-96) 5-6 QLJ 163

10(1988) 1 WLR 890 at 894

11(1988) 146 LSJS 377 see also Berriman v Pipeline Engineering Pty Ltd (1988-90) 52 SASR 324

12....          (1987) 11 NSW LR 573

13.... (1988) 80 ALR 134

14.... (1996-1997) 71 FCR 545