Darling Range Brewing Co Pty Ltd v Luciana Holdings Pty Ltd - [2007] WADC 225

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: DARLING RANGE BREWING CO PTY LTD -v- LUCIANA HOLDINGS PTY LTD & ANOR [2007] WADC 225

CORAM: STEVENSON DCJ

HEARD: 12 DECEMBER 2007

DELIVERED : Delivered Extemporaneously on 12 DECEMBER 2007 typed from tape and edited by Trial Judge

FILE NO/S: CIV 1983 of 2003

BETWEEN: DARLING RANGE BREWING CO PTY LTD
Plaintiff
AND
LUCIANA HOLDINGS PTY LTD
First Defendant
ANTONIO PISCICELLI
Second Defendant

Catchwords:

Costs - Whether action should have been commenced in the Local Court - Whether successful plaintiff's costs should be taxed in accordance with the Magistrates Court scale of costs - Power to award costs - s 74 District Court of Western Australia Act 1969 - O 66 r 17 Rules of the Supreme Court 1971 - Which provision applies

Legislation:

Courts Legislation Amendment and Repeal Act 2004 s 83
District Court of Western Australia Act 1969 s 74, s 74(2), s 74(3)(c), s 87
District Court Rules 2005 O 15 r5
Local Courts Act 1904 s 30(1), s 58
Local Courts Rules 1961 O 4 r 3
Rules of the Supreme Court O 66 r 17(1)

Result:

The defendants' application that the plaintiff's costs be taxed in accordance with the Magistrates Court scale of costs be dismissed
The defendants pay the plaintiff's costs of the application

Representation:

Counsel:

Plaintiff:     Ms B C Longfield-Turner
First Defendant              :     Mr S V Forbes
Second Defendant         :     Mr S V Forbes

Solicitors:

Plaintiff:     Cahill Billington
First Defendant              :     Galic & Co
Second Defendant         :     Galic & Co

Case(s) referred to in judgment(s):

Vella v Ivanovski [1984] WAR 8

STEVENSON DCJ: These are my oral reasons for decision. I reserve the right to add to, vary or edit the reasons if the need arises. This is the defendants' application for an order, in effect, that the plaintiff's costs of this action be taxed in accordance with the Magistrates Court scale of costs.
The basis of the defendants' application is that the plaintiff cannot recover costs greater than it would have had it brought its claim in the Magistrates Court "unless the Court certifies under O 66 r 17 Rules of the Supreme Court (RSC) that the action was properly brought in the District Court".
It is necessary to say something about the background of the matter before I turn to the application.
These proceedings were commenced by a writ of summons filed in this Court on 2 September 2003. The writ contained an indorsement of claim which was about 2½ pages in length. Counsel for the applicant defendant has taken me to the indorsement of claim and submits that it can be seen from the indorsement of claim that the plaintiff sets out three separate causes of action against the first defendant.
The plaintiff's first cause of action relates to the alleged conversion of cheques belonging to the plaintiff; the second relates to an alleged breach of fiduciary duty concerning a security system installed at the second defendant's house; and the third is for legal costs incurred by the plaintiff by reason of a breach of contract or fiduciary duty in respect of the first defendant's management of the Last Drop Tavern Warnbro.
The amount of the first claim is $7,560. The amount of the second claim is $12,250 and the amount of the third claim is $18,425. These three claims on their own total $38,235.
I note there may also be a fourth claim against the first defendant in (a)(v) of the indorsement of claim which is said to be for "damages for breach of contract in respect of the first defendant's management of the Last Drop Tavern Warnbro". It is not entirely clear whether this is intended to relate to the same amount specified for the third claim ($18,425) or whether it is a claim for "damages at large", which includes the quantified amount of the third claim. In any event, for present purposes, nothing turns on this.
As against the second defendant, the indorsement of claim seeks the first two quantified amounts claimed against the first defendant (presumably in the alternative) and an additional sum of $400 which is alleged to be monies borrowed by the second defendant from the plaintiff's safe. There is no claim against the second defendant in respect of the legal costs, or damages, arising out of the management issues concerning the plaintiff's business.
In addition to the above, there is in respect of each cause of action a claim for interest and a claim for costs.
The defendants' application is premised on the basis that O 66 r 17(1) of the Rules of the Supreme Court applies. This assumption is put in issue by the plaintiff who contends that the relevant provision which the defendants should be seeking to invoke is s 74 District Court of Western Australia Act 1969 but that this section in its present form no longer refers to a certification process.
The preliminary or first issue which arises, in either case, is whether it was open to the plaintiff to commence these proceedings in the Local Court without the special consent of the defendant.
The claimed amounts, as quantified, clearly exceed the jurisdiction of the Local Court as it was in September 2003 when the proceedings were commenced. At that time the Local Court jurisdiction was $25,000 and as against the first defendant, the three causes of action to which I have referred in monetary amount totalled, at least, $38,235. I note that this is of course the amount of those claims. I make no comment about the reasonableness or otherwise of the amounts claimed.
The final version of the statement of claim, which appears to have been filed shortly before the trial, discloses that the plaintiff and the first defendant entered into a partnership agreement whereby the first defendant agreed to manage a tavern business owned by the plaintiff which was known as the Last Drop Tavern Warnbro.
All of the causes of action in the indorsement of claim are associated or related to the conduct of the plaintiff's business by the defendants. The defendants accept quite properly that the claims against the first defendant, on their face, are in aggregate in excess of the maximum jurisdiction of the Local Court which, as I said, at the relevant time was $25,000.
The defendants also accept that the position with respect to the second defendant stands or falls in accordance with the outcome of the application insofar as it affects the first defendant because clearly the issues between the parties involve or arise out of the same substratum of facts and it is appropriate on any view that the various claims against the two defendants be heard together at the same time.
Unfortunately for both parties, and particularly so in view of the amount in issue, substantial legal work was done. As a result substantial legal costs were incurred, in relation to each party's case, presumably, on the basis that they both considered the claim would proceed to a trial in the District Court.
However, at or shortly before the trial commenced the parties proffered a consent order to the Court which resulted in a judgment being entered in the matter on 10 April 2007 in the following terms:
(1)The first and second defendants pay the plaintiff the sum of $26,500;
(2)The first and second defendants pay the plaintiff's costs of the action to be taxed, including any reserved costs.
Without more it is clear from the judgment of the Court that the taxation of the plaintiff's costs would be on the basis of the Supreme Court scale which applies to proceedings in the District Court, and not on any previous Local Court scale or Magistrates Court scale of costs. I also note that the amount of the consent judgment exceeded the jurisdiction of the Local Court as it was at the time these proceedings were commenced in this Court.
This application was made by the defendants on 9 August 2007, one month after the plaintiff had filed its bill of costs for taxation on 9 July 2007.
The defendants' chamber summons seeks the following orders:
(1)Unless it be certified by this honourable Court, under O 66 r 17 RSC, that this action was properly brought in the District Court, the plaintiff be entitled to recover no greater sum by way of costs than it would have recovered had the action been brought in the Magistrates Court.
(2)The costs of this action be taxed in accordance with the Magistrates Court scale.
(3)Such order as to costs as this honourable Court considers just and reasonable.
The grounds of the application stated in the chamber summons are:
"The action was not properly brought in the District Court. This action could have been brought in the Local Court. There is no important principle of law involved and the issues and/or the facts of the case were not complex."
In support of the application the defendants' solicitors have filed an outline of submissions dated 11 December 2007. Paragraph 8 says "At the time that these proceedings were commenced", and it goes on to read, after amendment today by counsel for the defendants by inclusion of the underlined words, "the total of the claims was only marginally above the jurisdictional limit of the Local Court. The amount claimed was well within the Magistrates Court jurisdiction following the increase in its jurisdiction in 2004. An order could have been made for the action to be transferred to the Magistrates Court. See s 74 District Court of Western Australia Act 1969".
As I have mentioned, the amount claimed in the writ was an amount in excess of $38,000 which on any reasonable view cannot be properly characterised as "marginally above" the jurisdictional limit of the Local Court at the time the proceedings were commenced. It is common ground that the limit at that time was $25,000.
In fairness to counsel for the defendant I note, because he told me, the written outline of submissions was prepared before he was engaged to appear on the application. I understand the defendants' position now is that subject to the additional oral submission which was made today, it is conceded that the proceedings could not have been commenced in the Local Court in 2003 by reason of the total amount of the claim and the jurisdictional limit which applied to the Local Court at that time.
Counsel for the defendant did observe that the jurisdiction of the Magistrates Court had been increased after these proceedings were commenced and the amount of the claim would have been within the increased amount of $50,000. Whatever the position was when the jurisdiction was increased it can not obviously bear upon what the legal position was at the time the action was commenced. I also note that the increase of the Magistrates Court jurisdictional limit occurred after the proceedings were commenced and that any reliance on or reference to the position at this stage appears to be beyond the grounds set out in the application when it was made.
I understand that the defendants do not seriously contend that the costs should be determined on the Magistrates Court scale, at this stage of the proceedings, by this Court invoking its general discretion in relation to costs. If they do I would reject the submission having regard to the facts of this case.
Before I turn to the defendants' oral submission today (which is additional to the submissions raised in their written submissions), I mention briefly s 87 of the District Court Act which provides, importantly, that "Subject to this Act", the practice and procedure of the District Court will be governed by the rules of court of the Supreme Court until special provision is made by the District Court in its own rules. I understand it is common ground that there are no relevant District Court Rules or special provisions in the rules which apply to the primary issue in this matter. I note that by reason of r 5 of the District Court Rules 2005, the 1996 District Court Rules apply to this case. The plaintiff says that s 74 of the Act applies because of the "subject to" exception in s 87 and because s 74 covers the field in respect of the matters referred to in O 66 r 17 RSC.
Order 66 r 17(1) of the Rules of the Supreme Court, which is at the heart of the defendants' application, provides:
"If an action is brought in the Supreme Court which could have been brought in the Magistrates Court without the special consent of the defendant, the plaintiff shall recover no greater sum by way of costs than he could have recovered had the action been brought in the Magistrates Court unless the Court certifies that by reason of some important principle of law being involved or of the complexity of the issues or of the facts the action was properly brought in the Supreme Court."
I note O 66 r 17 was amended on 2 May 2005 to refer to the Magistrates Court in place of "Local Court" upon the establishment of the Magistrates Court.
In my view, if one transposes District Court to Supreme Court (see s 87 District Court Act) as the defendants contend, the first limb of O 66 r 17(1) requires the defendants to persuade the Court that in this case the action could have been brought in the Local Court in 2003 without the need for any special consent of the defendants.
In oral submissions today, Mr Forbes, counsel for the defendants, made a submission based on s 58 of the Local Courts Act 1904 and O 4 r 3 of the Local Courts Rules 1961 which I was told were in operation at the relevant time at the commencement of these proceedings in the District Court in September 2003. His submission, which he described as "the individual claims argument" is that each of the separate causes of action to which I have referred must be considered in turn and it is the individual cause of action to which the jurisdictional limit applies and not the aggregate of the claims. His submission was that "the jurisdictional limit of $25,000 is for a cause of action" (emphasis added).
In submissions in reply, counsel for the plaintiff referred the Court to s 30 of the Local Courts Act 1904, and says that the provisions referred to merely provide that several causes of action can be united in a proceeding but that the action cannot be for more than $25,000.
For convenience I set out the provisions referred to by counsel. Sections 30(1) and 58 of the Local Courts Act 1904 provide as follows:
"30(1)Subject to subsection (2) all personal actions in which the amount claimed is not more than $25,000 whether on a balance of account or after an admitted set‑off or otherwise, may be commenced in a Local Court; and in an action for recovery of a balance of account, the court shall have jurisdiction, if the original claim is reduced to $25,000 or less, by payment or otherwise, or by deducting any sum for which the plaintiff gives the defendant credit upon the plaint being entered.
58Two or more causes of action, if by and against the same parties, may be joined in the same action; but if the Magistrate is of the opinion that the trial of different causes of action together would be inexpedient or inconvenient, he may order separate trials to be had."
(emphasis added)
Order 4 r 3 Local Courts Rules 1961 provides:
"Subject to the two preceding rules, a plaintiff may unite in the same action several causes of action without leave of the Magistrate."
In my opinion these provisions permit an action commenced by a plaintiff in the Local Court to contain more than one cause of action. But the proper construction of the jurisdictional limit of the Local Court is that the totality of the separate and distinct causes of action cannot exceed $25,000 as that was the relevant jurisdictional limit in 2003. It has subsequently been amended to $50,000.
Section 30(1) does not refer to causes of action, but speaks of a "personal action in which the amount claimed is not more than $25,000". In my view, s 58 of the Local Courts Act 1904 is concerned with procedure and must be governed by s 30(1) which is in Part III – Jurisdiction, as to subject matter. I also agree with the submission by counsel for the plaintiff that there is in the legislation a difference in terminology between "causes of action" and "action" as set out in s 58, and clearly O 4 r 3, as I said during submissions, does no more than reflect what is provided for and must be provided for in the Act itself, the rules being procedural.
In respect of the second part of par 8 of the defendants' outline of written submissions, reference is made to the possibility of the transfer of these proceedings to the Magistrates Court by reason of the increase of the jurisdictional limit of the Magistrates Court to $50,000 on a date which I do not presently have at hand but which I was told was in 2005.
Section 74 of the District Court Act has been amended but, in my view, in its current form it is an invitation to any party or indeed even the Court itself, if it so chooses to raise, at any time, the issue in any proceedings in this Court whether or not they should be more properly heard and transferred to the Magistrates Court. It is expressed in terms of the Court in its discretion ordering that the action or matter be transferred to the Magistrates Court and s 74(2) makes it plain that the application for such an order may be made by a party to the action or matter, or by the Court on its own initiative.
I, with respect, do not accept the defendants' submission that there is any greater onus on the plaintiff to make such an application for transfer in the event that circumstances arise in the course of the matter where such an order might be appropriate. The plaintiff's outline of submissions says that s 74 in it current form was inserted following the repeal of the former s 74 by s 83 of the Courts Legislation Amendment and Repeal Act 2004 which came into operation on 1 May 2005.
Obviously it was open to either party if they chose to apply to the Court for the action to be transferred to the Magistrates Court on the commencement of the current s 74 in 2005, which was before the plaintiff obtained judgment in 2007. It is of course moot as to what costs order the Court may have made pursuant to s 74(3)(c) had such an application been made.
Section 74 before its amendment in 2005 provided as follows:
"74(1)When an action is brought in the Court that might have been brought in a Local Court without the consent of the defendant –
(a)the defendant may, at any time, apply to the Court or a Judge thereof, for an order remitting the action to the appropriate Local Court sitting at such place as is specified in the order, and the Court or Judge thereof shall make an order accordingly, unless it or he considers that under the circumstances of the case it is advisable that the action should be tried in the Court, or;
(b)the Court or a Judge thereof may, without any such application, make such an order if it or he thinks fit.
(2)Notwithstanding section 78(c) so far as it relates to costs, when an action is brought in the Court that might have been brought in a Local Court without the consent of the defendant, the plaintiff is not entitled to recover a greater sum by way of costs than he could have recovered had the action been brought in a Local Court, unless the District Court Judge hearing the action certifies –
(a)in the case of an action founded in tort, that in his opinion it was proper to bring the action in the Court instead of the Local Court; and
(b)in any other case, that by reason of some important principle of law being involved, or of the complexity of the issues, or of the facts, the action was, in his opinion, properly brought in the Court."
("former s 74")
As can be seen the former s 74 is not enlivened unless the action "might have been brought in a Local Court without the consent of the defendant". I have already expressed my view that in this case the plaintiff could not have commenced its action in the Local Court in 2003 because the amount of its claim exceeded the jurisdictional limit at that time, namely $25,000.

Therefore it is not necessary for me to consider the plaintiff's submission that s 74 (whether it be the former s 74 or s 74 in its present form) covered the field and that by reason of the "subject to exception" in s 87 of the District Court Act, O 66 r 17 RSC does not apply or operate.
However, I am attracted to the proposition that the former s 74 would have prevented the application of O 66 r 17 to actions in the District Court. However, I would immediately observe that because s 74 in its current form is not "express" as to how costs should be dealt with if the action could have been brought in the Magistrates Court then it is a possible that O 66 r 17 RSC may have some room to operate in the District Court. But even if O 66 r 17 did apply in the District Court there would always be the obvious contention that the party seeking the benefit of a costs order on the lower scale "stood by" by not making an application for the matter to be transferred to the Magistrates Court, and as a result that it was consensual by its conduct to costs being determined on the Supreme Court scale.
I have been referred to a decision of the Supreme Court in Vella v Ivanovski [1984] WAR 8, which concerned s 74 before it was amended but the general principle, in my opinion, continues to be operative as expressed by the Court in that case. In that case it was a claim for personal injuries and the jurisdiction of the Local Court at the relevant time was $6,000.
In this case, of course, the claim included certain liquidated amounts so the task of the plaintiff's solicitor in having to assess which court is appropriate is perhaps not as difficult as it was in the Vella case. I will just cite two passages from the decision and reasons of Wickham SPJ at pp 9 and 10. Firstly, he said at line 37:
"I think it quite clear that in approaching the application in that way, his Honour asked himself the wrong question. He asked himself a question relating to the terms of the settlement. The question that should have been asked in the terms of the statute was whether in his opinion it was proper to bring the action in the District Court instead of in the Local Court and I emphasise whether it was proper to bring the action, not whether it was proper to continue it there in light of subsequent facts or in the light of subsequent negotiations."
Over the page his Honour said that:
"…the central test is whether the applicant or plaintiff in the case when issuing the proceedings might reasonably have been expected to recover an amount in excess of the maximum of the jurisdiction of the Local Court."
In this case, of course, judgment was entered for the sum of $26,500 which on any view is an amount in excess of the jurisdictional limit of the Local Court at the time the proceedings were commenced. Clearly, the Court does not know how that figure was arrived at and it is not appropriate for the Court to speculate. Equally, it is not appropriate for the Court, as was canvassed in submissions, to draw an inference from the fact that the minute of consent order which was tendered was amended in certain respects.
The plaintiff's outline of written submissions dated 12 December 2007 at par 11 contends that:
"For the reasons set out in paragraphs 32 to 53 below, the plaintiff submits that O 66 r 17(i) does not apply to proceedings in the District Court."
In the course of submissions I was not persuaded to this view and said so, but as can be seen, and as I stated during submissions, it is not necessary for me to decide this issue. In reviewing these reasons, as stated above, I think there is merit in the proposition that the former s 74 would have prevented O 66 r 17 applying to actions in the District Court but the position is far less clear under s 74 in its present form.
In summary, as I have indicated in my reasons, I agree with the plaintiff's submission that on the facts of this case, irrespective of whether the correct provision is s 74 District Court Act or O 66 r 17 RSC, the defendants' application must be dismissed because the plaintiff could not have brought these proceedings in the Local Court without the special consent of the defendants given the jurisdictional limit of the Local Court as it was in 2003.
For these reasons, I would dismiss the defendants' chamber summons dated 9 August 2007 and order that the defendants pay the plaintiff's costs of the application in any event.