Design Joinery & Doors Pty Ltd v IPower Pty Ltd (No 2) - [2015] SASC 102

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
DESIGN JOINERY & DOORS PTY LTD v IPOWER PTY LTD & ANOR (NO 2)
[2015] SASC 102
Judgment of The Honourable Justice Blue
14 July 2015
MAGISTRATES - APPEAL AND REVIEW - SOUTH AUSTRALIA - APPEAL TO SUPREME COURT - COSTS
PROCEDURE - COSTS
On the defendant’s appeal against judgment for the plaintiffs, judgment was reduced from $74,437.77 to $55,184. The Magistrate’s determination of liability in contract was reversed, but the plaintiffs’ alternative restitution cause of action was successful: [2015] SASC 93.
The defendant seeks an order for costs of the appeal except the hearing concerning restitution. The plaintiffs seek an order for costs of the appeal.
The defendant seeks an order for costs of action in the Magistrates Court or part thereof. The plaintiffs seek an order for costs of action in the Magistrates Court except in respect of their application to reopen.
Held:
1.      The plaintiffs should pay the defendant’s costs thrown away on appeal due to the plaintiffs’ failure to file a notice of alternative contention (at [12]).
2.      Otherwise, taking into account the mixed success overall, different successes on different issues, and the parties’ conduct, there should be no order as to costs of the appeal (at [7]-[12]).
3.      The Magistrate’s order that the plaintiffs pay the defendant’s costs of the application to reopen on the Supreme Court Scale should not be disturbed (at [13]).
4.      Otherwise, taking into account the mixed success on the contract and restitution causes of action and the parties’ conduct, there should no order as to the costs of action (at [14]-[23]).
Magistrates Court Rules 2013 (SA) r 106(1)(a); Supreme Court Rules 2006 (SA) r 285(4), referred to.
Australian Trade Commission v Disktravel [2000] FCA 62 ; Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 ; Design Joinery & Doors Pty Ltd v IPower Pty Ltd & Anor [2015] SASC 93; Parabanks Shopping Centre Pty Ltd v City of Salisbury & Anor (No 2) [2013] SASC 204 , considered.

DESIGN JOINERY & DOORS PTY LTD v IPOWER PTY LTD & ANOR (NO 2)
[2015] SASC 102
Magistrates Appeal (Civil):
BLUE J:

On 26 June, I allowed the defendant’s appeal and concluded that the plaintiffs’ judgment for $74,437.77 should be reduced to $55,184 exclusive of interest.[1] On 6 July 2015 I fixed interest and reduced the judgment from $81,837.77 to $60,670 inclusive of interest.
[1] Design Joinery & Doors Pty Ltd v IPower Pty Ltd & Anor [2015] SASC 93.
I now address the costs of the appeal and of the action in the Magistrates Court.
The defendant (Design Joinery) seeks an order that the plaintiffs (Simply Energy) pay its costs of the appeal up to and including the first hearing on 25 March 2015 and that there be no order as to the costs thereafter. Simply Energy seek an order that Design Joinery pay their costs of the appeal.
In the Magistrates Court, the Magistrate ordered that Design Joinery pay Simply Energy’s costs up to and including the 22 April 2014 hearing on the Magistrates Court scale, Simply Energy pay Design Joinery’s costs of the application to reopen on the Supreme Court scale, Simply Energy pay Design Joinery’s costs from the close of the application to reopen until 21 January 2015, and that there be no order as to the costs of the hearing on 22 January 2015.
Design Joinery seeks an order varying the Magistrate’s costs order to the effect that Simply Energy pay its costs up to and including the 22 April 2014 hearing on the Magistrates Court scale or alternatively if a fresh overall assessment is to be made of the costs in the Magistrates Court an order that Simply Energy pay its costs of action. Simply Energy seek an order that Design Joinery pay their costs of action except for the application to reopen in respect of which they accept they should pay Design Joinery’s costs on the Supreme Court scale.
Costs of appeal
Costs are in the discretion of the Court.
I first consider who has been successful overall in the appeal because prima facie subject to the overriding discretion of the Court costs normally follow the event. Design Joinery contends that it has been successful overall because the appeal was allowed and the amount of the Magistrate’s judgment has been reduced. Simply Energy contend that they have been successful overall because they have retained their judgment against Design Joinery albeit the amount of that judgment has been reduced by one quarter. I consider that there are two events.[2] Design Joinery has failed to overturn a judgment in favour of Simply Energy and that event has been decided in favour of Simply Energy. Design Joinery has succeeded in reducing the amount of that judgment and that event has been decided in favour of Design Joinery.
[2] Compare Parabanks Shopping Centre Pty Ltd v City of Salisbury & Anor (No 2) [2013] SASC 204 at [12]-[15].
I next consider the question of mixed results on separate issues. Design Joinery succeeded on the contract issue but failed on the restitution issue. Although resting on a common substratum of fact, these issues were quite distinct and the criteria are satisfied for recognising the mixed result in the costs order.[3] Using a broad axe, the time spent on appeal on the two issues was approximately the same.
[3] See Australian Trade Commission v Disktravel [2000] FCA 62 at [3] per French, Kiefel and Mansfield JJ; Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 at [3]-[6] per Finkelstein and Gordon JJ.
I next consider the conduct of the parties on the appeal. The notice of appeal was filed on 6 January 2015. Simply Energy did not file a notice of contention in respect of their restitution claim. Rule 285(4) of the Supreme Court Rules 2006 (SA) required any notice of contention to be filed within 14 days after service of the notice of appeal. Simply Energy first contended on appeal that the judgment should be upheld on the basis of restitution when they filed their outline of submissions on 20 March 2015 being two clear business days before the first hearing of the appeal on 25 March 2015. Design Joinery was not ready at that hearing to deal with that contention. As a result, both parties made submissions on contract and submissions on restitution were adjourned to 30 April 2015. This increased the costs of the appeal compared to the costs if Simply Energy had filed a timely notice of alternative contention but only by a relatively small proportion of the total appeal costs.
Design Joinery contends that the late notice of alternative contention deprived it of the opportunity to resolve the appeal by a compromise settlement. However, Design Joinery in the Magistrates Court resisted paying any amount to Simply Energy notwithstanding that Simply Energy pleaded restitution in the alternative to contract. Simply Energy had made a “Calderbank offer” to settle the action for $65,000 in August 2014 after the Magistrate granted permission to reopen the case, to which Design Joinery did not respond or make any counter offer. Simply Energy also made an offer on 28 April 2015 to settle the action and appeal for $55,000. At no point did Design Joinery express any interest in resolving the matter by compromise. I assess the chance that, if Simply Energy had filed a notice of contention by the end of January 2015,[4] Design Joinery would have sought to resolve the matter as remote.
[4] Assuming in the absence of proof from Design Joinery that the notice of appeal was served by 16 January 2015.
Design Joinery accepts that it should not recover its costs of the hearing on 30 April 2015 that addressed restitution but contends that it should not pay Simply Energy’s costs of the hearing for four reasons. It relies on the failure of Simply Energy to file a notice of contention, but I have concluded that this had a relatively small effect on the appeal costs and did not substantially prejudice Design Joinery as to the resolution of the matter. It relies on the fact that Simply Energy were given an indulgence, being the opportunity of filing an affidavit to explain calculation of the quantum of its restitution claim, but I ultimately rejected the tender of that affidavit as evidence and that affidavit had no effect on the disposition of the appeal. It relies on the fact that Simply Energy argued on appeal that the quantum of the restitution claim should be the price of their ultimate invoice and only succeeded for a lesser amount on a cost-based assessment, but this aspect of the argument on appeal occupied such little time as to be de minimus. It contends that Simply Energy did not formulate a cost based claim at trial, but it adduced all necessary evidence for that purpose and the Magistrate should have assessed the value of the electricity supplied on that basis in restitution if the Magistrate had not found the contract cause of action made out.
Ultimately, weighing these factors together, there should be no order as to the costs of the appeal, save that Simply Energy should pay Design Joinery’s costs thrown away due to the need to adjourn the March hearing of the appeal to address the restitution claim. I will fix these costs at a lump sum.
Costs of action in Magistrates Court
The costs order made by the Magistrate in respect of the application to reopen was effectively the price of the grant of that application. That costs order should not be disturbed.
Subject to that exception, it is appropriate to revisit what is an appropriate order in relation to the costs of action in the Magistrates Court on a fresh basis because the result of that action is now substantially different after the appeal. It is necessary to place myself in the position of the Magistrate as at 20 January 2015 when he made his costs orders but on the assumption that he had granted judgment in favour of Simply Energy on 19 December 2014 in restitution for $60,670 and found that the contract cause of action failed.
Simply Energy were successful overall in the action, recovering judgment for $60,670.
Design Joinery succeeded on the contract issue but failed on the restitution issue. Although resting on a common substratum of fact, these issues were quite distinct and the criteria are satisfied for recognising the mixed result in the costs order.[5]
[5] See Australian Trade Commission v Disktravel [2000] FCA 62 at [3] per French, Kiefel and Mansfield JJ; Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 at [3]-[6] per Finkelstein and Gordon JJ.
The Magistrates Court Rules 2013 (SA) contain a formula that reduces the costs of action to be ordered in favour of a successful party by reference to the proportionate difference between the amount claimed and the amount recovered. Rule 106(1)(a) relevantly provides:
(1)Subject to these Rules or to an order of the Court, the successful party (as defined by this Rule) in an action … is entitled on judgment to costs against an unsuccessful party… in accordance with the following principles –
(a) Where judgment is in respect of an action for a sum of money the shared costs in Cost Scale 1 in the Third Schedule applicable to the sum of money claimed at any stage of the litigation are totalled. The costs due to the successful party are calculated by multiplying the total shared costs by the results of this formula:
2 x the judgment sum – amount claimed
amount claimed
and where the result is positive the costs are awarded to the plaintiff (“the successful party”) and where the result is negative the costs are awarded to the defendant (“the successful party”) and where the result is zero there is no successful party.
Application of this formula would prima facie result in an order that Design Joinery pay just under 50% of Simply Energy’s costs.[6] This formula is designed to apply when a plaintiff over claims quantum but succeeds on liability. It is not apt to apply when a plaintiff fails in one cause of action for a higher amount and succeeds in an alternative cause of action for a lower amount. In these circumstances and having regard to the conduct of the plaintiff addressed below, it is appropriate in the circumstances to otherwise order as authorised by the chapeau to rule 106(1) and disregard the formula contained therein.
[6] Approximately 47.5% based on a judgment for $55,184 and a claim for $74,838 inclusive of GST but ignoring interest in both cases.
I turn to consider the conduct of the parties in the action. Simply Energy initially sued in September 2012 for $89,929 plus GST based on an incorrect number of kilowatt hours used by Design Joinery. On 6 February 2013, they amended the claim to $68,045 plus GST based on the correct number of kilowatt hours. They proceeded through the April 2014 trial without adducing evidence of the cost of electricity supplied to Design Joinery’s premises or other evidence from which the amount recoverable in restitution could have been determined by the Magistrate. It was only on 10 July 2014 that Mr Menichelli’s affidavit setting out the various costs incurred by Simply Energy was filed and served. Although it should have been obvious to Design Joinery since the revised invoice was issued on 15 January 2013 that the substantial majority of the amount invoiced represented a cost to Simply Energy, it was not until 10 July 2014 that Design Joinery was in a position to assess that cost at approximately $55,000.
Design Joinery contends that there was no plea by Simply Energy of a request for the supply of electricity or an express plea of restitution. I reject that contention. Paragraph 6 of the particulars of claim was pleaded in the alternative to the contract claim, pleaded that Design Joinery was liable to pay a reasonable price for the electricity and was manifestly a restitutionary claim. While paragraph 6 did not plead a request, it was apparent from the particulars of claim as a whole that the communications alleged to constitute the contract comprised a request if they did not amount to a contract and pleadings in the Magistrates Court are not expected to be as detailed or complex as in the District or Supreme Courts.
Design Joinery contends that the first attempt to prove a reasonable price did not occur until the second hearing on 19 December 2014. It is appropriate to take into account the fact that Simply Energy did not identify the cost of the electricity until after the April 2014 hearing but they did so in July 2014 when they served Mr Menichelli’s affidavit.
Simply Energy made a “Calderbank offer” to settle the action for $65,000 on 22 August 2014 after Mr Menichelli’s affidavit had been served and after the Magistrate granted permission to reopen the case, to which Design Joinery did not respond or make any counter offer. While in the circumstances I cannot conclude that Simply Energy ultimately bettered that offer, Simply Energy evinced a willingness to compromise that was not reciprocated by Design Joinery.
Weighing all of the factors, it is appropriate that there be no order as to the costs of action save that Simply Energy pay Design Joinery’s costs of the application in the Magistrates Court to reopen on the Supreme Court scale as the price of the application to reopen.
Conclusion
There should be no order as to the costs of the appeal, save that Simply Energy pay Design Joinery’s costs thrown away due to the need to adjourn the March hearing of the appeal to address the restitution claim. I will fix these costs at a lump sum.
There should be no order as to the costs of action save that Simply Energy pay Design Joinery’s costs of the application in the Magistrates Court to reopen on the Supreme Court scale.