Frost v Edwards
[2004] TASSC 105
•15 September 2004
[2004] TASSC 105
CITATION: Frost v Edwards [2004] TASSC 105
PARTIES: FROST, Adam
FROST, Colleen
v
EDWARDS, Peter
TITLE OF COURT: SUPREME COURT OF TASMANIA
JURISDICTION: APPELLATE
FILE NO/S: LCA 44/2004
DELIVERED ON: 15 September 2004
DELIVERED AT: Hobart
HEARING DATES: 9 August 2004
JUDGMENT OF: Evans J
CATCHWORDS:
Procedure – Inferior courts – Tasmania – Local courts – Jurisdiction – Counterclaim and action beyond jurisdiction.
Magistrates Court (Civil Division) Act 1992 (Tas).
Aust Dig Procedure [417]
REPRESENTATION:
Counsel:
Defendants: A B Walker
Claimant: J A Campton
Solicitors:
Defendants: Dobson Mitchell & Allport
Claimant: Murdoch Clarke
Judgment Number: [2004] TASSC 105
Number of Paragraphs: 16
Serial No 105/2004
File No LCA 44/2004
ADAM FROST and COLLEEN FROST v PETER EDWARDS
REASONS FOR JUDGMENT EVANS J
15 September 2004
The appellants, the defendants to a claim brought against them by the respondent in the Magistrates Court (Civil Division), appeal against an order dismissing the counterclaim they filed in response to the respondent's claim.
In these reasons I will refer to the appellants as the defendants, and the respondent as the claimant.
The claimant's claim against the defendants arises from a written agreement ("the building contract") pursuant to which the claimant agreed to perform building work for the defendants. The defendants delivered a defence and counterclaim to the claim denying that any amount was due to the claimant and pleading further that if any amount was due, they were entitled to set it off against the amount due to them under a counterclaim. The counterclaim is for an amount exceeding $20,000 claimed to be due from the claimant to the defendants arising from his breaches of the building contract.
The Magistrates Court (Civil Division) Act 1992 ("the Act") relevantly provides:
"3 ¾ In this Act, unless the contrary intention appears ¾
'action' means an action brought under this Act;
…
'prescribed amount' means $20 000.
…
7 ¾ (1) The Magistrates Court has a civil jurisdiction which is to be limited to actions for an amount not exceeding the prescribed amount.
8 ¾ The Court has jurisdiction to hear and determine all actions for the recovery of an amount or goods where the amount claimed or the value of the goods claimed together with the value of the amount of any claim for consequential damages for detention of those goods does not exceed the prescribed amount, whether on a balance of account or after an admitted set-off or otherwise.
…
12 ¾ (1) If an action or matter is commenced over which the Court does not have jurisdiction, the Court must, unless a consent is filed under section 11, order it to be struck out and has power to make an order as to costs.
(2) Before making an order under subsection (1), the Court must advise the parties to the action or matter that they may make application under section 30 to have the action or matter transferred to the Supreme Court.
(3) The Court must not make an order under subsection (1) before the expiration of 28 days from the day on which it advises the parties of their right to make an application under section 30."
Following the filing of the defendants' counterclaim, the Deputy District Registrar wrote to the parties as follows:
"Dear Sirs/Madam
edwards v frost
The Counterclaim in this action exceeds the jurisdiction of the Magistrates Court (Civil Division) of $20000.00.
If there is no consent filed as per section 11 (1) Magistrates Court (Civil Division) Act 1992 then the court has no further jurisdiction.
I draw your attention to following relevant sections of the Act.
Consent jurisdiction
11 (1) The Court has jurisdiction to hear and determine any action without limitation as to the amount of the claim if all parties to the action file with the registrar a consent in writing, signed by them or their solicitors, that the Court is to have such jurisdiction.
(2) On the filing of a consent referred to in subsection (1) all proceedings in respect of the action may be taken, and the matter may be heard, determined and enforced by the Court.
Court may award costs where action or matter struck out for want of jurisdiction
12 (1) If an action or matter is commenced over which the Court does not have jurisdiction, the Court must, unless a consent is filed under section 11, order it to be struck out and has power to make an order as to costs.
(2) Before making an order under subsection (1), the Court must advise the parties to the action or matter that they may make application under section 30 to have the action or matter transferred to the Supreme Court.
(3) The Court must not make an order under subsection (1) before the expiration of 28 days from the day on which it advises the parties of their right to make an application under section 30.
Transfer of proceedings into Supreme Court
30 (1) A party to a proceeding may apply to the Supreme Court or a judge for the proceeding to be transferred to the Supreme Court.
(2) An application may be made under subsection (1) even if the proceeding is wholly or partly beyond the jurisdiction of the Court.
(3) On an application under subsection (1), the Supreme Court or a judge may, if in all the circumstances of the case the Supreme Court or the judge considers it fit or desirable to do so, order that the proceedings be transferred to the Supreme Court."
After the expiration of 28 days from the delivery of the above letter, a magistrate made an ex parte order in the following terms:
"The Court orders that: 'There being a counterclaim by the defendant which exceeds the jurisdiction of the court and the parties having been advised by letter dated 22/4/04 of their rights to apply to have this action transferred to the Supreme Court and the court having received no notice of any such application or any other step being taken in the proceedings.
It is ordered 1 That the counterclaim filed on the 12th March 2004 be dismissed.
2 That the matter be listed for a directions hearing on a date to be fixed by the Registrar.
3 That the costs of and incidental to the counterclaim be reserved."
The defendants appeal this order on the following grounds:
"1The Learned Magistrate erred in law in holding pursuant to section 12(1) of the Magistrates Court (Civil Division) Act 1992 that the counterclaim was an action or matter commenced over which the Magistrates Court did not have jurisdiction.
2The Learned Magistrate erred in law in dismissing the counterclaim."
For the defendants' counterclaim to be covered by s12, it must be an "action or matter". The term "matter" is not defined. An explanation for the use of this term in s12, is s9, which sets out the court's equitable jurisdiction. Paragraphs (a) to (j) of that section include a variety of remedies, each of which is described as "an action". Paragraph (k) which concludes the section is as follows:
"(k) any other matter which is within the equitable jurisdiction of the Supreme Court and which is in respect of an amount that does not exceed the prescribed amount other than ¾
(i) an action for the administration of the estate of a deceased person; or
(ii) an action for the execution of a trust or for a declaration that a trust exists."
"Action" is a generic term and in its legal sense includes any sort of legal proceeding seeking a remedy. When used in legislation it must be so construed unless it is apparent from the legislation that it is intended to have a more restricted meaning, Re W Carter Smith, Ex parte The Commissioners of Taxation (1908) 8 SR NSW and Bradlaugh v Clarke (1863) 8 App Cas 354. The meaning given to "action" by s3, "an action brought under this Act", is not confining. A more restrictive meaning is given to "action" in the Magistrates Court (Civil Division) Rules 1998 ("the Rules"), r3 that provides "in these rules 'action' means an action commenced by a claim and conducted in accordance with these rules". On its face the unconfined meaning given to "action" by s3 is sufficiently wide to cover a counterclaim. The manner in which that term is used in the Act confirms that it is intended to have a wide meaning. The Act, s8 gives the court common law jurisdiction to determine "all actions" subject to the limitations there specified. In logic that conferral of jurisdiction and the limitations there specified should apply to a counterclaim as well as a claim. As already mentioned, the Act, s9, gives the court equitable jurisdiction in relation to a number of remedies identified as being sought in "an action". Several of those remedies are just as likely to be sought in a counterclaim as in a claim and there is no reason to confine their availability to claims. Section 25 empowers the court to order interest on a judgment "in any action for the recovery of a debt or damages". It would be absurd if this power only extended to a judgment on claim and did not extend to a judgment on a counterclaim.
I conclude the counterclaim is an action for the purposes of the Act. As the defendants' counterclaim is "for an amount" that exceeds the prescribed amount of "$20,000.00", it is an action over which the Magistrates Court, exercising its civil jurisdiction in the Civil Division, does not have jurisdiction, s7(1). In the absence of a consent filed under s11, it was incumbent on the court to strike that claim out, s12(1). The aspect of the counterclaim that is beyond jurisdiction is the claim for an amount exceeding $20,000.
The Rules, r50(1) had the effect of requiring the defendants to prepare their defence, including their setoff and counterclaim, in accordance with Form 5. Consistent with that form, the defendants delivered a pleading titled "Defence and Counterclaim" which set out particulars of the defence and particulars of the counterclaim. The portion of the pleading that detailed the defence concluded with par9, as follows:
"9 The defendants say further that if they owe any money to the claimant, they are entitled to a set-off against that amount in a sum exceeding the claimant's claim.
particulars
Particulars of the set-off are set out in the defendants' counterclaim set out herein."
Paragraph 9 of the defence was followed by the portion of the pleading that detailed the counterclaim. The matters there pleaded include the claimant's failure to perform or properly perform the building contract and allegations of defective work requiring rectification. These matters may be relied upon as a pure defence to the claim, as well as a defence by way of setoff and a counterclaim, D Galambos & Son Pty Ltd v McIntyre (1974) 5 ACTR 10 at 26. The pleading concluded with par21 and a prayer for relief as follows:
"21In the premises, by the claimant's conduct referred to in paragraphs 13, 17, 18 and 19 the defendants have suffered loss and damage.
particulars
The loss and damage is the sum of $30,820.00, being the difference between the price under the Contract and 70,000.00.
and the defendants counterclaim:
A Damages for breach of contract;
B Damages pursuant to Section 37 of the Fair Trading Act 1990; and
C Costs to be taxed."
In these circumstances, when the learned magistrate considered the order that needed to be made for the purposes of s12(1), care had to be taken not to make an order that went beyond striking out the impugned aspect of the counterclaim and impacted on the defendants' defence and claim to a setoff.
In the context of s12(1) the distinction between a counterclaim and a setoff is significant. A counterclaim is a proceeding in its own right, Aurel Forras v Graham Karp Developments Pty Ltd [1975] VR 202 at 217 – 222 and Henriksens Rederi A/S v THZ Rolimpex The Brede [1973] 3 WLR 556 at 561 – 562. If a claimant discontinues the claimant's proceeding, the counterclaim remains on foot and proceeds to trial. In McGowan v Middleton (1883) 11 QBD 464, the plaintiff, being confronted with a counterclaim in excess of his claim, discontinued and argued that the counterclaim fell with his discontinuance. This would be true of a setoff, but a counterclaim, taking effect as a cross-action, is not affected by the fate of the plaintiff's claim. Express provision is made to this effect by the Supreme Court Rules 2000, r199. For present purposes, the Rules of the Supreme Court apply pursuant to r44. Where a counterclaim is established for an amount in excess of the amount recovered by the claimant, the court gives judgment for the defendant for the balance, Supreme Court Rules, r200. A setoff proceeds on the basis that if the claimant's claim is established, then by reason of the setoff, the claimant is not entitled to succeed. Once established, a setoff defeats the claimant's claim to the extent of the setoff. For a right of setoff to be used as a ground to recover money, it needs to be established as a counterclaim. So long as a setoff is not so pursued, it will not fall foul of s7(1), as it is not an action to recover an amount, but only a claim to setoff so much of the amount established to be due as equals the claimant's claim.
As the defendants' Defence and Counterclaim includes a setoff linked to a counterclaim and some of the matters pleaded by way of counterclaim could be relied on in pure defence, I am surprised that the learned magistrate made an ex parte order dismissing the counterclaim without giving the parties an opportunity to be heard. The order made is that "the counterclaim filed on the 12th March 2004 be dismissed". This order appears to pay no regard to the setoff pleaded by the defendants and the links between that plea and the counterclaim or the matters of pure defence contained in the counterclaim. The only order that needed to be made to meet the requirements of s12(1), was an order removing from the pleading any claim to be entitled to recover the amount established to be due from the plaintiff under the counterclaim. As the order made went beyond this, it was an error.
I will accordingly allow the appeal, set aside the learned magistrate's order dated 31 May 2004, and order that the prayer for relief that follows par21 in the Defence and Counterclaim filed on 12 March 2004, be struck out.
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