Gaskin v Heinicke - [2007] SASC 256

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
GASKIN v HEINICKE
[2007] SASC 256
Judgment of The Honourable Justice Layton
12 July 2007
MAGISTRATES - JURISDICTION AND PROCEDURE GENERALLY - PROCEDURE - THE HEARING - GENERAL MATTERS - MATTERS OF PROCEDURAL FAIRNESS AND PROPRIETY
MAGISTRATES - APPEALS FROM AND CONTROL OVER MAGISTRATES - SOUTH AUSTRALIA - APPEAL TO SUPREME COURT - COSTS
Appeal against the decision of a magistrate in relation to costs - whether the appeal was limited to "a question about costs" - whether the appellant required permission to appeal - the effect of a court record - whether the court record accurately recorded the orders made by the court - whether the Magistrate ordered a taxation of costs on an indemnity basis against the appellant - whether the costs order should not have been made as the appellant was not given an opportunity to put forward submissions opposing the order.
Held: Permission to appeal was not required as the appeal was not limited to a question about costs but concerned broader issues - the Magistrate did not give the appellant an opportunity to be heard on a contested issue as to whether a costs order had been made and whether costs should be taxed on an indemnity basis - No costs were ordered by the Magistrate particularly on an indemnity basis - appeal allowed.
Magistrates Court Act 1991 (SA) s 40; Magistrates Court (Civil) Rules 1992 (SA) Schedule 3, Scale 1; MCR 108(3); Supreme Court Civil Rules 2006 (SA) 6SCR 281(b); 6SCR 290; Supreme Court Rules 1987 (SA) Rule 96C.02, referred to.

GASKIN v HEINICKE
[2007] SASC 256
Magistrates Appeal: Civil
LAYTON J:
Introduction

On 1 March 2007 the appellant filed a Notice of Appeal against an order made by a magistrate on 8 February 2007. Further, and in the alternative, the appellant has sought an extension of time within which to appeal against an order for costs on 2 March 2006, if this Court is of the view that such an order was made. A Supplementary Notice of Appeal was filed on 5 March 2007.
This appeal raises two linked arguments. The first is a contention that no order for costs was made by the Magistrate on 2 March 2006 and therefore there was no proper basis for the Magistrate’s subsequent order on 8 February 2007 that the respondent be granted indemnity costs in the sum of $19,107.55 inclusive of GST.
The second argument was an alternative argument, that if a costs order was made on 2 March 2006 (which is denied by the appellant) then she was not given the opportunity to make submissions as to why such an order should not be made.
Procedural matters
Permission to appeal
There is the preliminary procedural issue in relation to these arguments, namely whether permission to appeal is required.
Section 40 of the Magistrates Court Act 1991 (SA) relevantly provides as follows:
(1) A party to a civil action (except a minor civil action) may, in accordance with the rules of the Supreme Court, appeal against any judgment given in the action.
(2) If the rules of the Supreme Court provide that an appeal from a judgment of a particular class can only be brought with the permission of that Court, the right of appeal is limited accordingly, but in any other case an appeal lies as of right.
Further, 6SCR 281 of the Supreme Court Civil Rules 2006 provides:
Subject to any statutory provision to the contrary, an appeal to the Court lies by permission of the Court if –
….
(b) the appeal is limited to a question about costs. [emphasis added]
Accordingly, a question which arises in this case is whether the appeal is limited to “a question about costs”, and as a consequence whether permission is required pursuant to 6SCR 281(b). In my view the appeal is not limited to a question about costs, but it concerns broader issues. The appeal concerning the first argument raises the issue as to whether or not a costs order was made; the effect of a court record; whether the court record accurately records the orders made by the court; as well as whether there was a proper foundation upon which the Magistrate could have made an order for taxed costs on an indemnity basis on 8 February 2007. In my view permission is not required in relation to the first argument.
As to the second alternative argument, namely that if a costs order was made on 2 March 2006, it should not have been made as the appellant had not been given an opportunity to put submissions. This argument raises an issue of procedural fairness and in my view it is not simply limited to a question about costs. Therefore permission to appeal is not required.
In concluding that permission to appeal is not required, I have also had regard to the fact that questions of costs and whether they should be ordered and their amount, are usually discretionary matters which have traditionally been treated as requiring leave (permission) to appeal. In this case whilst the topic of the appeal is costs, the arguments centre around substantive and jurisdictional issues and not matters involving discretionary issues.
Extension of time
A further procedural matter is that of an extension of time for the institution of the appeal in relation to the order of the Magistrate made on 2 March 2006. The Notice of Appeal was received on 1 March 2007, with a Supplementary Notice of Appeal being filed on 5 March 2007. At the hearing, I ruled that the Supplementary Notice of Appeal be in lieu of the Notice of Appeal.
The relevant Supreme Court Rules at the time required that an appeal be instituted within 14 days of the judgment, order, or decision appealed against.[1] The appellant’s failure to appeal within the prescribed time limit means that she lost her right of appeal in relation to the order made by the Magistrate on 2 March 2006.
[1] Supreme Court Rules 1987 (SA) Rule 96C.02.
Rule 290 of the Supreme Court Civil Rules 2006 allows the Court to extend time in which to lodge an appeal. The power to extend time is discretionary. It is for the appellant to justify the Court’s exercising the discretion in his favour.
It is appropriate in this case to consider both the extension of time for appeal as well as the merits of appeal at the same time, as there are features which are common to both considerations.
Chronology of events
On 21 March 2005, the appellant commenced proceedings in the Magistrates Court for damages allegedly caused by the respondent permitting or causing a weed sprayer onto her property to spray blackberry bushes. She alleged that as a result of this spraying, her caretaker suffered a health crisis with his teeth and had a subsequent mental breakdown; her tenant (who operated ten beehives on her property) was forced to move to New Zealand; and that her property lost its status as a “haven for the chemically sensitive.”
On 6 April 2005, the respondent’s solicitors, Hynd & Co, sent the appellant a letter asserting that her Statement of Claim disclosed no cause of action against the respondent, and inviting the appellant to withdraw her claim by Monday 11 April 2005, without any costs to be sought from her. The letter also put the appellant on notice that if she were to pursue the matter, the respondent would bring an application for summary dismissal of her claim and would claim costs against her.
On 20 April 2005, the respondent made an application for summary dismissal of the appellant’s action.
On 2 June 2005, the respondent’s application for summary dismissal was adjourned to afford the appellant an opportunity to consider whether her claim should have been more appropriately brought against the contractor. At this general directions hearing the appellant was warned that “legal costs which cannot be recovered will be awarded against her if she does not comply with the order and warned that the claim would be struck out if it is not complied with.”
On 28 July 2005, the appellant filed an Amended Statement of Claim, increasing the quantum of her claim from $30,000 to $188,700. Her amended claim included particulars of loss of such things as “loss of shelter”; “loss of status/reputation as refuge for the chemically sensitive”; “loss of habitat – blue wrens and bandicoots for eco tourism aspect to farm host scheme”; “organic honey $500/year for ten years”; and “potential losses: death by endocrine cancer, anxiety, health breakdown.”
On 12 September 2005, the appellant filed amended particulars claiming $40,000, and was granted leave to join Amanda Pearce (the contractor who conducted the spraying of the blackberry bushes) as the first defendant to the action.
On 19 January 2006, a magistrate ordered that the appellant supply particulars of the alleged agency between the respondent and the first defendant within 20 days.
On 7 February 2006, the respondent’s solicitors sent a letter to the appellant’s solicitor requesting discovery.
On 8 February 2006, the respondent filed her defence. The appellant failed to file particulars of the alleged agency pursuant to the order of 19 January 2006.
On 20 February 2006, the appellant’s solicitor sent a letter to the respondent’s solicitors offering to settle the action on certain terms and conditions, which included no order as to costs.
On 27 February 2006, the respondent’s solicitors rejected that offer. Also on that day the appellant’s solicitor spoke with the respondent’s solicitor about a further proposal that the appellant discontinue her action, with each party to bear their own costs. This offer was also rejected, and the respondent’s solicitor indicated that their client wanted indemnity costs.
On 2 March 2006, the appellant’s solicitor filed a Notice of Discontinuance of the claim against the respondent. On that day the appellant and the respondent were represented by counsel and appeared before the Magistrate in a short hearing.
The affidavit of the appellant’s solicitor sworn on 2 April 2007, deposes as follows:
11I confirmed to the learned magistrate that a Notice of Discontinuance with respect to the Respondent had been filed and that it was likely that settlement would be reached in relation to the claim against the First Defendant.
12I recall that Mr Myszka said words to the effect that his client sought indemnity costs pursuant to Magistrates Court Rule 88(2). I informed the learned magistrate that my client opposed the application.
13Neither Mr Myszka nor I made submissions in relation [sic] the application for indemnity costs. No order was made that the Appellant pay the Respondent’s costs whether on an indemnity basis or otherwise. Instead the learned magistrate ordered that the Appellant and the Respondent attempt to agree costs. He informed the parties that the Respondent’s solicitors were to provide the Applicant with particulars of the costs they sought. If agreement could not be reached, the Respondent had leave to call the matter back on.
The court record of outcome of that same hearing states as follows:
1 P1 has discontinued against HEINEKE 2nd deft.
Order sought purs. to Rule 88(2) 2nd Deft is seeking indemnity costs.
Order 2 Deft to provide particulars of costs sought to Plaintiff’s solicitors, seek agreement thereto and in default of agreement Taxation by the Court.
2nd Deft excused in relation to attendance 13/4 leave to call on for a date to tax costs if not agreed.
Adj for settlement to be reached with 1st Deft and plaintiff.
A letter of 12 April 2006 from the respondent’s solicitors to the applicant’s solicitor records the following:
We refer to the court hearing on 2 March 2006 and to our client’s application for costs on an indemnity basis. We confirm that the magistrate directed us to provide particulars of the costs sought by our client to you and to seek to agree them, but in default of agreement, they were to be taxed by the court.
The affidavit of counsel for the respondent sworn on 30 March 2007 deposes:
5. I made an oral application for costs on an indemnity basis.
6.Besides the order apparent from the Court’s copy of the record for that day, the court made an order dispensing the respondent from filing a form 21 application in connection therewith.
On 12 April 2006, the respondent’s solicitors sent a letter to the appellant’s solicitors advising that the costs were $13,687.00, and seeking payment of them.
On 19 April 2006, the appellant’s solicitors sent a letter to the respondent’s solicitors indicating that the appellant was unwilling to pay the legal costs as they had been calculated on an indemnity basis. Instead the appellant offered to pay costs in accordance with schedule 3, scale 1 of the Magistrates Court (Civil) Rules 1992.
On 26 May 2006, the respondent’s solicitors sent a letter to the appellant’s solicitor rejecting the offer of payment of costs on the basis of schedule 3. They indicated that their client insisted on indemnity costs, but that their client would compromise the amount to $8,843.50. The starting point for the compromised figure was still indemnity costs.
On 9 June 2006, the appellant’s solicitors rejected the offer on behalf of the appellant, and reiterated an offer to pay in accordance with schedule 3.
On 24 August 2006, unbeknown to the appellant’s solicitor, the respondent’s solicitors sent a letter dated 24 August 2006 to the Registrar of the Magistrates Court at Holden Hill stating that it was their understanding that:
On 2 March 2006, we orally brought an application for a costs order on an indemnity basis against Ms Gaskin. His Honour directed us to provide particulars of our client’s costs to Ms Gaskin’s lawyers in an attempt to agree them, but in default of agreement, they were to be taxed by the Court. It is our understanding that His Honour was allowing our client’s costs on an indemnity basis.
The letter additionally requested that the Registrar provide to them a copy of the record of outcome from 2 March 2006 and any notes which might relate to “the costs order made by His Honour”.
Following that letter, the respondent’s solicitor received a telephone call from the Registrar informing her that “the costs order was made on an indemnity basis”. The respondent’s solicitors requested that this be put in writing, whereupon the Registrar advised the solicitor to “put in a detailed request in writing for the written confirmation requested”.
On 13 September 2006, still unbeknown to the appellant, the respondent’s solicitors sent another letter to the Registrar. This letter, which spanned over some four pages, detailed the background as to why the respondent was entitled to indemnity costs. This letter concluded with the following paragraphs:
Our client has provided the plaintiff’s solicitors with particulars of her costs as ordered by His Honour on 2 March 2006. However, the plaintiff is denying that our client is entitled to indemnity costs and alleges that our client is only entitled to her costs on a party and party basis pursuant to schedule 3 of the Magistrates Court Rules.
This is not our understanding of the order made on 2 March 2006. In the context of an application for indemnity costs, His Honour’s use of the expression “costs sought” as part of the order can only have been a reflection of the basis on which costs were sought, namely on an indemnity basis. If our client were to be limited to scale costs, she would have had not only a penalty but a disproportionate penalty visited upon her in being restricted to the prospect of a limited costs recovery after having to defend an action that should never have been commenced whilst at the same time the plaintiff will have been accorded an undeserved reprieve of inverse proportion.
We request confirmation in writing that our client is entitled to proceed to a taxation of her costs on an indemnity basis.
If you require any further information, please do not hesitate to contact the writer.
On 10 October 2006 the respondent’s solicitors received a faxed letter from the Registrar in the following terms:
As per telephone conversation on Tuesday the 10^th October 2006, I hereby advise Mr Harry Stipendiary Magistrate has confirmed that your client is entitled to proceed to a taxation of costs on an indemnity basis.
Mr Harry has advised that a taxation of costs be lodged with all parties.
The solicitors then sent a letter to the appellant’s solicitor dated 10 October 2006 enclosing a copy of the facsimile stating that it “confirms that our client was awarded costs on an indemnity basis”. This was the first time the appellant’s solicitor was made aware of the communications between the respondent’s solicitors and the Magistrate through the Registrar.
On 16 October 2006, the appellant’s solicitor responded to the respondent’s solicitors advising, first, that costs were not awarded to the respondent, and that this was confirmed by the court record. This letter drew further attention to the content of the facsimile sent by the Registry which in her view, simply indicated that the respondent was “entitled to apply for taxation of costs on an indemnity basis”, but that it did not mean that indemnity costs had in fact been ordered or agreed. The appellant’s solicitor indicated that the appellant disputed that the respondent was entitled to indemnity costs, and if they were still to be pursued by the respondent, then they should make an application for costs to be awarded on that basis.
On 1 December 2006, the respondent’s solicitors sent a letter to the appellant’s solicitor in response, enclosing a Bill of Costs for taxation.
On 16 January 2007, the appellant’s solicitor received a letter from the Registrar advising that the matter would be listed for hearing on 25 January 2007 and not 18 January 2007 as advised by telephone.
On 25 January 2007, the appellant’s solicitor attended at the Magistrates Court before a different magistrate. The appellant’s solicitor informed that Magistrate that there was an issue as to whether an order for indemnity costs had been made. That Magistrate then ordered that the action be listed before the Magistrate who had been previously dealing with the matter. He listed the matter for Thursday 8 February 2007.
On 5 February 2007, the respondent’s solicitors wrote to the Magistrate, putting forward their contention that they did not see the need to clarify the order of 2 March 2006 and requesting the Magistrate, if he concluded that there was no need to clarify the order, to dispense with the need for attendance by the parties on 8 February 2007. Further, they requested that the Magistrate direct the Registrar to appoint a date for taxation. A copy of this letter was sent to the appellant’s solicitors.
On 6 February 2007, a Clerk to the Magistrate orally advised the appellant’s solicitor that the Magistrate had decided that the hearing listed for 8 February 2007 should not occur and that he believed that the court record should be altered to read that an order for indemnity costs was made on 2 March 2006. He also indicated that the Magistrate would tax and allow the Bill of Costs for the full amount. I interpolate at this point to indicate that the Magistrate’s approach appears to have been based on the acceptance of the respondent’s solicitor’s submissions.
On 7 February 2007, the appellant’s solicitors sent a letter to the respondent’s solicitors confirming that oral information and advising that they were obtaining further instructions from their client about the situation.
On 8 February 2007, there was taxation by the Magistrate of the Bill of Costs and allowance thereof at $19,107.55.
On 9 February 2007, the respondent’s solicitors sent a letter to the appellant’s solicitor advising that the Magistrate had taxed the bill and requesting payment of the taxed bill. This was received by the appellant’s solicitor on 12 February 2007.

On 28 February 2007, the respondent’s solicitors sent a letter to the appellant’s new solicitors outlining the background to the matter, and outlining the respondent’s intention to execute on the Bill of Costs.
Submissions of counsel
Counsel for the appellant, Mr Simpson, submitted that a plain reading of the court record indicates that the Magistrate did not make an order as to costs, whether on an indemnity basis or otherwise. Mr Simpson also submitted that even if the Magistrate had made a costs order on 2 March 2006 (which was denied) the court record did not properly record that on its face. In that situation, the appropriate course was for the matter to be called on again before the Magistrate and, if appropriate, to correct the record after giving the representatives of the parties the opportunity to be heard.
In my view, the Magistrate dealt with this matter in an inappropriate manner. For reasons which I indicate hereafter, no order for costs was made on an indemnity basis on 2 March 2006 and, further, the Magistrate failed to give the appellant an opportunity to be heard before ordering costs to be taxed for a specific amount on 8 February 2007.
The initial correspondence of the respondent’s solicitors to the Registrar, who appears to have been conveying information to and from the Magistrate, did not suggest on their face that the appellant even knew of the communications between the respondent’s solicitors and the court.
The first letter of 24 August 2006 indicated that the respondent was seeking to clarify the interpretation of the order which was made on 2 March 2006, for good reason. The court record of the hearing of 2 March 2006 does not state that an order for costs was made. At best from the respondent’s point of view, it was uncertain.
The respondent’s second letter on 13 September 2006 to the Registrar indicates that the appellant was contending an interpretation to the contrary of the respondent. Again, there was no indication suggesting that this letter had been sent to the appellant’s solicitors
The Magistrate did not hear submissions from the appellant’s solicitors before indicating through the Registrar on 10 October 2006 that in his view, the respondent was entitled to proceed to taxation of costs on an indemnity basis.
The later communication by the Magistrate through a Clerk on 6 February 2007 advising that the Magistrate considered the court record should be altered to record that an order had been made for indemnity costs, was also made without advising or hearing the appellant before making that decision. This was done at a time when the Magistrate was clearly aware of the different point of view of the appellant.
Finally, the Magistrate vacated a date set for hearing on 8 February 2007, again without hearing the parties, and in particular without giving the appellant an opportunity to put any contrary argument.
The net result of this process was that the Magistrate did not give the appellant an opportunity to be heard on a contested issue as to whether a costs order had been made and whether costs should be taxed on an indemnity basis. In my view, this was a clear denial of procedural fairness.
Further, it is to be noted that indemnity costs are the exception and not the rule. Given that the only basis upon which costs were being sought was on an indemnity basis, I consider that there was no proper basis for the Magistrate to have made an order for costs on an indemnity basis as at 2 March 2006. No submissions had been made by either party on that point on that day. Further, no such order is expressed in the court record and there is no transcript to confirm such an order being made. On the contrary, the affidavit of the appellant’s solicitor deposes that no order was made, and that deposition is not contested. In those circumstances I conclude that no costs were ordered on 2 March 2006, particularly on an indemnity basis.
However, there are still further matters to be considered.
Counsel for the respondent, Mr Myszka, submitted that the appellant is bound by the Bill of Costs because she failed to file any objection to the Bill of Costs within the 21 days of the service of the Bill of Costs, or at all. He submitted that pursuant to MCR 108(3) of the Magistrates Court (Civil) Rules 1992 the bill is taken to have been admitted and the respondent is bound by the taxation. Rule 108(3) provides as follows:
(3)If the unsuccessful party does not file and serve a written notice objection to an item of the Bill of Costs (including detailed reasons for the objection) within 21 days of the service of a Bill of Costs, he or she will be taken to admit the item. [emphasis added]
With respect to this submission, Rule 108(3) appears to only apply to objections in relation to an item of the Bill of Costs. In this case, the appellant disputes its liability for the whole of the taxed Bill of Costs. As such, it would appear that Rule 108(3) does not apply. The respondent was put on notice of the appellant’s objection of the taxation by virtue of its continuing claim that no order for costs was made on 2 March 2006. As a consequence of my finding that no order as to costs was made on 2 March 2006, and my other findings as to the Magistrate’s denial of procedural fairness, I consider that there was no valid basis for the taxation of the Bill of Costs on 8 February 2007.
Conclusion
For the above-mentioned reasons, the appeal should be allowed and the order of the Magistrate of 8 February 2007 be set aside.
I order that the action be remitted to the Magistrates Court before a different magistrate in order to hear an application by the respondent as to whether an order for costs should be made and, if so, on what basis costs should be ordered.