H, AW v K, S

Case [2023] SASCA 26

Supreme Court of South Australia

(Court of Appeal: Civil)

H, AW v K, S

[2023] SASCA 26

Judgment of the Court of Appeal  

(The Honourable President Livesey, the Honourable Justice Doyle and the Honourable Justice Bleby)

16 March 2023

PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - OFFERS OF COMPROMISE, PAYMENTS INTO COURT AND SETTLEMENTS - PAYMENT INTO COURT - ACCEPTANCE

APPEAL AND NEW TRIAL - PROCEDURE - SOUTH AUSTRALIA - POWERS OF COURT - COSTS

ESTOPPEL - ESTOPPEL BY JUDGMENT - RES JUDICATA OR CAUSE OF ACTION ESTOPPEL - PARTICULAR CASES

In 2014, the appellant met the respondent and the two commenced a relationship.  Over the course of the relationship, the appellant transferred large sums of money into the respondent’s bank account, allowing her to rent a house for herself and her son, cut back on the hours she worked, pay for her son’s school fees, and live a more luxurious lifestyle than she would be able to afford on her own earnings.  The relationship broke down between October 2018 and January 2019.

The appellant brought proceedings seeking a declaration that the respondent held $87,000 on trust for him, and delivery up of a Mercedes Benz motor vehicle.  The respondent denied the claim, arguing that the money was provided to her by way of financial support, and that the car was a gift.

The respondent brought a cross claim in which she sought a declaration that the two of them had been in a de facto relationship.

On 11 November 2020, the respondent filed an offer in the Supreme Court proceedings to “settle the entire matter (all claims between the parties)”.  In relation to costs, the offer provided that the offeror (the respondent) would submit to any order the Court may make in the exercise of its discretion. The appellant did not file a formal response to the offer.

At trial, the judge dismissed the claim, finding that the money and motor vehicle were gifts and not subject to a claim in restitution. However, the judge also dismissed the claim for declaratory relief in the cross claim.

Following the delivery of judgment, each party sought orders for costs in their favour.  The judge found that costs should follow the event.  Although both the claim and cross claim had been unsuccessful, her Honour found that the cross claim did not significantly add to the costs incurred on the claim and so should not result in any reduction to the respondent’s entitlement to costs.

The judge held that these costs should be paid on an indemnity basis pursuant to r 132.10(2) of the Uniform Civil Rules 2020 (SA), on the basis that the appellant had obtained a judgment that was less favourable to them than the offer.

The appellant appeals on the ground that the judge erred in holding that the judgment dismissing the respondent’s cross claim provided no benefit or advantage to the appellant over a judgment based upon the offer to consent to an order…

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H, AW v K, S [2023] SASCA 26
Case
[2023] SASCA 26
Decision Date

CaseChat Overview and Summary

This case concerned an appeal regarding a costs order made by the primary judge. The appellant, a dual Australian-American citizen, had transferred significant sums of money to the respondent, an employee of a car dealership, with whom he had developed a relationship. The relationship later broke down, and the appellant initiated proceedings seeking declarations and restitution concerning money and property transferred to the respondent. The primary judge had made a costs order against the appellant, which he sought to overturn on appeal.

The central legal issues before the appellate court were whether the primary judge had erred in her discretion regarding the costs order, and whether the judgment obtained by the appellant was less favourable to him than a formal offer made by the respondent. Specifically, the appellant argued that a contested judgment for declaratory relief provided him with a benefit or advantage over a consent judgment, which he contended would not have had the same preclusive effect on subsequent Family Court proceedings. The court was asked to consider the implications of res judicata in the context of declaratory judgments, particularly those obtained by consent versus those determined after a trial.

The appellate court found it undesirable to definitively resolve the complex legal propositions raised by the appellant, deeming them more appropriate for determination in a case where they squarely arise. However, the court acknowledged that there was arguable merit in some of the appellant's contentions, suggesting that he may have derived some benefit from the judgment obtained compared to a consent judgment. Despite this, the court ultimately concluded that the appeal should be dismissed because the costs order made by the primary judge was nevertheless appropriate in the circumstances.

The court noted that the primary judge had found the formal offer made by the respondent to be more favourable to the appellant in respect of his claim, as accepting it would have resulted in a judgment in his favour and a payment of $21,769, whereas the actual judgment dismissed his claim. This finding, on its own, meant the appellant was prima facie liable for the respondent's costs. While the court acknowledged the complexity of comparing the offer and judgment on the cross-claim, particularly concerning the dismissal of a declaration of a de facto relationship, it ultimately upheld the primary judge's costs order.

Orders

Orders of the court

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Background

Background to the litigation

For the reasons which follow, it is undesirable that this Court attempt to provide a definitive answer to the difficult propositions of law, and mixed fact and law, inherent in the appellant’s argument on appeal for the purposes of resolving a costs dispute. However, even if it may be accepted that there was some potential benefit or advantage to the appellant from the judgment obtained, as opposed to a consent judgment, the appeal should be dismissed on the basis that the costs order made was nevertheless the appropriate order.Background The appellant is a dual Australian American citizen, who travels extensively for his work. In May 2014, he visited a European car dealership in Adelaide where he met the respondent, an employee of that dealership. They engaged in a series of text messages and telephone calls, and a relationship developed between them. Over the period of their relationship, the appellant transferred large sums of money into the respondent’s bank account, allowing her to rent a house for herself and her son, cut back on the hours of her work, pay for her son’s school fees, and live a more luxurious lifestyle than she had been able to afford on her own earnings. As the appellant continued to travel widely, and spent only a limited amount of time in Adelaide, much of the parties’ relationship was conducted through text messages and telephone calls. The relationship broke down between about October 2018 and January 2019.The appellant’s claim On 7 February 2019, the appellant brought an urgent application in this Court, seeking a freezing order over the respondent’s bank accounts. He sought a declaration that the respondent held the sum of $87,000 on trust for him, and delivery up of a Mercedes Benz motor vehicle, furniture and jewellery, all of which were in her possession. In the alternative, he sought restitution of the sum of $87,000, and damages for conversion or detinue of the other items mentioned. In his statement of claim, the appellant pleaded that he and the respondent had made an arrangement in 2014 whereby he would make payments to her, with which she would lease a house where she and her son would reside, and where he could stay when he visited Adelaide and store some belongings. He would also purchase a motor vehicle which would be kept at the house, and which the respondent would be able to use when the appellant was not in Adelaide. He further pleaded that, in December 2018, he and the respondent mutually agreed to terminate the arrangement, at which time it was agreed between them that the respondent would vacate the house by 1 February 2019, and return to him the balance of funds in her bank account, the car, and the furniture in the premises. He pleaded that the respondent had retained the money, the car and the furniture, and had not vacated the premises. At trial, the appellant did not press his claims in respect of the furniture and jewellery. He confined his claim to the money and the motor vehicle. It was agreed that the respondent had vacated the premises shortly after the court proceedings were commenced.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

In any event, the precise reason for, and indeed correctness of, her Honour’s approach did not affect the parties’ approach to this appeal. Both approached the appeal on the basis that it was to be accepted that the relevant issue was whether the judgment obtained was less favourable to the appellant, and that, in order to succeed on appeal, it was necessary for the appellant to establish that the judgment obtained on the cross claim provided the appellant with some benefit or advantage so as to avoid the conclusion that the (overall) judgment was less favourable to the appellant.The judgment was less favourable to the appellant than the offer The primary judge commenced her consideration of whether the judgment was less favourable to the appellant by addressing the claim. Her Honour said that there could be no doubt that, in respect of the claim, the formal offer was more favourable to the appellant than the judgment.[20] Had the appellant accepted the formal offer, he would have received a judgment in his favour on the claim, and a payment of $21,769. The judgment in fact entered dismissed his claim. As the judge observed, on this basis, the appellant was prima facie liable to pay the respondent’s costs in respect of the claim, on the standard basis until 25 November 2020, and thereafter, on an indemnity basis.[20] Costs reasons at [60]. The judge then addressed what she described as the more difficult issue of comparing the Offer and judgment on the cross claim.[21] [21] Costs reasons at [61]ff. Her Honour began by dealing with the aspects of the cross claim based upon allegations of equitable estoppel and unconscionable conduct, in respect of which the respondent sought relief in the form of (i) a declaration that she owned the motor vehicle, (ii) equitable relief in respect of outstanding rent and other expenses, and (iii) damages. Focussing upon the issue that arose in respect of the motor vehicle on the cross claim, the judge held that the cross claim for this relief was “neither here nor there” given its overlap with the issues on the claim itself.[22] In substance the respondent had succeeded on those issues, albeit in the context in which they arose in the claim.[22] Costs reasons at [63]. The more important issue, her Honour reasoned, was the significance of the dismissal of the cross claim for a declaration that the parties were in a de facto relationship. As her Honour framed the issue, the question was whether a judgment by consent (that is, based upon acceptance of the Offer) dismissing the respondent’s claim for a declaration of a de facto relationship would have had the same effect as a judgment dismissing that claim after a contested trial. The appellant argued that the latter was of benefit or advantage to him in that, by succeeding after a contested trial, he obtained a judgment that had the effect of barring the respondent from continuing with her Family Court proceedings. On the appellant’s argument, a judgment by consent based upon acceptance of the Offer would not have had that effect.

Ratio Decidendi

Legal Principle Established

Ground 2 in the appellant’s notice of appeal is merely consequential upon Ground 1. It contends that, in light of the error identified in Ground 1, the judge erred in the exercise of her discretion in making the impugned costs order. It further contends that her Honour ought, in all the circumstances of the matter, to have exercised the Court’s discretion to make an order that the respondent pay 40 per cent of the appellant’s costs of the claim and cross claim, including reserved costs, on a standard basis.Consideration It is undesirable, if not inappropriate, for this Court to attempt to reach any definitive resolution on a costs hearing of several of the issues raised by the appellant’s submissions.[41] They involve complex and contentious issues of law, indeed mixed fact and law, that should be determined when they squarely arise, having regard to the precise legal and factual matrix in which they arise. In particular, it is undesirable for this Court to attempt a definitive resolution, merely for the purposes of determining a costs dispute, of whether the relevant preclusionary doctrines would operate, or would have operated, were the respondent to attempt to pursue her Family Court proceedings in the face of the judgment dismissing her cross claim, or to attempt to do so in the face of the consent judgment that would have been entered following acceptance of the respondent’s Offer.[41] Energy Global Logistics Pty Ltd v Zigga Zagga (Australia) Pty Ltd [2021] NSWSC 348 at [62], [122] (Ward CJ in Eq); Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681 at [8]-[9] (Basten JA), [31]-[32] (Payne JA, Meagher JA agreeing); Stateland Developments Pty Ltd v Princi [2007] NSWSC 709 at [3], [11] (Gzell J); Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Quin (1997) 186 CLR 622 at 625-626 (McHugh J); Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201 (Hill J). However, before returning to the significance of this observation for the disposition of this appeal, it is nevertheless appropriate to make some limited observations about the operation of these preclusionary doctrines, essentially reflecting our view that there is at least some arguable merit in several of the contentions advanced by the appellant, and leading us to accept that it is at least arguable that the appellant derived some benefit or advantage from the judgment he in fact obtained on the cross claim for declaratory relief, relative to a consent judgment based upon acceptance of the Offer.Res judicata As set out in particular (i) of Ground 1, the appellant makes the point that the judge appears to have assumed that a contested judgment for declaratory relief would give rise to res judicata, with the only issue being whether a consent judgment to the same effect would likewise give rise to res judicata. By approaching the issue in this way, the judge focussed her attention upon whether a consent judgment might give rise to res judicata, and concluded that it could. The appellant’s argument, however, is that it is the declaratory nature of the judgment – regardless of whether it is a judgment by consent or following a trial – that is the obstacle to the operation of res judicata. On the appellant’s argument, it may be that declaratory judgments generally are incapable of giving rise to res judicata; alternatively, they will not do so where they relate only to the existence of a state of affairs or status (as opposed to some cause of action, or at least some right or obligation), or where the judgment involves a dismissal of the claimed declaration (as opposed to the making of a declaration, whether positive or negative in its terms).