H, AW v K, S - [2022] SASCA 69

SUPREME COURT OF SOUTH AUSTRALIA
(Court of Appeal: Civil)
H, AW v K, S
[2022] SASCA 69
Judgment of the Honourable Justice Bleby
18 July 2022
APPEAL AND NEW TRIAL - PROCEDURE - SOUTH AUSTRALIA - WHEN APPEAL LIES - FROM SUPREME COURT - BY LEAVE OF COURT - GENERALLY
On 11 November 2021, a judge of this Court dismissed both the applicant’s claim and the respondent’s counterclaim. Each party then made an application for costs in their own favour.
The respondent had filed a formal offer with the Court in accordance with the Rules, to which the applicant did not respond. In her costs judgment, the judge held that the respondent was entitled to her costs in respect of the claim and counterclaim on the standard costs basis from 7 February 2019 to 25 November 2020 (that date being 14 days after the filing of the formal offer) and that from 25 November 2020, she was entitled to her costs on an indemnity basis.
The applicant now appeals against that costs judgment. The question is whether leave to appeal should be granted.
Held, per Bleby JA:
1. The applicant’s contentions are reasonably arguable. Leave to appeal is granted.
H, AW v K, S [2021] SASC 128; H, AW v K, S (No 2) [2022] SASC 49; Coles v Wood [1981] 1 NSWLR 723; Zavarco plc v Nasir [2022] Ch 105; Ekes v Commonwealth Bank of Australia [2014] NSWCA 336; Zetta Jet Pte Ltd v The Ship Dragon Pearl (No 2) (2018) 265 FCR 290; Clayton v Bant (2020) 95 ALJR 34, considered.

H, AW v K, S
[2022] SASCA 69
Court of Appeal – Civil

BLEBY JA: By a judgment dated 11 November 2021, the primary judge in this matter dismissed both the applicant’s claim and the respondent’s counterclaim.[1] The applicant sought a declaration that the respondent held a sum of money on trust for him and that he owned a motor vehicle which remained in her possession. He sought restitution of the money in the alternative. The primary judge concluded that the motor vehicle and the money were gifts to the respondent and thus not subject to a claim in restitution.
[1] H, AW v K, S [2021] SASC 128.
The respondent’s counterclaim sought a declaration that she and the applicant were in a de facto relationship. The primary judge concluded that they were not. She dismissed the application for a declaration to that effect. Each party then made an application for costs in their own favour.
Relevantly, on 11 November 2020, the respondent had filed a formal offer with the Court. That comprised an offer to consent to judgment on the applicant’s claim on the basis that there be judgment for the applicant in the sum of $21,769 (inclusive of interest) to be paid by the respondent, with the claim otherwise dismissed. On the counterclaim, she offered to consent to judgment on the basis that a declaration be made that she was the owner of the motor vehicle, with the counterclaim otherwise dismissed. That offer was made pursuant to rule 132.4 of the Uniform Civil Rules 2020 (‘UCR’).
The applicant did not comply with his obligation to respond to the offer pursuant to UCR 132.6 and, as the primary judge noted, made no offer to settle the litigation. He declined to make any offer at mediation.
In the event, the primary judge held that the respondent was entitled to her costs in respect of the claim and the counterclaim on the standard costs basis from 7 February 2019 to 25 November 2020 (that date being 14 days after the filing of the formal offer) and that from 25 November 2020, she was entitled to her costs on an indemnity basis.[2]
[2] H, AW v K, S (No 2) [2022] SASC 49 at [91].
Importantly, the respondent had also commenced a proceeding in the Family Court of Australia against the applicant. That proceeding had been adjourned pending the outcome of the Supreme Court action.
The primary judge fashioned the costs order in the terms that she did on the basis that the applicant had obtained a judgment that was less favourable to him than the terms of the respondent’s offer, as contemplated by UCR 132.10(3)(c)(ii). She held that the dismissal of the application for a declaration that the parties had been in a de facto relationship, whether that dismissal occurred by way of consent, or by way of judgment following a contested hearing, gave rise to a res judicata. She further held that the dismissal in either case would give rise to an issue estoppel and that, in any event, it would be an abuse of process to litigate the Family Court proceedings if the claim had been dismissed by consent.
On the application for leave to appeal, the applicant contends that the following contentions are reasonably arguable:
1.The dismissal of an application for declaratory relief does not give rise to a res judicata, whether that be by way of consent or judgment on a contested hearing. To this end, the applicant relies on Coles v Wood[3] and Zavarco plc v Nasir.[4] He submits that the primary judge mistakenly assumed that her dismissal of that application at trial gave rise to a res judicata and incorrectly understood the issue on the costs application to be whether a consent judgment would also do so. In any event, his contention is that in neither case does the dismissal give rise to a res judicata. That being the case, the dismissal of the claim would not prohibit the respondent from litigating her claims in the Family Court proceedings and seeking a declaration in those proceedings.
2.The primary judge held that if the applicant had accepted the respondent’s formal offer consenting to dismissal of the counterclaim, that would have given rise to an issue estoppel that prevented the respondent from pursuing her claim in the Family Court. This, again, would have the same effect as a judgment following a contested trial. In this regard, the judge referred to Ekes v Commonwealth Bank of Australia.[5] The applicant’s contention, relying primarily on Zetta Jet Pte Ltd v The Ship Dragon Pearl (No 2)[6] and Clayton v Bant,[7] is that while the judgment on the trial, which depended on findings of fact following an adversarial contest, was capable of giving rise to an issue estoppel, a judgment by consent, as contemplated in the offer, could not do so. It follows that by obtaining judgment at trial, the applicant bettered the position that he would have been in had he accepted the offer. The offer relevantly only amounted to an offer that the application for a declaration be dismissed. It did not offer to consent to a negative declaration to the effect that the parties were not in a de facto relationship.
3.The primary judge concluded that had the applicant accepted the respondent’s formal offer, any pursuit by the respondent of her action in the Family Court would have amounted to an abuse of process. The applicant contends that this conclusion is by no means certain. He submits that the terms of the offer supported an inference that the respondent intended, on achieving a settlement of the action, to pursue her application for declarations in the Family Court. To this end, again, the applicant draws attention to the distinction between a dismissal of an application for a declaration and a making of a negative declaration. He asks, rhetorically, what has been decided by the dismissal of the application for a declaration?
[3] [1981] 1 NSWLR 723.
[4] [2022] Ch 105.
[5] [2014] NSWCA 336; H, AW v K, S (No 2) [2022] SASC 49 at [75].
[6] (2018) 265 FCR 290 at [20].
[7] (2020) 95 ALJR 34 at [52], footnote 83.
The question of whether to grant leave to appeal looks to the following considerations:
a)whether the decision is attended with sufficient doubt to warrant its reconsideration on appeal;
b)whether the decision raises an issue of principle of general importance;
c)whether allowing the decision to stand would work a substantial injustice to the applicant.
These considerations are to a degree interrelated. The substantive questions raised on the Notice of Appeal are not without difficulty. In my view, the applicant’s contentions are reasonably arguable. The contentions with respect to the establishment of a res judicata or an issue estoppel raise questions of principle that have a degree of importance. Finally, if it transpires that the award of indemnity costs was made in error, it has the potential to work a substantial injustice on the applicant.
The application for leave to appeal was called over before me on 24 June 2022. Shortly prior to that hearing, the respondent filed an application for security for costs. After some discussion, I indicated that I would hear the application for leave and, if I granted leave, that I would then list the matter for directions on the application for security for costs. The next step in this matter will therefore be for the respondent to pursue that application.
Conclusion
Pursuant to UCR 213.1(1)(c), I grant leave to the applicant to appeal in terms of the Notice of Appeal (FDN 1), filed 7 June 2022.