HAMILTON-SMITH v Bernsteen Pty Ltd (in Liq) - [2004] SASC 212

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
HAMILTON-SMITH v BERNSTEEN PTY LTD (IN LIQ)
Judgment of The Honourable Justice Anderson
22 July 2004
PROCEDURE - COSTS - APPEALS AS TO COSTS - DISCRETION
Costs - appeal against costs order - whether court can make a reduction to account for costs taken up on an issue on which a successful party has failed - whether conduct of party to whom costs awarded is unreasonable - costs awarded on Supreme Court Scale - costs taxed accordingly - indemnity costs awarded on one matter - whether Magistrate erred in his discretion. Principles of interference with discretionary exercise as to costs - appeal dismissed.

PROCEDURE - JUDGMENTS AND ORDERS - AMENDING, VARYING AND SETTING ASIDE
Default judgment set aside by Magistrate - whether default judgment regular or irregular - appellant out of time to appeal - leave to appeal given despite being out of time - whether liquidated amount - judgment held to be regular - appeal dismissed.
Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1987) 17 FCR 211; Southern Resources Ltd & Ors v Residues Treatment & Trading Co Ltd & Ors (1990) 56 SASR 455; NE Perry Pty Ltd v Judge (No2) [2003] SASC 364, applied.

HAMILTON-SMITH v BERNSTEEN PTY LTD (IN LIQ)
[2004] SASC 212
Magistrates Appeal

ANDERSON J This matter includes several rulings by a Magistrate during a most unfortunate series of events arising in the litigation between the two parties. This is all during the interlocutory process involving a judgment by default. Indeed it could be better described as a long running saga. At the end of the day, it is really an argument on the question of costs awarded by the learned Magistrate following the contested hearings. In addition, the appellant seeks to appeal out of time in relation to one portion of the judgment, namely, that the default judgment which was eventually set aside by the learned Magistrate was a regular and not an irregular judgment. If it was irregular there would likely be a different outcome on costs.
The judgment of the learned Magistrate in relation to costs was delivered on 25 March 2004. The appellant claimed that the need for this appeal only arose after the costs judgment was delivered by which time the appellant was out of time to appeal against that portion of the judgment delivered earlier on 5 December 2003 relating to whether the default judgment was a regular or irregular judgment.
Given the complexity of the matter and in the circumstances I would give leave for that ground of appeal to be argued even though it is out of time. It has always been a central issue and there is no prejudice in allowing the appeal out of time.
Some of the relevant history of this matter is set out in the reasons of the learned Magistrate delivered on Friday, 5 December 2003. I will summarise the chronology which his Honour sets out in his reasons. The originating claim was filed on 6 August 2002 claiming an amount owing of $27,723.29 together with various court costs and fees. A defence and counterclaim was filed. There were various directions hearings and on 2 January 2003 an amended defence and counterclaim was filed. There then followed the normal listing conferences and orders were made for the defendant (appellant) to comply with the rules as to discovery.
On 23 April 2003, Ms Riach appeared for the plaintiff. The defendant did not appear. On that day, the learned Magistrate made an order in default because of the defendant’s non-attendance and also in default of the discovery orders previously made, that the defence and counterclaim be struck out and that judgment be entered for the plaintiff for the amount claimed. The learned Magistrate treated it as a liquidated amount. On 11 June 2003, there began the series of events involving the application to set the judgment aside which proceeded through various stages and required reasons to be delivered by the learned Magistrate at each stage. I set out hereunder a summary of the matters on which the learned Magistrate was required to give rulings or reasons:
1On 4 July 2003, the learned Magistrate ruled it was not appropriate for the defendant to attend for cross-examination and listed the matter for further argument. He reserved the question of costs at that stage.
2On 3 September 2003, the learned Magistrate dealt with the argument and considered an affidavit which had been filed by Ms Riach. He gave leave for an affidavit to be filed by the plaintiff’s solicitors on the issues of discovery and further ordered that the defendant verify on oath that she had not been in possession of any documents relating to the issue of discovery. He again reserved the question of costs.
3Reasons were delivered on 12 September 2003, following discussions about privilege and the waiver thereof and then there was an application for the solicitor for the defendant to be called to give oral evidence. The learned Magistrate adjourned this application.
4On 19 September 2003, further reasons were delivered. His Honour refused the application that the defendant be called for cross-examination upon her affidavit and refused the application that the solicitor for the defendant be permitted to give evidence on oath in substitution for the affidavit evidence. Once again the question of costs was reserved.
5In his reasons of 5 December 2003, the learned Magistrate set out the complete chronology relating to this matter and dealt with the application to set aside the judgment. Apart from considering the facts, his Honour directed himself in relation to all the relevant legal principles in a detailed analysis of those principles. His Honour found that there was an arguable defence. His Honour also found that there was a reasonable excuse for failure to comply with the orders for discovery. However, his Honour did not find that the judgment had been irregularly obtained. He likewise refused an application for security for costs. He also reserved the question of costs generally.
6Finally on 25 March 2004, his Honour delivered his reasons in relation to the question of costs. Being somewhat restrained in his choice of words the learned Magistrate described this as “an unusual interlocutory application”. Detailed oral and written submissions were put before his Honour. In his reasons, he said:
“[33] What the plaintiff says is that the plaintiff was not opposing the application as a matter of general principle or seeking at all cost (sic) to retain a judgment obtained but that the concern of the plaintiff was that the material relied upon by the defendant in support of the application was selective in nature. The essence of the plaintiff’s submission is that the defendant omitted the full history and that because the defendant was seeking the indulgence of the Court to have a regularly obtained judgment set aside, that it was incumbent upon the defendant to present the full story and reasonable for the plaintiff to seek to draw out from the plaintiff the full story.”
The learned Magistrate then dealt with the previous sequential hearings describing the matters which he had dealt with in his earlier reasons. At the end of the day he found that it was not a case where the plaintiff’s opposition to the defendant’s application had been capricious or unreasonable. He found that the plaintiff sought to confine the opposition to discrete issues. He found also that the defendant failed to appreciate the discrete nature of the plaintiff’s opposition and addressed at large, as a result of which the argument consumed far more time than was necessary.
The learned Magistrate then directed himself on general principles, namely, that where a judgment has been regularly obtained the plaintiff is entitled to the costs incurred as a consequence of the defendant subsequently taking out an application to have that judgment set aside. His Honour found that the plaintiff did give reasonable warning to the defendant of its intention to sign judgment.
The learned Magistrate found further that the opposition by the plaintiff to the application by the defendant was unsuccessful but that it was not a case of the plaintiff unreasonably refusing to consent.
He discussed the question of costs generally in the background of the plaintiff having an entitlement to costs. At the end of the day, the order made by the learned Magistrate was that the defendant should pay the costs incurred of and incidental to the preparation of the affidavit of Ms Riach on an indemnity basis but that aside from that issue, the order for costs be that the defendant pay 80% of the plaintiff’s costs of and incidental to the interlocutory application to be taxed on a party and party basis and based upon 90% of the Supreme Court scale. His Honour did not order as requested the further defence of these proceedings to be conditional upon the payment of costs.
As I said at the outset and repeat, this is quite a saga in relation to what could have been a relatively straightforward matter dealt with expeditiously and without incurring vast legal costs.
Although I have covered in general terms the complaints made by the appellant, I will now deal with the specific matters which are raised on the appeal. I do not intend to set out the detailed arguments which were put to me and had earlier been put to the learned Magistrate and are very adequately summarised in his different sets of reasons.
In simple terms, the starting point is that we have a default judgment which has been set aside. If this judgment was regularly obtained then all things being equal, the plaintiff is entitled to costs incurred as a result of the defendant having to take out an application to have the judgment set aside.
Firstly, I agree with the learned Magistrate that this was a liquidated amount. It was in fact a claim for goods sold and delivered pursuant to an agreement. The appellant received the goods and has not paid for all of them. There is correspondence between the parties in which the appellant acknowledges an agreement to pay the balance. This letter is dated 18 February 2002 and says:
“In accordance with provisions of that agreement I have today forwarded by post, a cheque in the sum of $1,045 for stock sold from commencement of trade up until Friday, 15 February 2002. Could you please forward a tax invoice for that amount at your earliest convenience.”
There were other letters in similar terms written on four other occasions and each time the letter enclosed a cheque in payment.
The word “debt” is used by the appellant in some of this correspondence and although, as the learned Magistrate says, this cannot decide the issue it is certainly indicative of the state of mind of the appellant, namely, that she knew she had an obligation to pay a fixed amount by way of debt for the balance owing by her for goods sold and delivered.
There are strong grounds indeed for the learned Magistrate to have found that it was a liquidated amount. In his reasons published on Friday, 5 December 2003 on this aspect his Honour said:
“[51]I paraphrase the agreements as follows:
-     The defendant was to pay 70 cents in the dollar of the cost price of the stock in store.
-     She was to pay for the stock sold on a weekly basis in arrears.
-     She was to take possession of the store on 17 January 2002.
-     She was to make payment in full for all stock supplied at the expiration of three months from the date of the agreement.”
The learned Magistrate correctly reasoned in my view that it was a claim that fell within Magistrates Court Rule 61, namely, that had no defence been filed the plaintiff would have been entitled to sign judgement. It was in my view a regularly obtained judgment.
The learned Magistrate also dealt with the question as to whether the appellant was on notice that the respondent was likely to sign judgment. This consideration involved the solicitors representing the appellant at different stages and in particular, Mr Viscariello. He was the sole director of the respondent company. He was also a solicitor. He was employed by the firm Gretsas Chrzaszcz who were acting for the appellant at the relevant time. Information provided to the Court by the appellant regarding the notification of a hearing date to the appellant was less than frank. It did not disclose that Mr Viscariello was present in court on at least two occasions when orders for discovery were made which was one of the bases on which the learned Magistrate entered the default judgment. Apart from being a director of the company and apart from being a solicitor in the employ of the firm representing the appellant, Mr Viscariello and the defendant had a personal relationship. The whole position of Mr Viscariello is set out in detail commencing in paragraph 10 of the learned Magistrate’s reasons delivered on Friday, 5 December 2003 and I do not repeat those.
After the events I have spoken of, the appellant’s solicitors changed but Mr Viscariello left the employment of Gretsas Chrzaszcz and joined the firm of McNamara Business Property Law which took over the matter. The appellant claims that no-one from the firm of Gretsas Chrzaszcz advised her of her legal obligations in relation to discovery despite the fact that in an affidavit Mr Viscariello describes the appellant as his girlfriend. He was present in court when the orders were made and it is not surprising that the learned Magistrate did not accept her evidence that nobody had informed her of her obligations.
In relation to the failure to attend the hearing on 23 April 2003, the learned Magistrate again in his reasons at paragraph 72 deals with this in detail. The short version is that one letter, clearly written in error, nominates a wrong date which is so obvious as to not require comment. Anyone receiving that letter which advises of the adjourned date, which date is incorrectly stated as a date that has already passed, was on notice to enquire what the correct date was and failed to do so.
There is a lot of time devoted in the reasons published by the learned Magistrate to an affidavit by Ms Riach which was required to be filed by her in her capacity as the solicitor acting for the respondent. In a nutshell, her integrity was challenged by counsel in a statement to the court and she was required to file an affidavit setting out the full circumstances, which she duly did. Ultimately, the details set out by her in this detailed affidavit were not challenged and it is no wonder that the learned Magistrate held the appellant responsible for all costs associated with that aspect of that matter on an indemnity basis.
Coming to the actual decision, which relates to the way in which costs were finally reasoned by the learned Magistrate, his Honour having had the conduct of the matter throughout and having seen the developments at each stage, the nuances of each party’s strategy and the way in which they were approaching the matter, was in a very strong position to form an opinion in the exercise of his discretion as to what was fair and reasonable on the question of costs. He did just that. He formed the view that a very large amount of unnecessary time was occupied in trifling and unhelpful argument from the appellant. He formed the view that had the appellant appreciated that the respondent was attempting to argue the matter on a very limited basis only, it would not have been necessary to waste the time and costs which were wasted in what I have already described as a saga – see Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1987) 17 FCR 211 at 222 and Southern Resources Ltd & Ors v Residues Treatment & Trading Co Ltd & Ors (1990) 56 SASR 455 at 480 as applied in NE Perry Pty Ltd v Judge (No 2) [2003] SASC 364 at [10] per Besanko J.
In such a matter involving an interlocutory decision the discretion of his Honour in relation to costs should not be lightly interfered with. It should only be interfered with if it is obvious that an error of principle has been made. I must say having read each of the reasons set out in paragraph 5 hereof, and having followed the progress of the matter through I am not in the slightest bit surprised to find the order which his Honour made at the end of the day. In fact, it could be said, as indeed Mr Livesey for the respondent contended, that it was charitable in favour of the appellant. Whilst I would not go that far, I think it is a fair and reasonable assessment of the costs on the basis of his Honour’s views none of which have been demonstrated to me as being wrong.
I consider that both in relation to the order that the costs be taxed on a party and party basis, based on 90% of the Supreme Court scale and in addition that the defendant pay 80% of those taxed costs, it is a fair assessment of the matter. I would therefore not interfere with his Honour’s findings in relation to costs and I would dismiss the appeal.