Lauro v Minter Ellison Lawyers - [2018] SASC 159

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
LAURO v MINTER ELLISON LAWYERS
[2018] SASC 159
Judgment of The Honourable Justice Kelly
10 October 2018
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - JUDGMENTS AND ORDERS - AMENDING, VARYING AND SETTING ASIDE JUDGMENTS AND ORDERS - ACTIONS TO REVIEW OR SET ASIDE JUDGMENT OR ORDER - GENERALLY
Appeal against an order from a decision of a Magistrate to dismiss a claim by the appellant. The Magistrate dismissed the appellant’s claim finding that it amounted to a collateral attack on a default judgment in respect of which the appellant had already exercised his right of appeal to this Court and of which an appeal is still on foot to the Full Court. As such, the Magistrate found that it constituted an abuse of the Court’s process, dismissed the claim and ordered indemnity costs fixed at $1,500.00 against the appellant.
Held per Kelly J dismissing the appeal:
1) The Magistrate was correct to find that if successful in the appeal to the Full Court there would be two actions on foot dealing with identical subject matter and both effectively seeking the same relief.
2) The appellant has not identified any other error of either fact or law made by the Magistrate in the exercise of the discretion to dismiss the action.
3) The award of indemnity costs was in all the circumstances fair and reasonable.
Magistrates Court Act 1991 Section 32; Legal Practitioners Act 1981 Section 41; Competition and Consumer Act 2010 Section 101, referred to.
Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] Applicant Counsel 993, distinguished.
Lauro v Minter Ellison Lawyers [2017] SASC 197, considered.

LAURO v MINTER ELLISON LAWYERS
[2018] SASC 159
Magistrates Appeal
KELLY J:

This is an appeal from a decision of a Magistrate to dismiss a claim by the appellant for orders:
1staying an order for enforcement of a default judgment and costs order in an action (AMC-13-2765) entered on 26 August 2014 and 19 September 2014;
2for a declaration pursuant to s.32 of the Magistrates Court Act 1991 that a retainer agreement between the appellant and the respondent is not valid or enforceable, and
3that the default judgment and costs orders made on 26 August 2014 and 19 September 2014 be set aside.
The Magistrate dismissed the appellant’s claim finding that it amounted to a collateral attack on the default judgment in respect of which the appellant had already exercised his right of appeal to this Court. As such, the Magistrate found that it constituted an abuse of the Court’s process and dismissed the claim.
Background
In June 2013 the respondent commenced proceedings in the Magistrates Court against the appellant for unpaid legal fees. The matter was listed for trial. After the appellant failed to attend at Court on the appointed trial date, the respondent applied for judgment in default which was granted on 26 August 2014.
In September 2014 the appellant sought to set aside the default judgment. He was unsuccessful and in due course appealed to a single Judge of this Court against the dismissal of that application.
On 22 December 2017 a Judge of this Court dismissed the appeal[1].
[1] See Judgment of Hinton J in Lauro v Minter Ellison Lawyers [2017] SASC 197.
On 28 June 2018 the appellant was granted permission to appeal the decision of Hinton J in Lauro v Minter Ellison Lawyers. That appeal has not yet been heard.
Issues on appeal
The appellant now complains that the Magistrate erred in law and in fact in dismissing the appellant’s claim by misapprehending the nature and effect of the appellant’s claim and by applying the wrong legal principles to his claim.
The gravamen of the Magistrate’s reasoning in respect of the issues which arise on this appeal are to be found in the reasons of the Magistrate at paragraphs [20] to [22]:
20.The plaintiff’s current action is an abuse of process as it seeks to re-litigate the substance of the claim of the 13/2765 Action which has been disposed of by other judicial officers, and it seeks to interfere with orders made in that action. The appeal process, currently properly embarked upon [by] Mr Lauro, is the only legitimate record to disturb the orders made by Magistrate Milazzo or Hinton J.
21.Further, the 13/2765 Action is currently before the Supreme Court, and it would be impermissible for a Magistrate of this Court to interfere with the appeal process by way of collateral orders. In the event that Mr Lauro’s appeal to the Full Court relating to the 13/2765 Action is successful, then there would be two actions on foot dealing [with] the identical subject matter and effectively addressing the same relief.
22.In my view this is not a matter capable of being determining [sic] by reference to principle of res judicata and issue estoppel, as the within action is effectively raising fresh defences for Mr Lauro relative to the 13/2765 Action. It does not seek to ventilate similar issues on different causes of action, rather it is seeking to ventilate new matters in relation to the same cause of action. It is the very definition of a collateral attack on the earlier proceedings.
The appellant contends that instead of finding that the appellant was trying to raise new defences relative to the 13/2765 Action her Honour should have instead held that the appellant’s claim was a properly instituted new proceeding seeking a declaratory order that the alleged retainer agreement between the appellant and the respondent was invalid pursuant to the Legal Practitioners Act 1981 (SA) and the Competition and Consumer Act 2010 (Commonwealth).
The appellant contended that a further error was made by the Magistrate in finding that the appellant’s appeal to the Full Court in respect of the default judgment of 26 August 2014 and the judgment of Hinton J of 22 December 2017 “is the only legitimate method to disturb the orders made by Magistrate Milazzo or Hinton J”. He contended that the Magistrate should have held instead that the earlier action does not deal with the question of the validity or otherwise of the alleged retainer agreement between the appellant and the respondent. The appellant contended that the Magistrate should have held that the appellant’s claim sought a declaratory order that the alleged retainer agreement between the appellant and the respondent was invalid.
The appellant also complained that the Magistrate erred in making an award of $1,500 for indemnity costs against the appellant.
In seeking the declaration that the purported retainer agreement between the appellant and the respondent is invalid by reason of the respondent’s failures to comply with the professional and statutory obligations under the Legal Practitioners Act and Australian Consumer Law, the appellant was seeking to characterise the action before the learned Magistrate as a new and separate cause of action distinct from the issues which arose in the claim by the respondent for the unpaid legal fees in respect of which the default judgment was entered.
The appellant’s argument in short was that given that he had never raised the defence of statutory invalidity in the first action, he should not be prevented from bringing a claim for declaratory relief based on that defence separately. The appellant contended that in any event the earlier action had never been determined on its merits and there has been no finality in respect of that matter either, since the challenge to the default judgment remains the subject of the appeal to the Full Court.
Regrettably, it is the appellant who has misapprehended or mischaracterised, or perhaps both, the nature and the effect of the claim made in the action before the learned Magistrate.
To my mind, the Magistrate’s characterisation of the appellant’s claim in paragraphs 20 to 22 of her reasons set out in paragraph [8] herein is plainly correct.
The appellant has also misapprehended the effect of observations made by Hinton J in Lauro v Minter Ellison Lawyers at paragraph 55 when he stated as follows:
In my view it was open to the Magistrate to conclude that the appellant did not have a reasonable excuse for his non-attendance at trial on 26 August 2014. So concluding the discretion contained in rule 87(1) MCCR was not enlivened and the application was rightly dismissed. No need arises to consider the appellant’s contentions in relation to rule 87(2)(a). Nonetheless, as the matter was argued I indicate that in my view it was not open to the Magistrate to be satisfied that the appellant did not have an arguable case on the merits. I accept the appellant’s submission that the defence puts in issue the question of what were the terms of any contract between the appellant and the respondent. … On the limited information before me, I consider that there is an arguable case as to the terms of any contract.
Relying on that paragraph the appellant contended before the Magistrate and again before this Court that his Honour’s view of the second limb of the argument put to him, namely that the appellant had an arguable defence, entitled him to bring the fresh action and pursue such arguable defences, including the defence which he put that the retainer agreement was invalid by virtue of statutory and consumer legislation. In making that submission, the appellant also relied on Kok Hoong v Leong Cheong Kweng Mines Ltd[2].
[2] [1964] AC 993.
In that case Kok Hoong (“KH”) claimed arrears of rent from Leong Cheong Kweng (“LCK”) under an agreement to hire machinery which had been made between the parties in 1952. In 1954 KH obtained a default judgment on the arrears of unpaid rent. In 1955 the parties came to a fresh agreement and in 1957 KH again sued for unpaid arrears of rent from 1955.
In the second action, LCK claimed that the agreement was unlawful by virtue of KH’s non-compliance with money lenders legislation and bills of sales ordinances that then applied.
The Privy Council held that LCK was not estopped from raising that defence in the second cause of action, based on the subsequent agreement in respect of unpaid arrears in a period which post-dated the default judgment in 1954.
The Magistrate’s reasons at paragraphs [12] to [19] (set out below) in rejecting the appellant’s argument are, in my view, also plainly correct:
12.Mr Lauro further submitted that issue estoppel did not apply in cases of statutory invalidity. He referred to a number of authorities, notably the passage in Kok Hoong v Leong Cheong Kweng Mines Ltd, where Lord Justice Atkin said:
There is, in most cases, no estoppel against a defendant who wishes to set up that statutory invalidity of some contract or transaction upon which he is being sued, despite the fact that by conduct or other means he would otherwise be bound by estoppel.
13.Mr Lauro said further that issue estoppel does not arise in any event as the Supreme Court proceedings have not been finally determined, and he submitted that the current appeal proceedings in the Supreme Court are only addressing the ‘reasonable excuse’ limb of r 87, and based on the decision of Hinton J, Mr Lauro was entitled to run his ‘arguable defence’ in this court.
14.Minter Ellison submitted that it would be oppressive to have to deal with the substance of the matter of the 13/2765 Action because it has been dealt with already in the Magistrates Court, and continues to be addressed in the Supreme Court appeal proceedings. Mr Lauro said that a law firm the size of Minter Ellison could not genuinely claim to be oppressed by his conduct, especially as he is an unrepresented litigant. He described Minter Ellison as a sophisticated and well-resourced party.
15.Legal authority makes it clear that the power to strike out or stay proceedings should be exercised with caution. The exercise of such power is the exception, and in the ordinary course, even if a party’s prospects of success are slim, he ought to be permitted to have that claim determined by the court. Justice Dixon stated in the case of Cox v Journeaux (No 2) that it is only where ‘to permit a party to proceed would amount to an abuse of jurisdiction or would inflict unnecessary injustice upon the opposite party that a suit should be stopped’.
16.In the Supreme Court decision of Cosenza v Gill in 2016, Stanley J referred to the decision of Brocx v Hughes in the Western Australian Supreme Court, and particularly the words of Newnes J:
Where a party demonstrates a disregard for the orders or procedures of the court and as a result their claim is dismissed, their right again to invoke the jurisdiction in respect of that same claim cannot be unlimited if the public interest in the efficient use of court resources and the rights of other litigants are to be given due recognition. It cannot be the case that so long as the limitation period has not expired a party can ignore the rues and orders of the court, secure in the knowledge that if the worst happens and the action is struck out they can’t simply start again. It would bring the administration of justice into disrepute, and be ‘productive of serious and unjustified trouble and harassment’ to the defendant, if a party whose actions had been dismissed by reason of their contumacious conduct could simply institute and proceed with a fresh action and, until the limitation period ran out, could continue to repeat that if and when the same fate befell them. To the extent that statements in the older cases, including Birkett v James and Tolley v Morris, may be understood to suggest that such a party is entitled as of right to prosecute a fresh action, I would not follow them. The High Court pointed out in Batistatos:
The “right” of the plaintiff with a common law claim to institute an action is not at large. It is subject to the operation of the whole of the applicable procedural and substantive law administered by the court, whose processes are enlivened in the particular circumstances. This includes the principles respecting abuse of process.
17. The only relief claimed in this action relates to, and forms part of, the 13/2765 Action. In that action his Honour Hinton J considered that Mr Eric Lauro may have had an arguable defence, but that it was open to Magistrate Milazzo to find that he did not have a reasonable excuse (as per the second limb of r 87) and as such his discretion was not enlivened. Mr Lauro’s appeal was dismissed and indeed is currently still before the Supreme Court in relation to an appeal before the Full Court.
18.Mr Lauro submitted that Hinton J’s decision, particularly at para [42], gave rise to his entitlement to bring a fresh action effectively arguing two new defences. Firstly, a defence is not a cause of action. Secondly, that is not the effect of Hinton J’s reasoning in considering the test set out in r 87.
19.Mr Lauro has fundamentally misunderstood the purpose of the reasoning set out by Hinton J, in considering each limb of the test set out in r 87. His Honour’s view that Mr Lauro had an arguable defence to Minter Ellison’s action did not give rise to any basis or opportunity for Mr Lauro to then pursue such defence(s). It was simply the first step in considering whether the default judgment recorded in the 13/2765 Action should be set aside. The second limb of r 87 was then considered by Hinton J, specifically whether Mr Lauro had a reasonable excuse for failing to attend at the trial. That Hinton J raised the arguable defence goes to one limb of Mr Lauro’s application to set aside the default judgment (r 87). It does not afford Mr Lauro a fresh or separate cause of action.
[Footnotes omitted]
The principle in Kok Hoong v Leong Cheong Kweng Mines Ltd does not apply to the facts here. The Magistrate was correct to find that if successful in his appeal to the Full Court, there would be two actions on foot dealing with identical subject matter and both effectively seeking the same relief.
The appellant has not identified any other error of either fact or law made by the Magistrate in the exercise of the discretion to dismiss the action.
I turn now to the order made for costs in the Court below. The appellant claims that the Magistrate was wrong to award indemnity costs. That too is an appeal from a discretionary decision made by the Magistrate. It is well established that the discretion in relation to the award of costs is wide and general.
The appellant has not pointed to any error of fact or law which would justify this Court’s intervention in the order made by her Honour.
The Magistrate acknowledged that the award of indemnity costs is exceptional. Her Honour properly identified the purpose of a costs award as being to compensate rather than to punish. The facts she identified properly gave rise to the exercise of the discretion in favour of awarding indemnity costs. Those facts were that the respondent had forwarded a letter to the appellant on 20 February 2018 warning the appellant that the claim made would inevitably fail, that it involved the impugning of the earlier judgments and that the declaration sought could not in the circumstances be made. The appellant was given the opportunity to discontinue the action without incurring any costs liability at that stage. He did not accept that offer. Furthermore, the appellant commenced the action the subject of this appeal in the face of an order made by the Magistrate in 2014 that he was prohibited from making any further application to set aside the default judgment without the permission of the Court.
The lump sum awarded fixed at $1,500 was in all of the circumstances fair and reasonable.
Furthermore, in light of the respondent’s concession not to rely on the matter of jurisdiction, I have found it unnecessary to deal with this issue.
The appeal is dismissed