Madanat v David (No 2)

[2020] NSWSC 686

Supreme Court

New South Wales

Medium Neutral Citation:	Madanat v David (No 2) [2020] NSWSC 686
Hearing dates:	On the papers
Date of orders:	04 June 2020
Decision date:	04 June 2020
Jurisdiction:	Equity - Applications List
Before:	Robb J
Decision:	See pars [19] and [21]
Catchwords:	COSTS — Party/Party — Specific court rules in relation to costs — Action which should have been brought in inferior court – where the proceedings could have been commenced in the Local Court – where the costs should be assessed as if the notice of motion had been heard by the Local Court of New South Wales
Legislation Cited:	Civil Procedure Act 2005 (NSW) Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited:	Madanat v David [2020] NSWSC 284 Wong v Maroubra Automotive Refinishers Pty Ltd; Ayres v Maroubra Automotive Refinishers Pty Ltd (No 2) [2015] NSWSC 364
Category:	Costs
Parties:	Joanna Madanat (plaintiff / respondent / applicant) Suzy David (first defendant / applicant / respondent) Fred David (second defendant / applicant / respondent)
Representation:	Counsel: M Castle (plaintiff / respondent / applicant) M Dulhunty (first and second defendants / applicant / respondent)   Solicitors: Firths (plaintiff / respondent / applicant) David Legal (first and second defendants / applicant / respondent)
File Number(s):	2019 / 274481

Judgment

1. I delivered judgment on the defendants’ notice of motion seeking an order summarily dismissing the plaintiff’s claim on 25 March 2020: Madanat v David [2020] NSWSC 284. I made an order dismissing the notice of motion.

2. I invited the parties to deliver submissions on the issue of the costs order that should be made by the Court. I have now received those submissions.

3. In the ordinary case, it would be appropriate for the Court to make an order that the defendants pay the plaintiff’s costs of the notice of motion on the ordinary basis, as the costs would then follow the event: see Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 42.1.

4. However, this is not an ordinary case as the amount of the plaintiff’s claim in this Court is $5,160.04. As that amount is, to say the least, a minute fraction of the $500,000 referred to in UCPR r 42.34, there is a question as to whether the plaintiff, if successful in any aspect of these proceedings, should be paid her costs.

5. As explained in the principal judgment, a dispute arose between the plaintiff, who at one stage was a client of the defendants, who are solicitors, as to the reasonableness of the defendants’ costs and disbursements in the sum of $65,000 in respect of a personal injury claim that was settled by the plaintiff, and which the plaintiff had paid.

6. After some acrimonious correspondence between the present solicitors for the plaintiff and the defendants, in which legal proceedings were threatened, the defendants repaid the plaintiff $32,510.50, for the purpose of settling the claim and to avoid the cost and inconvenience of becoming involved in contested court proceedings.

7. No doubt, the defendants then thought that that was the end of the matter. However, the plaintiff banked the cheque for $32,510.50 and then sued the defendants for $5,160.04 in interest in this Court.

8. The plaintiff’s claim as pleaded is a common law claim for money had and received. As I understand it, the plaintiff could have commenced that claim in any court in this State that has jurisdiction to determine common law claims of $5,160.04.

9. If the plaintiff succeeds in these proceedings on a final hearing, she may not be awarded her costs, on the basis that UCPR r 42.34(2) provides that an order for costs in these circumstances “will not ordinarily be made, unless the Supreme Court is satisfied that: (a) for proceedings that could have been commenced in the District Court – the commencement and continuation of the proceedings in the Supreme Court, rather than the District Court, was warranted…”

10. In my view, while it is premature for the question to be decided, there is a substantial likelihood that the plaintiff, if successful, will not be awarded her costs. While every case should be treated on its separate merits, it should be rare that the Court would countenance the making of common law claims in the Court for amounts as small as $5,160.04.

11. That gives rise to the question of whether the Court should deal with the costs of interlocutory applications on the ordinary basis to which UCPR r 42.1 applies, when there is every prospect that the Court would not, after the final determination of the proceedings, make any cost order in favour of the plaintiff.

12. The parties made submissions on that issue, but I do not think that this is an appropriate case to attempt any general analysis of how UCPR r 42.34 should apply in cases such as the present. I will say, however, that I am not persuaded by the plaintiff’s submission that the insignificant amount of the claim should be treated as being immaterial, given that the case raises the question of whether solicitors should be obliged to pay interest on excessive legal fees, and that there is some scope for argument about whether there is a “freestanding” right to interest at common law on a claim for money had and received. For the reasons that I set out at [75] to [81] of the principal judgment, there is a very high likelihood that any trial judge of this Court, the District Court, and any magistrate in the Local Court would feel obliged to find that such a right exists.

13. Section 98 of the Civil Procedure Act 2005 (NSW) has the effect that costs are in the discretion of the Court, where the discretion is unconfined provided that it is exercised judicially and having regard to authority that throws light on the considerations that are appropriate to be taken into account in making cost orders.

14. As the plaintiff’s claim is framed at present, I can see no reason why it could not have been prosecuted in the Local Court. The defendants may, with respect, have been misguided or overambitious in their aspiration to have the plaintiff’s claim struck out. However, there is a basis for according them some sympathy, given that they are facing the need to defend a trivial claim in this Court, whereby it is almost inevitable that, if they attempt to defend the claim as is their right, they will incur costs that are totally disproportionate to the amount at issue.

15. There is a reason for the existence of UCPR r 42.34, as the commencement of proceedings such as the present one in this Court necessarily involves an element of oppression on the defendants. They are faced with the stark choice of abandoning their rights or risking incurring disproportionate costs in defending them.

16. It would not be fair or just for the Court to award the costs of the notice of motion on the basis that the costs follow the event, in circumstances where, if the occasion had not arisen for the Court to consider the need to award costs until final judgment, the Court may decide that it is not appropriate to make any cost order in favour of the plaintiff.

17. On the other hand, it was the defendants’ choice to seek to strike out the plaintiff’s claim and they failed. As I have said, the event is that the plaintiff has succeeded, but in my view that is an event that should have arisen in proceedings in the Local Court. On the same basis as did McCallum J (as her Honour then was) in Wong v Maroubra Automotive Refinishers Pty Ltd; Ayres v Maroubra Automotive Refinishers Pty Ltd (No 2) [2015] NSWSC 364, I will make an order that the defendants pay the plaintiff’s costs of the notice of motion in the same amount as those costs would have been assessed if the notice of motion had been heard by the Local Court of New South Wales.

18. The parties should turn their mind to the most cost effective way of the costs being quantified, if they cannot agree the amount of the costs. They may relist the matter before me if the issue needs to be determined by the Court.

19. The order of the Court is:

1. Order the defendants to pay the plaintiff’s costs of the defendants’ notice of motion filed on 8 November 2019 in the same amount as those costs would have been assessed if the notice of motion had been heard by the Local Court of New South Wales.

2. Grant liberty to apply by arrangement with the associate to Robb J if any issue arises as to the quantification of the costs payable under order 1.

20. Following the Court having prepared the above reasons in draft, and having decided to make the orders in par 19, the Court received an application from the plaintiff to make an order transferring the proceedings to the District Court of New South Wales pursuant to s 146(1)(a) of the Civil Procedure Act 2005 (NSW). The Court permitted the application to be made orally given the amount involved in the claim. Initially, the defendants objected to the order being made on the basis that the Court should transfer the proceedings to the Local Court of New South Wales, and not the District Court. Following the Court making an invitation to the defendants to suggest appropriate case management orders to enable the Court to resolve the dispute in a proper manner, the defendants changed their position and advised the Court that they neither consented to nor opposed the order sought by the plaintiff being made.

21. In those circumstances, as the proceedings clearly are not appropriate to be prosecuted in this Court, I will make the following additional order:

1. Order pursuant to s 146(1)(a) that these proceedings be transferred to the District Court of New South Wales.

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