Marks and Co Pty Ltd v Hart, Karen Danielle

[1998] FCA 1000

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SG 7232 of 1997

BETWEEN:	MARKS & CO PTY LTD APPLICANT
AND:	KAREN DANIELLE HART and CHRISTOPHER ZANE HART both trading as FINESSE FRAMING RESPONDENT
JUDGE:	MANSFIELD J
DATE:	29 JULY 1998
PLACE:	ADELAIDE

REASONS FOR DECISION

I have before me a motion of Karen Danielle Hart and Christopher Zane Hart (“the Harts”) dated 7 July 1998 for orders, supplementary to an order for taxation against them made on 3 April 1998, to permanently stay the taxation of costs or to permanently stay the enforcement of the costs order or for other orders.

The background to the motion is as follows:  on 20 August 1997, Marks and Co Pty Ltd (“Marks”) obtained judgment against the Harts trading as Finesse Framing in the Adelaide Registry of the Magistrates Court of South Australia for $5,930 plus costs of $378, a total of $6,308.  A bankruptcy notice in respect of that indebtedness was duly served on the Harts but they did not comply with it.  On 31 October 1997, Marks applied for a sequestration order against the estates of the Harts based upon their failure to comply with that bankruptcy notice.  That application was opposed.

It was first listed for hearing on 8 December 1997 and was adjourned from time to time until finally dealt with on 3 April 1998.  Shortly before that date the Harts had tendered to Marks the full amount of the outstanding judgment sum and interest.  They had also shortly before that date written to solicitors for the Marks in terms to which I shall refer.  There had also been an order in the Magistrates Court on 2 December 1997, staying the execution of the judgment whilst the Harts paid $100 per week, commencing from 28 November 1997, and it appears that up to the time of the payment of the balance of the judgment sum, they had complied with that order.

When the matter came on before the Court on 3 April 1998, the Court ordered that:

(1)     The Petition be dismissed.

(2)The Petitioning Creditors’ costs, including reserved costs, be agreed or taxed and paid in accordance with the Bankruptcy Act 1966.

By that time the amount of the debt outstanding had been paid.  On 26 March 1998 the Harts had written to solicitors for Marks, enclosing two cheques for the judgment debt and interest and “$1200 costs (part only)” and added:

“As the costs have not as yet been awarded by the court we wish to offer an amount of $2000 for costs with the balance paid over the next 60 days.  If accepted this would be in full satisfaction of all claims.”

They indicated that if the costs were not agreed they would be disputing the costs of the petition.

It is common ground that shortly before the order made by the Court there was a discussion between Ms Hart and solicitors for Marks, in which they arrived at an agreement for costs, although it is not agreed as to what that agreement was.  It was following that agreement that the Court made the order to which I have referred.

So far as the discussion as to costs was concerned, it is also common ground that, notwithstanding the content of the letter of 26 March 1998, it was proposed and agreed that the balance of the costs - whatever that balance should be - would be paid within thirty days and not sixty days.  The dispute is whether the agreement was that a further sum of $800, to make a total of $2,000, was payable, or whether a further sum of $2,000, to make a total sum of $3,200, was payable.  It is that issue which, in effect, I am asked to resolve.

Whatever the situation, the further sum was not paid within time; that is, within the thirty days.  That matter was drawn to the attention of the Harts by solicitors for Marks by fax on 19 May 1998.  It was in its terms unclear as to whether they then expected a further payment of $800 or of $2,000.  Subsequently the Harts tendered a further cheque in the sum of $800 as “full and final payment” of the costs.  That cheque was not accepted.  Marks has proceeded to tax its costs.  A bill of costs in short form was lodged.  Notice objecting to certain matters was given pursuant to O 77 r 68(4), Federal Court Rules.  An estimate of the costs was then provided by the taxing officer in the sum of $3,388, which would include the $1,200 already paid.  No account was apparently paid to the two matters raised in that notice, which are also raised in the correspondence and the affidavit evidence before me.

Those two matters are:

1. whether there was an agreement by Marks to accept $2,000 all inclusive for costs, of which $1,200 was paid prior to 3 April 1998 and $800, the balance, tendered belatedly, on 25 May 1998, but still in performance of that agreement.  I should add to that, it is also said in submissions that acceptance of the cheques enclosed with the letter of 26 March 1998 itself constituted acceptance of the agreement therein contained, even prior to any discussion as to costs on 3 April 1998 and therefore that letter and the acceptance of those cheques constitutes the agreement between the parties.  There is no dispute that those cheques were presented upon them having been enclosed with that letter;

1. the original claim upon which the judgment was entered was for $5,930, which included a sum of $845 for “costs” as part of the amount of the indebtedness.  That amount appears on a statement of account as a journal entry made on 8 May 1997 as the last entry on the account.  It is not otherwise explained.  It now appears from the material before me that it was added by Marks, purportedly in accordance with the terms of trading agreement between Marks and the Harts executed by Ms Hart on behalf of the Harts’ business on 11 June 1996.

That document is entitled ‘Credit Application:  Terms Of Trading’.  The original was sent to the Harts for execution and only the front page of the document was sent back, duly executed.  The original contained a credit application and terms of trading agreement on the front page, which is the page completed by Ms Hart; immediately above her signature, in the pro forma document, is an acknowledgment of receipt of the agreement which acknowledges that she had read the terms of the agreement overleaf and agreed to be bound by them.  I am satisfied that the terms of the agreement overleaf are the ‘terms of trading’ on the back of that document which included as clause 3 under the heading Payment of Accounts the following:

“Any expenses, costs or disbursements incurred by the supplier in recovering any outstanding moneys, including debt collection agency fees and solicitor's costs shall be paid by the customer providing that those fees do not exceed the scale charges as charged by that debt collection agency/solicitor.

I shall deal with each of those two matters in turn.

So far as the agreement is concerned, both parties are of the view that there was an agreement reached on 3 April 1998.  It is for the Court to determine what that agreement was in the light of the evidence before it.  I have reached the conclusion that the agreement was that the Harts would pay to Marks the further sum of $2,000 in addition to the $1,200 already paid by them shortly before that date in payment of the costs.

I accept that may not have been the intention of Ms Hart when she had her discussion with the solicitor for Marks on 3 April 1998 but that is not the relevant test.  The existence of an agreement and its terms is a matter to be determined objectively by the Court in the light of the communications between the parties.  In my view, the letter of 26 March 1996 is ambiguous to the extent that, of itself, it is capable of accommodating either an allegation of a proposed agreement for costs proposed at $2,000 all inclusive, or an agreement for costs proposed of $2,000 in addition to the $1,200 already paid.  What is significant, in my view, is that the amount of the disbursements incurred by Marks up to 3 April 1998 were themselves in the order of something like $1,800.  It is in my view inherently improbable that the solicitors for Marks would have agreed a figure for costs which effectively allowed no profit or solicitor’s costs at all.  The letter of 26 March 1998, as I have said, is itself ambiguous.  It offers an amount of $2,000 for costs with the balance to be paid over the next sixty days.  It is capable of supporting an interpretation that that offer was in addition to the costs already tendered of $1,200.  Without going through all of the further communications which are in evidence before me, and without ruling specifically on whether certain of those communications are or are not capable of being admitted for the purposes of determining objectively the intention of the parties at the time of the transaction, it seems to me that on balance the agreement for costs was a further sum of $2,000 to be paid within thrity days.

It also follows from the above that I do not construe the letter of 26 March 1998 as a letter, the acceptance of which committed Marks to accepting any amount for costs or to accepting that it was no longer entitled to tax costs.  The terms of that letter are not expressed in a way which put solicitors for Marks on notice that the presentation of the cheques then enclosed would constitute an acceptance of any offer contained in that letter, so that upon their presentation there was a binding agreement between the parties.  The conduct of the parties on 3 April 1998 is consistent with that construction because they were prepared to negotiate further on the question of costs, at least in respect of the time for payment.

On the other hand I reject the contention of solicitors for Marks that the agreement entered on 3 April 1998 between them was one which had a default clause that if the money agreed to be paid was not paid within thrity days, then solicitors for Marks would be entitled to proceed to tax costs as if there were no such agreement.  There is nothing to indicate that term was expressly agreed on the day in question, although it may have been in the mind of the solicitors for Marks, and it is not a term which it is necessary to infer to give the agreement commercial efficacy.  The fact that the payment was not made within the period agreed upon constituted a breach of the agreement, but I do not see the agreement as expressing a default provision of the nature contended for, nor was it such an agreement as to make time of the essence in such a way that some default provision must necessarily have been provided for.  The consequence is, in my view, that Marks is entitled to recover no more than an additional amount of $2,000 for costs in addition to the $1,200 already paid.

I turn to the second of the two issues which are raised.  I have referred to the terms of the trading agreement and to the invoice.  The material before me does not indicate that expenses, costs or disbursements were incurred by Marks in recovering the then outstanding moneys by way of debt collection agency fees or solicitor’s costs or that such fees, totalling $845, did not exceed scale charges as charged by a debt collection agency or solicitor.  No invoices have been produced to support the journal entry in the statement to which I have referred.

I do not infer as a matter of probability that there were such invoices or expenses incurred which meet the qualification and the provision contained within clause 3 of the terms of the trading agreement.  I note that the costs on the summons, which would include the solicitor’s costs, were $378 for recovery of the amount in question.  I do not suggest that amount was necessarily added capriciously by Marks but simply conclude that I am not satisfied that it was added correctly in terms of clause 3 of the trading agreement terms for the reasons I have given.  It seems to me that the consequence of that finding is that it is available to me on this application to accept the submissions made on behalf of the Harts that credit should be given for that amount in some way in relation to recovery of the costs to which otherwise I have found Marks to be entitled.  In my discretion, I do so.  It would be undesirable given the amounts involved, and given that the parties have addressed the issue, and given the time that has passed, to leave the parties to relitigate the question elsewhere perhaps by applying to set aside part of the initial judgment in the Adelaide Magistrates Court.  I conclude that I should allow the Harts credit on costs for that $845.

Accordingly, subject to being satisfied that it is appropriate to make any orders on this motion, in my judgment the appropriate consequence of my findings is that Marks is entitled to recover no more than a further $2,000 for costs in addition to the $1,200 already paid with the letter of 26 March 1998, but that it should give credit for the $845 to which I have referred, and therefore that it should recover the sum no more than the sum of $1,155 by way of further costs at this point in time.

I have considered whether I should in fact make any order on the motion.  The taxation of costs has not been formally completed.  Upon reflection, I have however reached the view that it is not inappropriate for the Court to entertain the motion at this stage.  That is because the two issues to which I have referred - the question of agreement and the question of payment of the $845 by it having been credited to the statement upon which the initial judgment was entered - are not matters which a taxing officer would properly take into account in determining taxable costs in accordance with the Rules.  The task of the taxing officer is to identify whether work of a certain nature has properly been carried out and to determine what is an appropriate fee for that work, having regard to the Rules and the Schedules to the Rules.  I do not think a taxing officer could or should, in such circumstances, determine matters relating to whether the original trading statement upon which the judgment was based included an amount towards those costs, or an amount for costs, or could or should determine extraneous to the taxation process whether the parties had reached some agreement between them.  Accordingly, I do not think it is inappropriate for the Court to address those two issues at this point in time.

There remains to address the question of what order the Court should make.  As I have said, the taxing process is not complete but it appears from the material before me that the taxing officer has taken the view that the appropriate costs will be in the sum of $3,388, including the $1,200 already paid, and the notice of objection has already been before that taxing officer.  There is no reason to think that, absent any order from the Court, the taxing officer will not therefore proceed to issue the certificate of taxation in the sum of $3,388 in the near future.

I do not think there is any error on the part of the taxing officer in having proceeded as he has done thus far in the light of the order of the Court of 3 April 1998, nor do I think there is any error or oversight in the order made on 3 April 1998.  It was made by consent of the parties but in the light of what was a private agreement between the parties, albeit apparently discussed in the presence of the Registrar then hearing the petition.  In those circumstances I do not think it appropriate to vary the order made on 3 April 1998 or to make any order directed to the taxing officer, even if I had power to do so.  I am not to be taken as suggesting that at this point, and in the absence of any review of the taxing officer’s taxation, I do have such power.

In my view the appropriate order is to make a determination on this motion that Marks is entitled to recover from the Harts by way of costs, in relation to the certificate of costs to be issued by the taxing officer, a further sum not exceeding the amount of such certificate and in any event not exceeding $1,155.  I make it clear that sum includes the amount of $800, which the Harts have previously tendered but which has not been accepted by Marks.

In my view, given the nature of the dispute, it is appropriate therefore to make an order on this motion that Marks be restrained from recovering by way of costs from the Harts in this proceeding in respect of the taxed costs any further amount beyond the sum of $1,155.  I so order.

I have considered the question of costs.  I will hear the parties if they wish to make any submissions about costs but it seems to me, subject to those submissions, that it is appropriate that there should be no order for costs on this motion.  [After further submissions on costs] I make no order as to costs.

I certify that this and the preceding seven (7) pages are a true copy of the Reasons for Decision herein of the Honourable Justice Mansfield.

Associate:

Dated:             

Counsel for the Applicant:	Mr A Marshall
Solicitors for the Applicant:	Marshalls
Counsel for the Respondent:	Mr V Bennetts
Date of Hearing:	29 July 1998
Date of Decision:	29 July 1998