Phantom Precision Engineering Pty Ltd v Luscombe (No 2)

Case [2021] SASC 103

SUPREME COURT OF SOUTH AUSTRALIA

(Magistrates Appeal: Civil)

PHANTOM PRECISION ENGINEERING PTY LTD v LUSCOMBE (No 2)

[2021] SASC 103

Judgment of the Honourable Justice Lovell 

24 August 2021

MAGISTRATES - APPEAL AND REVIEW - SOUTH AUSTRALIA - APPEAL TO SUPREME COURT - COSTS

APPEAL AND NEW TRIAL - PROCEDURE - SOUTH AUSTRALIA - POWERS OF COURT - COSTS

The appellant was successful in its appeal against a decision of a Magistrate for judgment in favour of the respondent in relation to a purported debt claim. The appellant seeks its costs of the appeal fit for two counsel or alternatively senior counsel, and its costs of the primary action including a portion on an indemnity basis. The respondent contends no costs order should be made, or alternatively any order should be limited to the primary action on a Magistrates Court scale.

Held, by Lovell J:

1. The appellant was successful on appeal and should receive its costs;

2. The appeal was not of sufficient complexity to warrant two counsel;

3. In all the circumstances, it was not unreasonable for the respondent to have refused the appellant's Calderbank offer of settlement;

4. The respondent is to pay the appellant’s costs of the appeal and the primary action to be agreed or taxed on a party party basis;

5. The costs of the appeal are to be fit for senior counsel.

Uniform Civil Rules 2020 (SA) r 194.5, referred to.

Aljade and MKIC v OCBC [2004] VSC 351; Australian Securities and Investments Commission v West & Anor (2008) 100 SASR 496; Beasley v Marshall (No 3) (1986) 41 SASR 321; Calderbank v Calderbank [1975] 3 All ER 333; Crump v Equine Nutrition Systems Pty Ltd Trading as Horsepower (No 2) [2007] NSWSC 25; Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373; Grynberg v Muller [2002] NSWSC 350; Jones v Bradley (No 2) [2003] NSWCA 258; Kroehn v Kroehn (1912) 15 CLR 137; Leighton Contractors Pty Ltd v Public Transport Authority of Western Australia (No 7) [2009] WASC 218; Oshlack v Richmond River Council (1998) 193 CLR 72; Pinehurst Nominees Pty Ltd v Coeur De Lion Investments Pty Ltd [2015] QSC 122; Players P/L (In Liq) (Recs Apptd) v Clone P/L (No 3) [2020] SASC 165; Resort Management Services Ltd v Noosa Shire Council (No 2) [1995] 1 Qd R 56; SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323; Stanley v Phillips (1966) 115 CLR 470; Stipanov v Mier (No 2) [2006] VSC 424; Tickell v Trifleska Pty Ltd (1990) 25 NSWLR 353, considered.

PHANTOM PRECISION ENGINEERING PTY LTD v LUSCOMBE (No 2)
[2021] SASC 103

Magistrates Appeal – Civil

  1. LOVELL J: On 28 May 2021, I allowed an appeal by Phantom Precision Engineering Pty Ltd (“the appellant”) against a decision of a Magistrate for judgment in favour of Mr Luscombe (“the respondent”).[1] I set aside the judgment of…

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AGLC
Phantom Precision Engineering Pty Ltd v Luscombe (No 2) [2021] SASC 103
Case
[2021] SASC 103
Decision Date

CaseChat Overview and Summary

In the case of Phantom Precision Engineering Pty Ltd v Luscombe (No 2), the appellant appealed the decision of a Magistrate who had found in favour of the respondent in a debt claim amounting to $61,434.17. The central dispute was whether the advance made by the respondent was a loan or an investment, and if the Deed of Settlement and Release released the appellant from liability. The appeal was heard by the Supreme Court of South Australia.

The primary legal issues before the court were the interpretation of the pleadings and the construction of the Deed of Settlement and Release. The appellant argued that the Magistrate erred in her interpretation of the pleadings and the construction of the Deed. The court found that the Magistrate had indeed erred in her interpretation of the pleadings, and that the evidence did not support the respondent's claim. The court dismissed the grounds relating to the construction of the Deed as they were rendered unnecessary by the findings on the pleadings.

The court awarded costs to the appellant for both the appeal and the primary action, finding that the appellant was successful on appeal. While the appeal involved multiple grounds, the court considered the matters as two main issues and found the appellant only partially successful. The court did not find the appellant's conduct in the litigation to be so egregious as to warrant a departure from the general rule that costs follow the event. The court held that the appeal was not of such complexity as to require two counsel, and that the respondent's refusal of the appellant's Calderbank offer was reasonable. Finally, the court ordered that the respondent pay the appellant’s costs of the appeal and primary action on a party-and-party basis, with the costs of the appeal being fit for senior counsel.

Orders

Orders of the court

Held, by Lovell J:

1. The appellant was successful on appeal and should receive its costs;

2. The appeal was not of sufficient complexity to warrant two counsel;

3. In all the circumstances, it was not unreasonable for the respondent to have refused the appellant's Calderbank offer of settlement;

4. The respondent is to pay the appellant’s costs of the appeal and the primary action to be agreed or taxed on a party party basis;

5. The costs of the appeal are to be fit for senior counsel.

Background

Background to the litigation

The parties subsequently filed written submissions on the question of costs. The appellant seeks its costs of the appeal certified fit for senior counsel, if not two counsel. The appellant further seeks its costs of the primary action, including a portion on an indemnity basis. The respondent submits no costs order should be made, or alternatively any order should be limited to the primary action on a Magistrates Court scale. Background The factual background is set out in my original judgment. In summary, the respondent made a claim in debt against the appellant for $61,434.17, said to be the outstanding amount of a $100,000.00 advance made to the appellant. An issue arose as to whether the advance was a loan or an investment. The appellant argued that it was an investment and the balance was therefore not repayable on demand. Further, the appellant argued that in any event it had been released from any liability by virtue of a Deed of Settlement and Release (“the Deed”). The Magistrate found in favour of the respondent, holding that the $100,000 advance was a loan and that the appellant had admitted on the pleadings both that it was a loan and that the sum outstanding was $61,434.17. Further, the Magistrate held that, in any event, the Deed did not operate to release the appellant from liability. The appeal concerned the Magistrate’s interpretation of the parties’ pleadings (Grounds 1 and 2) and the proper construction of the Deed (Grounds 3 and 4). The appellant was successful as I found the Magistrate erred in her interpretation of the pleadings. On review of the evidence, I further found the evidence did not establish the purported loan agreement or the quantum of the respondent’s claim. I also refused the respondent’s application to adduce further evidence related to these issues. The appeal grounds relating to the construction of the Deed were raised in the alternative and, whilst strictly unnecessary to have been decided, I dismissed them. That is, the appellant was successful on the pleadings point, and unsuccessful (again) on its argument about the construction of the Deed. Parties’ submissions as to costs The appellant seeks its costs of the appeal and the primary action, relying upon the general rule that a successful party in litigation is entitled to an award of costs in its favour. The appellant also seeks an order that costs of the appeal be certified fit for both senior counsel and junior counsel, or alternatively senior counsel. The appellant submits the appeal raised issues of sufficient complexity that justified the retainment of both counsel and that there was efficiency in having trial counsel briefed in respect of the appeal as junior counsel. Alternatively, the appellant submits costs should be certified fit for at least senior counsel, as such an order is ordinarily made in appellate matters. The respondent submits the appellant’s conduct in the litigation was profligate warranting a departure from the general rule and disentitling, or at least limiting, the appellant from receiving a favourable costs order. Further, the respondent submits that the appellant was only partially successful on appeal, upon grounds which arose as a direct result of its own deficient pleadings. The respondent opposes any order for costs being certified fit for two counsel or fit for senior counsel on the basis that such an order would offend the principles of proportionality. Rather, the respondent submits any appeal costs should be fit only for one junior counsel.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

In relation to the primary action, the appellant seeks costs on an indemnity basis, or alternatively a solicitor client basis, from 7 May 2019.[3] The appellant relies upon correspondence exhibited to an affidavit of its solicitor, Mr Michael Fabbro, including a Calderbank offer[4] in the amount of $100.00. The appellant submits that in light of the Court’s findings dismissing the respondent’s claim, it was unreasonable for the respondent to have not accepted the offer. The respondent contends that the Calderbank offer was deficient as it was not a genuine offer to compromise; rather, it was a mere offer to surrender.[3] I note the appellant’s submissions refer to both 17 May 2019 and 7 May 2019; the letter annexed to Mr Fabbro’s affidavit is dated 7 May 2019. [4] Calderbank v Calderbank [1975] 3 All ER 333.Consideration The Court’s power to award costs is discretionary and the Court is not restricted in the factors it may have regard to when considering an application for costs.[5] I have taken into account the parties’ written submissions, and the affidavits of Mr Michael Fabbro sworn 11 June 2021 (solicitor for the appellant) and Mr Paul David Bear affirmed 18 June 2021 (solicitor for the respondent). [5] See Uniform Civil Rules 2020 (SA) r 194.5(1). Costs to a successful party The general rule is that costs follow the event.[6] It is well established that the purpose of an order for costs is to provide compensation to a successful party, rather than serve as a punishment to an unsuccessful party.[7] Where there are multiple grounds of appeal, it will ordinarily be appropriate for the court to award costs to the successful party without attempting to differentiate between the issues which were successful or unsuccessful, unless a particular issue or group of issues is clearly dominant or separable.[8][6] Uniform Civil Rules 2020 (SA) r 194.5(2). [7] Oshlack v Richmond River Council (1998) 193 CLR 72 at [67]. [8] Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 at [6]. The appellant in this case was successful on appeal. While there were four grounds of appeal there were only two issues: the pleadings point and the Deed construction point. The appellant was only successful on the pleadings point. Whilst it is true that the conduct of a successful party may disentitle it to a favourable costs order,[9] as explained in the primary judgment, I do not accept that the respondent did not have proper notice of the appellant’s Defence. Whilst the appellant’s Defence was unclear, it was sufficient to have put the respondent on notice of its case, namely that it disputed the existence of the loan agreement, its terms and the quantum of the claim. I do not consider the appellant’s conduct in this matter warrants a departure from the general rule. [9] Oshlack v Richmond River Council (1998) 193 CLR 72 at [69] citing examples of misconduct in litigation which may justify a proper departure from the usual order as to costs.