Raad v Toplot/Toplot v Raad

[1999] NSWSC 1035

CITATION:	Raad v Toplot/Toplot v Raad [1999] NSWSC 1035
CURRENT JURISDICTION:	Common Law
FILE NUMBER(S):	11709/98; 11735/98
HEARING DATE(S):	03/02/99
JUDGMENT DATE:	15 October 1999
PARTIES :	Milad Sarkis Raad Toplot Pty Limited
JUDGMENT OF:	Dowd J

LOWER COURT JURISDICTION:	Local Court
LOWER COURT FILE NUMBER(S) :	1676/94
LOWER COURT JUDICIAL OFFICER:	Magistrate M Stoddart

COUNSEL :	Mr J Patel Mr C Stomo
SOLICITORS:	Milad S Raad & Associates Wight & Strickland
CATCHWORDS:	Stated case - no error on verdict; Stated case concerning costs; No error on indemnity costs - wrong application of scale
ACTS CITED:	Local Courts (Civil Claims) Act 1970
CASES CITED:	Hurstville Municipal Council v Connor &Anor (1991) 24NSWLR 724 Dennis v Watt (1942) 43SR 32 Mitchell v Nestle Australia Ltd (1988) 36ACR 119 Wentworth v Rogers (1986) 6NSWLR 534 Fountain Select Meats v International Product Merchants (1998) 81ALR 39 Degman Pty Ltd v Wright (No.2) (1993) 2NSWLR 534
DECISION:	Stated case on verdict dismissed; Stated case on costs upheld in part; Costs order substituted

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1    By Summons, each of the plaintiffs have commenced proceedings as an appeal by way of stated case from decisions of Stoddart M, at the Burwood Local Court in respect of proceedings brought by Toplot Pty Limited (‘Toplot’) against Milad Sarkis Raad (‘Raad’) in the Civil Claims Jurisdiction, for monies owed under a contract for sale of a real estate business.

2    The background facts are that in early 1991, Toplot agreed to buy a Real Estate agency and three rent rolls from P & M Jones Real Estate Pty Limited (‘Jones’). Four separate agreements were entered into. All the sales were concluded on 16 April 1991. Three of the agreements dated 22 March 1991 were drawn by Raad, who was the solicitor for Jones.

3    Clause 3 of the Rent Roll Agreements provided for a retention fund to be invested by Raad. The funds were to be released in circumstances set out in Clause 3(b) of each Agreement.

4    Raad paid approximately half of the retention funds of the sum of $15,000, but disputed Toplot's claim for the remainder. Raad released the balance of the retention funds, some of which were paid to himself, and paid other debts of Jones.

5    In the proceedings, Toplot claimed that Raad breached Clause 3 of the Rent Roll Agreements and that Raad owed a duty of care to Toplot to exercise reasonable skill, care and diligence, and competence as a solicitor, to invest the retention funds and to release the funds only in accordance with the agreements, and that Raad held the retention funds on trust and had a fiduciary relationship duty to Toplot, and that he had a duty not to abuse his position and to use due skill and care in the conduct of his affairs. The amount claimed was $15,782.14 as liquidated damages.

6    The court hearing, which was lengthy and involved protracted cross-examination, had been preceded by a considerable number of procedural motions and preliminary hearings, with protracted hearings in relation to pleadings and the issues in the proceedings. The hearing was followed by extensive written submissions before determination by his Worship, who found that the principal issue for determination by the court was the interpretation of the three rent roll Agreements, and in particular cl 3. There was no issue that Raad was acting for Jones in relation to the agreement.

7    The Learned Magistrate found, on a preliminary issue relating to Toplot filing a Notice of Discontinuance, that Toplot had an entitlement to recommence the proceedings. Raad's contention was that Toplot's witness, Mr Kenneth Wolf, failed to substantiate his legal entitlement in respect of three subject properties, giving rise to the entitlement of a refund.

8    His Worship found that Mr Wolf, Toplot's witness, was unable to give evidence to substantiate Toplot's claim, and His Worship found that Raad was entitled to disburse the retention funds in the way that he did.

9    The Learned Magistrate found for Raad, and made an order for costs against Toplot, but declined to make that order for costs on an indemnity basis.

10    The Summons filed by Raad attaching a Stated Case on the order for costs, sought a declaration that the determination of the Learned Magistrate was erroneous in point of law, and sought an order reversing, affirming or amending the determination, and that the stated case which was attached to the summons be remitted to the Magistrate. Costs were also sought.

11    The costs judgment was made on 4 May 1998, and awarded defendant's costs assessed at $8,300.00.

Toplot's Contentions

12    The grounds contended by Toplot in its Stated Case were that His Worship erred in finding that the word "may" in cl 3 of the Rent Roll Agreements would reinforce the overriding inference that only genuine claims were to be subject to a refund, and that His Worship erred in finding that the proper interpretation of cl 3 was that claims made by Toplot were required to be substantiated in a manner required by Raad, or at all.

13    It was further contended that His Worship erred in finding that Toplot was required to substantiate his claim for the retention money, and that His Worship erred in failing to find in favour of Toplot, that the stake held by Raad was not held as a pre-estimate of damage, but as an earnest of performance.

14    It was further contended by Toplot that his Worship erred in finding that Raad breached his fiduciary duty in making the payments that he did, and it was further contended that His Worship failed to give proper consideration to the allegations of negligence when he made a decision in relation to Toplot's complaint against Raad.

15    It was also contended that the Magistrate erred in his assessment of costs in favour of Raad.

Raad's Stated Case on Costs

16    The grounds of determination as set out in the Raad Stated Case were that the Learned Magistrate did not accept the submission that although the case was lengthy, there was nothing adduced in the evidence sufficient to give rise to the court finding that exceptional circumstances existed.

17    Further, it was contended that the Learned Magistrate also rejected the claim for witness expenses in respect of the plaintiff himself, and that the Learned Magistrate did not consider it necessary to state and specify reasons for that rejection.

18    Raad further asserted that the claim for fees paid to counsel was rejected pursuant to Pt 31 rules 3 and 7 of the Local Courts (Civil Claims) Rules, and costs were assessed on the recommended scale for the purposes of Pt 31 of the Local Courts (Civil Claims) Act 1970.

19    Raad further asserted that the Learned Magistrate did not make an express finding in relation to the defendant's submission that it did not award costs on an indemnity basis, and thus any award of costs leaving the defendants substantially out of pocket would result in grave injustice, and that the Learned Magistrate should have exercised his discretion to alleviate that injustice, and to make an award in the lump sum that was not less than two-thirds of the total expenses incurred.

20    The Learned Magistrate stated that it was implicit in his judgment that he did not consider that he was at liberty to make an award or grant any costs other than permitted by Pt 31 of the Local Courts (Civil Claims) Rules, if a case for indemnity costs was not made out.

21    His Worship in his judgment on costs applied principles set out in Hurstville Municipal Council v Barry Connor & Anor (1991) 24 NSWLR 724, and that there must be some form of reprehensible or inappropriate conduct, or some other exceptional circumstance, such as whether proceedings are in the nature of a test case or involve the public interest. His Worship found there was no such conduct, and the fact that costs would not fully compensate the successful party, or the unsuccessful party's cases without merit, did not constitute sufficient grounds for certifying special circumstances.

Raad's Contentions

22    Raad contended that in relation to the costs order, the Learned Magistrate had failed to exercise his discretion in accordance with true principles of law, and had failed to properly take into account the facts in evidence relevant to the exercise of that discretion.

23 It was further contended that the interpretation adopted by the Learned Magistrate to use Pt 31 of the Local Courts (Civil Claims) Rules 1988 in his costs order was wrong and erroneous in law, and that he should have taken into account Part 31A of the Local Courts (Civil Claims) Rules.

24    Raad further contended that the claim for witness' expenses was rejected without valid reason, and further that His Worship had erred in holding that there was nothing in the evidence sufficient to give rise to a finding that special circumstances existed, and that his discretion had miscarried in finding that there needed to be blameworthy conduct before an indemnity order could be made.

25    Raad contended that the basis of the Toplot cause of action was false and deliberately concocted, and that the witness had conducted himself by multiplying allegations upon allegations to prolong the litigation, and thus caused Raad to incur liability for costs far beyond what he could have reasonably expected to incur in litigation of genuine issues, and that Toplot had initiated and maintained the proceedings as an abuse of process, and that Toplot should have known that it had no chance of success.

26    The Raad Stated Case contended that the Learned Magistrate failed to apply the true test for an order for indemnity costs.

27 The Raad Stated Case proposed for determination the issue of whether the determination on costs was erroneous in point of law, and therefore Raad was entitled to indemnity costs, or if not, that Raad was entitled to an order for costs that would not leave him out of pocket by more than one-third of the total reasonable costs and expenses to be incurred by him, and whether there was an error of law in rejecting witness' expenses for Mr Raad, and as to whether his Worship was not at liberty to take an award of costs other than pursuant to the provisions of Pt 31A of the Local Courts (Civil Claims) Rules 1988.

Appeal by Way of Stated Case

28    The Local Courts (Civil Claims) Act 1970 provides that where a party is dissatisfied with a judgment or order of the court as being erroneous in point of law, that party may appeal by way of Stated Case under s101 of the Justices Act 1902. Where a Magistrate is entitled to decide a matter of facts, a Magistrate is entitled to so decide it unless the Magistrate has wrongly applied some legal principle in reaching that decision: Dennis v Watt (1942) 43 SR 32.

29    This court is obliged to determine the question of law arising, and shall reverse, affirm or amend the determination or remit the matter to the Justice with the opinion of the court, or make such other order as seems fit, and the court may make such order as to costs as it seems fit. This discretion granted to the court in the use of the words "make such other order in relation to the matter as seems fit", confers a wide discretion: Mitchell v Nestle Australia Ltd (1988) 36 ACR 119.

The Parties' Submissions

Toplot's Stated Case

30    The court was provided with extensive submissions in addition to oral submissions in the proceedings.

31    The submissions of Toplot on the issue of liability relate to what was essentially a finding of fact by His Worship, and do not in any way reveal any error of application of law on the part of His Worship. His Worship found a contractual relationship between Jones and Toplot. There is evidence capable of supporting His Worship's inference of fact, and there is nothing to show that His Worship misdirected himself as to law.

32    The Learned Magistrate found that the plaintiff's evidence consisted of tendering an affidavit and a large number of documents, but on many occasions the plaintiff asserted that there was correspondence in existence, but was unable to support his oral evidence by specific documents. His Worship found Mr Wolf's evidence, upon which Toplot relied, less than convincing.

33    There is no evidence that supports Toplot's contentions that Raad was negligent or that any fiduciary duty existed, or that there was any breach.

34    I do not therefore find that His Worship erred in relation to the contentions set out in the stated case.

35    In the light of costs in the sum of $8,300, the amount is not, in the circumstances of the case and the length of time that it took, in any way excessive, and thus in that respect was not in error.

36    The question of interlocutory orders, and whether they are taken into account, is a matter clearly within the discretion of the Learned Magistrate.

37    I therefore find no error in Toplot's contentions set out in 4.1 to 4.12 of the Stated Case, and determine that the Learned Magistrate's determination was not erroneous in point of law.

38    I affirm the determination in respect of which the case was stated.

Stated Case of Raad as to Costs

39    Counsel has made extensive submissions in relation to costs.

40    As to the contention that the defendant is entitled to an award of costs on an indemnity basis, there have been a number of determinations to which I have been referred. It is useful to refer to Wentworth v Rogers (1986) 6 NSWLR 534. That was a case where a trial was extensively prolonged by extensive allegations of facts, and although the case was without merit, the court there held that it had not been commenced to prolong litigation, and although the allegations made were in many matters scandalous, they were not made with deliberate falsehood.

41    I was also referred to Fountain Select Meats v International Product Merchants (1998) 81 ALR 39, which held that where an applicant was properly advised and should have known that he had no chance of success, in such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard.

42    An examination of the evidence in this matter, and of the extensive cross-examination, shows that although the evidence of the witness for Toplot was not accepted, there was clearly no restraint on either party in terms of continuing the proceedings and the making of allegations. The fact that Mr Wolf was an unimpressive witness does not thereby entitle Raad to a finding that the matters were such as to come within the cases that I have cited, or Degman Pty Limited v Wright (No. 2) (1993) 2 NSWLR 534. No basis has been shown for the making of an order for indemnity costs in applying the above authorities.

43    The exercise of the discretion by His Worship in relation to the claim for indemnity costs shows that he examined the extensive submissions put before him. His Worship referred to the principles in Hurstville Municipal Council v Connor & Anor (1991) 24 NSWLR 724, and applied the principle that to award costs on an indemnity basis, there must be some form of reprehensible or inappropriate conduct, or some other exceptional circumstances, as in proceedings which are in the nature of a test case or involve the public interest. Clearly, on the examination of the evidence here, there was no blameworthy conduct, or anything bringing it within the principles applied by His Worship.

44    His Worship found that there was nothing adduced in the evidence sufficient to give rise to the court certifying that special circumstances existed. It appears to the court that His Worship applied the correct principle, and that no case was made out justifying an order for indemnity costs.

45    The order that was made as to costs therefore did not constitute an error of law in terms of the question of indemnity costs.

46    His Worship, in determining costs, is vested with a wide jurisdiction. His Worship did not, in expressing his reasons, say that he was bound to apply the provisions of Pt 31 r 3. He told the court that he had regard to the provisions of Pt 31 r 3, and referred to Pt 31 r 7, but did not express himself to necessarily be applying to them. It was open to His Worship to apply the scale, whether it formally applied or not.

47 His Worship however did, in the Stated Case, say that he had felt constrained by Pt 31 of the Local Court Rules. His Worship was no longer constrained by Pt 31, but Pt 31A applied, and therefore the scales, although open to His Worship to adopt, did not in fact bind him. I consider that His Worship did not intend, by the tenor of his judgment, to fully reimburse Raad for what was a very substantial costs assessment, in the light of the jurisdiction and in the light of the amount claimed.

48    The obligation of Raad is to show error on the part of His Worship. The fact that a very considerable sum was charged for costs, and that sum exceeded by some fifty percent the amount of the actual claim, does not show that the amount claimed was a proper sum. It seems to the court that the amount of costs ordered, in the light of the discretion available to His Worship, was within a proper exercise of discretion.

49    Although the amount of costs did not of itself constitute an error, the application of Pt 31 of the Rules constituted an error. It is therefore appropriate for this court to re-examine the costs ordered, and the court may refer the matter back to His Worship for determination of that sum.

50    I am concerned however that the costs of this matter going back before the Learned Magistrate, and the incurring of further costs in relation to a costs order, would make an order referring it back to His Worship a very expensive exercise. I consider in the circumstances that, in using this court's power to make such order as is appropriate on the Stated Case, that this court should substitute an order as to costs in the sum which would have been proper in the circumstances, taking into account the extensive interlocutory proceedings and the complex nature of the preparation for the hearing.

51    I consider that a proper sum in the circumstances would be the sum of $12,000 for costs, which is substituted for His Worship's order.

52    In the event, Toplot has failed in its Summons, and Raad has succeeded in part in respect of his Summons. It seems to me therefore that Raad should have an order for costs against Toplot in respect of the hearing.

53    The orders that I make therefore are:

1. That the Summons of Toplot be dismissed and the decision of His Worship as to the verdict is affirmed.

2. On the summons for a stated case by Raad, that the decision of His Worship is affirmed except in the amount of costs.

3. The court substitutes for the sum of $8,300 the sum of $12,000.

4. Toplot is to pay Raad's costs of these proceedings.

oOo

Last Modified: 05/30/2001