Rayner v Pethick

Case [2006] SASC 70

SUPREME COURT OF SOUTH AUSTRALIA

(Magistrates Appeals: Civil)

RAYNER & ANOR v PETHICK & ANOR

Judgment of The Honourable Justice Bleby

10 March 2006

PROCEDURE - COSTS - APPEALS AS TO COSTS - WRONG EXERCISE OF DISCRETION

PROCEDURE - COSTS - DEPARTING FROM THE GENERAL RULE - CONDUCT OF PARTIES - DEMAND, OFFER AND CONSENT

Appeal by plaintiffs against Magistrate's refusal to award plaintiffs costs of whole action following judgment in favour of plaintiffs - Cross-appeal by defendants against failure of Magistrate to award defendants costs on an indemnity basis - Argument on costs by way of written submissions only - Solicitor correspondence included in defendants' written submissions - Costs awarded to plaintiffs to a date well before trial and defendants awarded costs from thereafter - Whether correspondence constituted an agreement for settlement of action - Whether costs should follow the event - Consideration of consequences of "without prejudice" settlement offer on costs - Whether Magistrate entitled to rely on "without prejudice" correspondence on question of costs - Whether correspondence admissible under s 67C(2) Evidence Act 1929 (SA) - Appeal allowed - Cross-appeal dismissed - Defendants to pay plaintiffs' costs of whole action.

Magistrates Court Act 1991 (SA) s 37(1); Magistrates Court (Civil) Rules 1992 (SA) r 106; Supreme Court Act 1935 (SA) s 40(1); Supreme Court Rules 1987 r 55, r 56, r 59, r 101.02; Evidence Act 1929 (SA) s 67C, referred to.
Copping & Ors v ANZ McCaughan Ltd (No 1) (1995) 63 SASR 523, applied.
Battye & Battye v Shammall (No 2) (2003) 86 SASR 254; Bates v Nelson (1973) 6 SASR 149; Formosa v Eminent Forms Pty Ltd (2005) 91 SASR 6; Cutts v Head [1984] Ch.29, distinguished.
Chapman v Allan & Draper (1999) 74 SASR 274, discussed.
Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; Duke Group Ltd (In Liq) v Pilmer & Ors (Unreported, Mullighan J, 1 June 1998); Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1998) 81 ALR 397; Groom v Earthmoving Contractors Association of SA Inc (No 2) [2001] SASC 241, considered.

RAYNER & ANOR v PETHICK & ANOR
[2006] SASC 70

Magistrates Appeal: Civil

BLEBY J:

Introduction

  1. This is an appeal by the plaintiffs in an action in the Magistrates Court and a cross‑appeal by the defendants in respect of the Magistrate’s order for costs following the entry of judgment in favour of the plaintiffs in the sum of $14,005.19, after the hearing of the disputed claim.  The plaintiffs’ claim was for monies unpaid by the defendants to the plaintiffs for the plaintiffs’ crop of pears in the years 2000 and 2001 which had been processed and marketed by the defendants.  What began as a harmonious relationship between neighbours became a bitter feud between the parties.

  2. On 20 October 2005 the Magistrate gave judgment for the plaintiffs in the sum of $14,005.19.  There was no counterclaim by the defendants.  The Magistrate reserved the questions of…

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Rayner v Pethick [2006] SASC 70
Case
[2006] SASC 70
Decision Date

CaseChat Overview and Summary

The appeal in Rayner v Pethick involved the plaintiffs, who had obtained a judgment in their favour, seeking an order for the defendants to pay their costs for the entire action. The defendants cross-appealed against the refusal of the Magistrate to award them costs on an indemnity basis. The crux of the appeal centred around the interpretation and application of the Evidence Act 1929 (SA) concerning "without prejudice" communications made during settlement negotiations. The primary legal issue was whether the Magistrate was entitled to rely on such communications when determining the costs order, and if the "without prejudice" correspondence could be admitted as evidence under Section 67C(2) of the Evidence Act.

The Court examined whether the "without prejudice" correspondence constituted an agreement for the settlement of the action. It was noted that neither party had acted on any such agreement during the trial, nor had they attempted to enforce it. The defendants argued that the correspondence showed the parties were ad idem, but this argument was rejected as there was no evidence of a mutual consent to the terms of the agreement. The Court held that without such consent, the correspondence could not be used to demonstrate the terms of any settlement, nor was it admissible under Section 67C(2)(a) of the Evidence Act. The Court distinguished this case from Chapman v Allan & Draper, where it was held that there must be mutual consent at the time of tender for a document caught by Section 67C to be admissible. In the present case, there was no suggestion that such consent had been given or withdrawn.

The Court concluded that the Magistrate was not entitled to rely on the "without prejudice" correspondence in making the costs order. The appeal was allowed, and the cross-appeal was dismissed. Consequently, the defendants were ordered to pay the plaintiffs' costs of the whole action. The Court emphasised the importance of mutual consent in determining the admissibility of "without prejudice" communications in the context of costs orders.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

The question is whether the Magistrate was entitled to rely on that correspondence in making the order for costs that he did.Section 67C, Evidence Act1929 Section 67C of the Evidence Act 1929 relevantly provides:(1) Subject to this section, evidence of a communication made in connection with an attempt to negotiate the settlement of a civil dispute, or of a document prepared in connection with such an attempt, is not admissible in any civil or criminal proceedings.(2) Such evidence is, however, admissible if –(a)the parties to the dispute consent; or…(g)the making of the communication, or the preparation of the document, affects the rights of a party to the dispute; or … The defendants sought to justify the admissibility of the correspondence both before the Magistrate and before me on a number of grounds. First, the defendants argued that the correspondence indicated that the parties were ad idem and the matter had settled. The “without prejudice” correspondence was admissible to show the terms of the agreement. If that is so it is surprising that there was no attempt on the part of the defendants or, indeed, for that matter on the part of the plaintiffs, to rely on the agreement at the trial. The plaintiffs did not sue on the agreement and did not seek to amend their pleadings after 20 August to do so. The defendants, although they filed an amended defence after 20 August 2004 did not plead the agreement as an answer to the plaintiffs’ claim for damages. The first time any alleged agreement or settlement was raised was in the defendants’ argument as to costs. As there was no agreement, the “without prejudice” correspondence was not admissible to prove the terms of any agreement, and without the aid of s 67C(2) of the Evidence Act was not admissible at all. The defendants relied on s 67C(2)(a). The defendants were not given leave by the Magistrate to file affidavits in support of their argument. They nevertheless did so. There is no suggestion that in doing so they had previously obtained the consent of the plaintiffs to the tender of or reliance on the correspondence. The accompanying written submission relied heavily on and referred to the correspondence. On the other hand, the plaintiffs, in filing their written submission, did not object to the defendants’ reliance on the correspondence. They exhibited some of their own in relation to events subsequent to 20 August 2004, but none of this was “without prejudice”. In essence, their argument was that no agreement had been reached. The Full Court had occasion to consider the effect of s 67C(2)(a) in Chapman v Allan & Draper.[4] In that case the defendant in his defence had pleaded the letter in question and was, by that, taken to have consented to the tender of the document in evidence if it was otherwise admissible. By their pleading in reply the plaintiffs did not consent to the tender of the document and objected to its use, but not on grounds contained in s 67C. At the trial, counsel for the plaintiffs sought to tender the document, relying on the defendant’s pleading, arguing that any confidentiality, and presumably any bar to its use derived from s 67C, had been waived. The Full Court concluded that the document was not admissible under s 67C(2)(a), holding that there was never a mutual consent to the tender. In particular the Court declined to resolve the matter by analogy with offer and acceptance in the law of contract. That is, by treating the statement of the plaintiffs’ counsel in opening as an acceptance of a consent indicated by the defendants’ plea in his defence:[5]There is much to be said for the view that a document caught by s 67C cannot be tendered under the exception in s 67C(2)(a) unless, at the time of tender, there is mutual consent. There may be circumstances in which a party would be prevented from withdrawing a consent earlier given, particularly when the other party has acted to its prejudice upon the basis of that consent. But there is no suggestion of that here. [Emphasis added][4] (1999) 74 SASR 274.[5] Ibid at 289.

Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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