Residential Property Conveyancers v Vincent Bagnato - [2009] SASC 71

SUPREME COURT OF SOUTH AUSTRALIA
(Applications Under Various Acts or Rules: Civil)
RESIDENTIAL PROPERTY CONVEYANCERS v VINCENT BAGNATO & ORS
[2009] SASC 71
Reasons for Decision of The Honourable Justice Layton
13 March 2009
MAGISTRATES - APPEALS AND REVIEW - SOUTH AUSTRALIA - APPEAL TO SUPREME COURT - COSTS
PROCEDURE - COSTS - APPEALS AS TO COSTS
PROCEDURE - COSTS - DEPARTING FROM THE GENERAL RULE - OTHER CASES - DISCONTINUANCE OR ABANDONMENT
Application for permission to appeal against a decision of a magistrate to refuse an application for costs by the second defendant upon discontinuance of the action – legal principles on costs upon discontinuance – whether the Magistrate impermissibly adjudicated the issues in the case by deciding that the plaintiffs acted reasonably in joining the second defendant – whether the Magistrate erred in finding that the plaintiffs acted reasonably in the course of litigation and that the second defendant’s conduct caused delay – whether the second defendant’s pursuit of discovery as to “best endeavours” was relevant prior to amendment of pleadings - whether Magistrate would have exercised discretion differently had evidence of Calderbank offers been before him – whether costs should have been awarded on the complex action scale.
Held: Magistrate correctly applied relevant principles in deciding that the plaintiffs had acted reasonably in joining the second defendant – no error was demonstrated in the finding by the Magistrate that the second defendant had caused delay – refusal of Calderbank offers by the plaintiffs as not so unreasonable that the Magistrate would have exercised discretion differently had they been before him – the notification alleged by the applicant as certifying the action as complex did not sufficiently alert the plaintiffs that Rule 106(7) of the Magistrates Court (Civil) Rules was being triggered – issues were also narrow in compass and were made unnecessarily prolix by procedural issues – permission refused and proposed appeal rejected on its merits.
Civil Liability Act 1936 (SA) s 41; Magistrates Court (Civil) Rules 1992 (SA) r 106(7); Supreme Court Civil Rules 2006 r 281; Magistrates Court Act 1991 (SA) s 40(2), referred to.
Australian Securities Commission v Aust-Home Investments Ltd (1993) 116 ALR 523; Boscaini Investments Pty Ltd & Ors v The Corporation of the City of Kensington and Norwood [1999] SASC 327; Danielsen v Waldowski [2008] SASC 27; Gribbles Pathology Pty Ltd v Health Insurance Commission (1997) 80 FCR 284; Pentroth Pty Ltd v Kirschild Pty Ltd [2006] SASC 356; Re the Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622, applied.

RESIDENTIAL PROPERTY CONVEYANCERS v VINCENT BAGNATO & ORS
[2009] SASC 71
LAYTON J:

This is an application for permission to appeal against an order for costs made by a magistrate on 1 October 2008. Permission to appeal against a costs order is required by Rule 281(b) of the Supreme Court Civil Rules 2006 (“2006 Rules”).
The submissions made by counsel were in relation to both the application for permission to appeal and the appeal itself, and included further written submissions provided after the hearing specifically directed to the merits of the appeal. These reasons canvass both the application for permission to appeal and the merits of the appeal proper.
This matter has a substantial history. I will briefly outline the facts before turning to the issues.
Background circumstances
The applicant is a small conveyancing corporation run by a conveyancer who was the second defendant in an action in the Magistrates Court. The first three respondents were the plaintiffs in that action. The subject of the litigation was a contract for purchase of land between the plaintiffs and the first defendant (the fourth respondent in this application), being the owner of the land. The second defendant was the conveyancer retained by the plaintiffs. For convenience, I will refer to the first three respondents collectively as “the plaintiffs”, the applicant as “the conveyancer”, and the fourth respondent as “the vendor”. The vendor did not appear at the hearing of the appeal and did not provide any submissions.
The contract for purchase of land was subject to a special condition relating to the obtaining of finance by the plaintiffs. The plaintiffs paid a deposit of $20,000 to the vendor on 14 May 2005. Settlement was due to take place on 24 June 2005.
The plaintiffs’ solicitors gave notice to the vendor on 27 June 2005 that they were terminating the contract as the plaintiffs were unable to obtain finance.
On 2 August 2005 the plaintiffs instituted proceedings in the Magistrates Court of South Australia to recover their deposit from the vendor.
Thereafter the litigation continued with the filing of a Defence and Counterclaim by the vendor, and later the joinder of the conveyancer. The action eventually settled with the return of the deposit. A Notice of Discontinuance was filed by the plaintiffs against both the vendor and the conveyancer, and the vendor discontinued the counterclaim. The conveyancer then applied for costs against the plaintiffs, and sought them on the complex action scale. On 1 October 2008 the application was refused and Magistrate Millard directed each party to bear their own costs.
The conveyancer now seeks permission to appeal against that order. The submissions put before me went into considerable detail in regard to the progress of the Magistrates Court matter. The evidence before me consisted of the following:
·Four affidavits of the conveyancer’s solicitor, Kymberley Alissa Lawrence, sworn 5 August 2008, 21 August 2008, 22 October 2008 and 11 November 2008;
·An affidavit of the plaintiffs’ solicitor, Phillip David Gallasch, sworn 25 August 2008;
·Appellant’s Outline of Argument on Appeal;
·Further Particulars of Ground of Appeal 1(a);
·Respondent’s Outline of Argument, and
·Appellant’s Reply Submissions.
The affidavits of the conveyancer’s solicitor sworn 5 August 2008 and 21 August 2008, along with the affidavit of the plaintiffs’ solicitor sworn 25 August 2008, were before Magistrate Millard prior to the 1 October 2008 costs order.
Approach
Rule 281(b) of the 2006 Rules provides that an appeal limited to the question of costs lies only by permission of the Court. This reflects the reluctance of the Court to entertain appeals from costs orders. A preliminary issue was raised by counsel for the conveyancer as to whether permission was required for the proposed appeal. I rejected his argument that permission was not required, given the clear wording of r 281(b) of the 2006 Rules and s 40(2) of the Magistrates Court Act 1991 (SA), which provides that a right of appeal from a judgment of the Magistrates Court is limited by the rules of the Supreme Court.
The common law approach to appeals from costs orders of the Magistrates Court is summarised in [1912] of Legal Costs South Australia, which states:[1]
The courts will not entertain appeals against Magistrates Court orders on costs unless the magistrate by taking into account some matter wholly unconnected with the cause of action, or by being without material on which to exercise the discretion, has not in law exercised the discretion at all. The Supreme Court will not interfere with the exercise of a discretion by a magistrate who assigns reasons which are perfectly germane and not based on any false principle. The discretion of the magistrate must be fairly exercised…
[1] Butterworths, Legal Costs South Australia, (service 95/85), [1912].
In applying r 281(b), it seems to me that those principles are still applicable with regard to hearing applications for permission to appeal against costs. This is particularly relevant to the Magistrates Court as it has a more limited jurisdiction than the higher courts. It is important to ensure that matters are dealt with in the Magistrates Court expeditiously and cost effectively, and costs should not be increased by inappropriate appeals on such discretionary matters as costs orders.
The application
A number of issues were raised by the conveyancer in this application. First, whether the Magistrate correctly applied the relevant principles regarding costs following a discontinuance. In particular, whether the Magistrate hypothetically tried the action by deciding that the plaintiffs had acted reasonably in joining the conveyancer.
Second, whether the Magistrate erred in his reasons by finding that the plaintiffs’ conduct from the commencement of the action until the discontinuance was reasonable, and by finding that the conveyancer was responsible for delays by seeking discovery against the plaintiffs and non-parties. Counsel for the conveyancer alleged the following errors by Magistrate Millard in support of the application:
·Magistrate Millard failed to take account of the plaintiffs’ failure to respond to requests for discovery up until the vacation of the trial on 19 October 2006, and;
·Magistrate Millard failed to take account of the plaintiffs’ failure to provide full and proper discovery in accordance with the orders of Magistrate Panagiotidis.
Third, counsel for the conveyancer drew my attention to Calderbank offers made to the plaintiffs on 29 March 2006 and 15 May 2007 which were not before Magistrate Millard. It was submitted that if those offers had been before Magistrate Millard, his Honour may have exercised his discretion to award costs differently. The conveyancer’s counsel submitted that in the event that I consider permission to appeal should be granted, in the exercise of my discretion I should have regard to those Calderbank letters.
Finally, counsel for the conveyancer submitted that Magistrate Millard was in error in failing to make any finding as to whether the costs should have been awarded on the complex action scale.
Before considering these arguments, I note the following legal principles.
Legal principles
There are a number of authorities which discuss the principles to be applied to the question of costs when an action has been discontinued. Magistrate Millard referred to the applicable principles in determining the application.
In Pentroth Pty Ltd v Kirschild Pty Ltd,[2] White J considered r 52.03 of the Supreme Court Rules 1987, which provided that a discontinuing party was to bear the costs of the proceedings unless the court ordered otherwise. His Honour found that this did not create a presumptive entitlement for costs against the discontinuing party and adopted the approach suggested by McHugh J in Re The Minister for Immigration and Ethnic Affairs; ex parte Lai Qin[3] (“Lai Qin”), in which McHugh J stated:[4]
“In some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. …
If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases. [Citations omitted]”
[2] [2006] SASC 356.
[3] (1997) 186 CLR 622.
[4] Re The Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622, 624-5 as cited in Pentroth Pty Ltd v Kirschild Pty Ltd [2006] SASC 356, [34].
In applying this approach, White J commented:[5]
This approach suggests that the court should not, in effect, try an action simply for the purposes of determining an appropriate outcome for costs. There may be cases in which the court considers that a party’s conduct in commencing the litigation, or in continuing it, was unreasonable or in which it can, conveniently, form a view as to the probable outcome. In such cases, an order that the discontinuing party pay costs may be appropriate. Much may depend on any explanation provided to the court for the discontinuance, as well as the circumstances surrounding its commencement and continuance generally. However, when the court is satisfied that the conduct of the parties has been reasonable, it will usually be appropriate for the court to make no order as to costs.
[5] Pentroth Pty Ltd v Kirschild [2006] SASC 356, [35].
Therefore, the fact that a discontinuance is filed does not of itself determine whether the discontinuing party should pay the costs of the person against whom the action is discontinued. It is still necessary to consider whether the party has acted reasonably in commencing and continuing the action.
In Boscaini Investments Pty Ltd & Ors v The Corporation of the City of Kensington and Norwood,[6] Debelle J referred to Australian Securities Commission v Aust-Home Investments Ltd,[7] in which Hill J extracted the following principles from the relevant authorities:[8]
“(1)    Where neither party desires to proceed with litigation the court should be ready to facilitate the conclusion of the proceedings by making a cost order.
(2)     It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a court determining how the costs of the proceeding should be borne to endeavour to determine for itself the case on the merits or, as it might be put, to determine the outcome of a hypothetical trial. This will particularly be the case where a trial on the merits would involve complex factual matters where credit could be an issue.
(3)     In determining the question of costs it would be appropriate, however, for the court to determine whether the applicant acted reasonably in commencing the proceedings and whether the respondent acted reasonably in defending them (SEQEB).
(4)     In a particular case it might be appropriate for the court in its discretion to consider the conduct of a respondent prior to the commencement of the proceedings where such conduct may have precipitated the litigation.
(5)     Where the proceedings terminate after interlocutory relief has been granted, the court may take into account the fact that that interlocutory relief has been granted. [Citations omitted]
[6] [1999] SASC 327.
[7] (1993) 116 ALR 523.
[8]    Australian Securities Commission v Aust-Home Investments Ltd (1993) 116 ALR 523, 530 as cited in Boscaini Investments Pty Ltd & Ors v The Corporation of the City of Kensington and Norwood [1999] SASC 327, [21].
Debelle J cited other authorities which followed these propositions, and agreed with the following comments made by Finkelstein J in Gribbles Pathology Pty Ltd v Health Insurance Commission:[9]
“For my own part I should wish to emphasise that in the absence of a hearing on the merits it is difficult to see how any order, other than an order that each party bear its own costs, can be made except in special circumstances. To do otherwise would require some prediction of the outcome of the case. It seems to me that the third proposition stated by Hill J was intended to cover the situation where the Court was in fact able to form a clear view about the merits of a case without a trial. So, if a claim is patently hopeless that would be a good reason to make an order for costs against the claimant. Likewise if a defence was bound to fail that would be good reason for awarding costs in favour of the claimant. But I venture to suggest that there will be very few cases where the issues will be sufficiently clear, in the absence of a hearing, for an order for costs to be made in favour of a party.”
[9] Gribbles Pathology Pty Ltd v Health Insurance Commission (1997) 80 FCR 284, 287 as cited in Boscaini Investments Pty Ltd & Ors v The Corporation of the City of Kensington and Norwood [1999] SASC 327, [21].
Debelle J agreed that the third proposition enunciated by Hill J was of limited assistance, as the reasonableness of the conduct of the parties is not likely to assist in determining whether an applicant should recover their costs. In the view of Debelle J, “the real question is whether the applicant had reasonable prospects of success.”[10] However, his Honour acknowledged a party who does not act reasonably may be disentitled to costs. His Honour therefore suggested the third proposition should be varied as follows:[11]
Depending on circumstances, where the applicant has acted reasonably in commencing proceedings, has an arguable case, and it is reasonable to conclude that the respondent has acted in consequence of the commencement of proceedings, the court may be prepared to make an order as to costs in favour of the applicant.
[10] Boscaini Investments Pty Ltd & Ors v The Corporation of the City of Kensington and Norwood [1999] SASC 327, [22].
[11] Ibid.
In concluding that is was not possible to determine the likely prospects of success of the application before him, Debelle J referred to issues concerning the credit of witnesses and the contents of complex documentation. His Honour concluded that, “to make any order as to costs would be to presume the outcome. It is not possible, therefore, to make any order as to costs”.[12]
[12] Ibid.
Judge Withers in the case of Danielsen v Waldowski[13] followed the approach taken by Debelle J and applied the combination of these tests with the modified proposition.
[13] [2008] SASC 27.
The above authorities indicate that in deciding whether a party has acted reasonably or unreasonably in either commencing or defending proceedings, it is inappropriate for a court to in effect try the case and determine the hypothetical outcome. However, it is relevant for a court to consider whether the party had an arguable case with a reasonable prospect of success. If the applicant party has a reasonably arguable case, and so has a defendant in defending the action, then in the absence of unreasonable conduct by either party, as McHugh J indicated in Lai Qin, the proper exercise of the cost discretion will usually mean that the court will make no order as to costs.
Counsel for the conveyancer submitted that the authorities above differed in a material way from the case at bar because in this case there were multiple defendants.
In my view, the same principles apply whether it be single or multiple defendants. However, when applying those principles the factual circumstances of each case must be considered. In this case, the fact that there had been a settlement between the vendor and the plaintiffs does not change the situation when one comes to look at whether the conduct of the plaintiffs in joining the conveyancer was reasonable, as well as whether their conduct during the litigation was reasonable. It is a matter of the application of the principles to the circumstances in each case, no matter how many defendants are involved.
Factual chronology
In order to set the background to these submissions I will sketch the overall chronology of the litigation before descending into the minutiae in order to determine whether Magistrate Millard erred.
On 2 August 2005 the plaintiffs instituted proceedings in the Magistrates Court of South Australia seeking to have their deposit returned from the vendor.
On 23 August 2005 the vendor filed a defence in which he denied that the plaintiffs were unable to obtain the loan. He said that the conveyancer had informed the vendor’s solicitor, during a telephone conversation on 16 June 2005, that finance had been approved for the plaintiffs. He further pleaded that on 20 June 2005, the conveyancer had given notice to the vendor’s solicitors by facsimile that the plaintiffs were “ready and willing and anxious to complete settlement”.[14]
[14] The first defendant, in his Defence & Counterclaim dated 23 August 2005, cites the facsimile as stating: “I further confirm that the Purchasers are ready and willing and anxious to complete settlement booked for Friday 24/06/05… and bank cheques payable to ESTATE OF JA FEATHERSTONE totalling $260,169.18 will be handed over to you on their behalf at Settlement.”

The vendor therefore denied that the plaintiffs were entitled to terminate the contract and retrieve their deposit and counter-claimed damages for loss caused as a result of the plaintiffs’ failure to settle.
On 1 December 2005 the plaintiffs were given leave to amend their Statement of Claim and to join the conveyancer. In the Amended Statement of Claim, the plaintiffs alleged that the conveyancer had breached the conveyancing contract by wrongly indicating to the vendor that they had secured finance and were ready to proceed with the transaction. It was alleged that the plaintiffs had not given the conveyancer any instructions to make such representations; the conveyancer had no authority to make the representations; and there was no proper basis for it to have done so.
On 27 January 2006 the conveyancer filed a Defence and Counterclaim seeking payment for the conveyancing services rendered to the plaintiffs. The conveyancer denied that it had been negligent, and alleged that an employee of the conveyancer had received a call from Adelaide Lending Centre, on 15 June 2005, informing her that finance was approved for the plaintiffs. Further, and in the alternative, the conveyancer alleged that the special condition had in fact been satisfied.
On 20 April 2006 a conciliation conference was held and an order was made for mutual discovery. Following a series of communications between the parties relating to the discovery of documents, which I will address in more detail later, a two day trial date was set for 25 September 2006.
On 7 September 2006 an application was made by the conveyancer and was heard before Magistrate Panagiotidis. Her Honour vacated the trial date and re‑listed it for 19 October 2006. Her Honour also made orders for discovery and non-party discovery, and gave leave to the conveyancer to amend its Defence and Counterclaim. Disputes continued between the parties on the subject of discovery.
On 19 October 2006 the trial date was again vacated by Magistrate Panagiotidis on the application of the conveyancer. Her Honour adjourned the matter for further directions, and also made a number of orders with regard to further and better discovery and supplementary discovery and gave leave for the conveyancer and the vendor to amend their defences.
On 27 October 2006 the conveyancer filed a Further Amended Defence and Counterclaim alleging contributory negligence and a failure by the plaintiffs, in particular the third plaintiff, to use their “best endeavours” to obtain finance.
On 30 November 2006 the conveyancer filed an application alleging that the orders made by Magistrate Panagioditis had not been complied with by the plaintiffs. The application sought orders to enter judgment against the plaintiffs for non-compliance, or in the alternative, that the action be dismissed for want of prosecution. As the plaintiffs were in the process of seeking alternative legal representation, the application was adjourned to 1 February 2007.
Following a further adjournment, on 9 March 2007 a case management conference was held to address the issues in dispute. During this conference, the conveyancer indicated its intention to seek an expert report. Orders were also made by Magistrate Panagiotidis in relation to supplementary discovery.
Between 9 March 2007 to 1 August 2008, further issues arose regarding discovery of documents, particularly concerning the production of the expert report.
On 30 July 2008, following negotiation between the plaintiffs and the vendor, the vendor agreed to return the deposit; to contribute to the plaintiffs’ costs; and to discontinue the counterclaim against the plaintiffs. A Notice of Discontinuance was filed by the plaintiffs against both the vendor and the conveyancer.
On 4 August 2008 an application was brought by the conveyancer for the costs of the action to be borne by the plaintiffs and for those costs to be awarded on the complex action scale.
After hearing full argument with the benefit of detailed affidavits and the court file, Magistrate Millard provided reasons on 1 October 2008 for refusing the conveyancer’s application and directing each party to bear its own costs.
Did the Magistrate impermissibly adjudicate the issues in the case?
Counsel for the conveyancer submitted that Magistrate Millard had impermissibly adjudicated the issues by finding that the plaintiffs had acted reasonably in joining the conveyancer in the proceedings.
I have carefully read the Magistrate’s reasons for decision and can find no indication that there was any attempt to impermissibly try the action in the course of concluding that the plaintiffs had acted reasonably in joining the conveyancer. Magistrate Millard correctly set forth relevant principles, which included those expressed earlier in my reasons.
Magistrate Millard noted that the plaintiffs sought the return of $20,000 from the vendor. In [29] of his reasons his Honour noted that the conveyancer was joined following the allegations made by the vendor, in his defence, that the conveyancer, acting on behalf of the plaintiffs, had passed information to him which differed from the information supplied by the plaintiffs. The plaintiffs’ case was that the representations made by the conveyancer were unauthorised and there was an arguable case that they were entitled to damages from the conveyancer if they had forfeited the deposit. Magistrate Millard was not in error in accepting this argument.
Magistrate Millard also noted that the action was finally settled with the reimbursement of the deposit by the vendor together with a significant contribution towards the plaintiffs’ costs. Magistrate Millard referred to the plaintiffs’ submission at [30], that because they had been successful in the relief which they had sought, they were under a duty to discontinue the action. To attempt to continue prosecuting the action against the conveyancer would have effectively amounted to an abuse of process. Magistrate Millard, at [37], indicated his acceptance of the argument and stated that once the matter had been settled between the plaintiffs and the vendor there was nothing further to litigate other than the issue of costs.
Magistrate Millard further noted that the plaintiffs were not seeking orders for costs against the conveyancer. His Honour specifically applied the comments made by McHugh J in Lai Qin[15] and indicated that he was not persuaded to depart from those principles, concluding that there should be no order for costs between the plaintiffs and the conveyancer. In my view Magistrate Millard was correct in his approach. No error is indicated in his reasons.
[15] (1997) 186 CLR 662.
I now turn to the conveyancer’s submissions regarding the conduct of the plaintiffs and the alleged failure by the Magistrate to take account of procedural defaults.
Did the Magistrate err in his finding that the conveyancer’s conduct in discovery caused delay?
Counsel for the conveyancer submitted that Magistrate Millard erred in his finding at [39] of his reasons – in particular the following finding:
My review of the file records and the affidavit material confirms her Honour’s view the second defendant’s protracted conduct of the issue of discovery – particularly non party discovery – substantially delayed the disposition of this matter and materially increased the costs for all parties.
It was submitted by the conveyancer that contrary to that finding, the plaintiffs were responsible for delays in the disposition of the trial because they failed to provide proper discovery in accordance with the conveyancer’s requests and court orders. The procedural defaults alleged occurred over two stages of the litigation process: the first stage being prior to the vacation of the trial on 19 October 2006 (“the first stage”), the second stage being the following eight months (“the second stage”).
The plaintiffs in response submitted that the delays and the vacation of the trial date was not due to default in discovery by them, it was due to delays by the conveyancer in the amendment of the pleadings; the pursuit of discovery which was not relevant on the pleadings; the circumstances in which the conveyancer sought non-party discovery; and the delay in seeking expert reports. They contended Magistrate Millard was not in error in his conclusion.
The submissions made by both parties were very detailed and I will address them in the following order:
1Whether the plaintiffs were responsible for delays in the first stage;
2Whether the plaintiffs were responsible for delays in the second stage;
3Whether the Magistrate erred in finding that the conveyancer had caused delays when seeking non-party discovery, and
4Whether the seeking of expert reports by the conveyancer contributed to the delays.
The first stage
The conveyancer submitted that the plaintiffs failed to provide adequate discovery, despite numerous requests, and that this default was the cause of the vacation of the trial date on 19 October 2006.
In considering this submission, it is important to note that the conduct in issue occurred before the conveyancer had amended its defence to plead that the plaintiffs had failed to use their “best endeavours” to obtain finance. The date on which the conveyancer brought up this issue and the time from which certain documents appropriately became discoverable was a point of contention between the parties.
The plaintiffs asserted that the issue of “best endeavours” was first raised in the Amended Defence and Counterclaim filed on 27 October 2006, so therefore documents relevant to this issue were not discoverable until that time. They submitted that any failure on their part to produce documents in relation to “best endeavours” prior to 27 October 2006 cannot be considered as a procedural delay.
Counsel for the conveyancer submitted that “best endeavours” was always in issue and is why the conveyancer’s solicitors sought the production of documents relevant to that topic from an early stage. It was contended that the issue was raised in [4] of the Statement of Claim, which stated:
The special condition was not fulfilled in that the plaintiffs were not able to obtain finance to fund the purchase.
In considering this contention, I note that “best endeavours” is only one aspect of the special condition provision, being clause SC1.2.
The special condition provision within the contract for purchase of land was in the following terms:
SC1 Finance
SC1.1This contract is conditional upon the purchaser obtaining approval, on or before the last date for approval, for a loan up to the amount specified below at the interest rate specified below and otherwise on such terms and conditions that the lender requires to assist in purchasing the property (‘the approval’).
SC1.2 The purchaser will use best endeavours to obtain a loan.
SC1.3In the event that the approval is not obtained on or before the latest date for approval and provided a purchaser has not waived the special condition and communicated such waiver to the vendor in writing either party (but in the case of the purchaser, provided it has complied with SC1.2) may immediately terminate this contract by giving notice in writing to the other parties.
SC1.4In the event of termination of the contract pursuant to SC1.3 and provided the purchaser has complied with SC1.2 all monies paid by or on behalf of the purchaser shall be repaid to the purchaser.
SC1.5In the event of termination of this contract pursuant to SC1.3 in circumstances where the purchaser has failed to comply with SC1.2 the vendor will be entitled to deposit which is forfeited and proceed against the purchaser for damages for breach of contract.
However, the mere reference in [4] of the Statement of Claim to the special condition does not mean that “best endeavours” thereby becomes a matter required to be proved by them. The requirement to use “best endeavours” was just one aspect of the special condition, and it was not specifically identified in the pleadings. The discovery required of a plaintiff is dependant upon what is put in dispute by the pleadings. The conveyancer did not put the specific allegation of a failure to use “best endeavours” to the plaintiffs until the Amended Defence and Counterclaim filed on 27 October 2006. Until that time, the defence asserted that the conveyancer had been informed that the special condition had been fulfilled, and, or in the alternative, that the plaintiffs had actually fulfilled the special condition. That is a different defence. I therefore do not accept that the issue was overtly, nor indeed inferentially, identified in the pleadings prior to the specific amendment made to the pleadings on 27 October 2006.
Counsel for the conveyancer also adverted to a letter of 11 May 2006 in which the conveyancer’s solicitors requested records of all attempts to obtain finance, all bank statements and all records of the third plaintiff’s financial position. Counsel for the conveyancer asserted that the “best endeavours” issue was therefore raised in the request for records of “attempts to obtain finance”.
In my view, requesting records of “attempts to obtain finance” does not clearly identify the issue of a breach of the special contractual condition relating to “best endeavours”. Again, I note that at this stage of proceedings the pleadings which governed discovery related only to whether the plaintiffs had in fact obtained finance.
In addition, the plaintiffs submitted that in any event, regardless of relevance, they essentially complied with the requests made by the conveyancer on 11 May 2006. On 17 May 2006 they filed a List of Documents, including a letter from Adelaide Lending Centre and an Adelaide Bank loan document. Further, on 24 May 2006, they served a sealed copy of ‘the Plaintiffs’ list of documents’ on the conveyancer’s solicitors.
In my view, there does not appear to be a valid basis for the conveyancer to allege default on the part of the plaintiffs at this stage of the proceedings.
Further correspondence was also referred to by the conveyancer in support of the argument that “best endeavours” was put in issue between the parties well before it was properly articulated in the Amended Defence and Counterclaim filed on 27 October 2006. The correspondence particularly identified was dated 6 June 2006, and 14, 17 and 24 July 2006.
In the letter of 6 June 2006 the conveyancer’s solicitors wrote:
In your letter dated 13 April 2006 you inform us that you clients used their best endeavours to obtain finance. We presume therefore that we will find evidence that Mr Degiglio applied to obtain finance to fund its share of the purchase price, $74,666 and not an amount greater than this.
Letters of 14 July 2006 and 24 July 2006 requested all records relevant to “an assessment of whether Mr Degiglio [the third plaintiff] used his best endeavours to obtain finance” but were directed to Adelaide Bank and Bernie Lewis Home Loans respectively, and not the plaintiffs’ solicitors. There was no indication that a copy of these letters was sent to the plaintiffs’ solicitors.
In the letter of 17 July 2006, the conveyancer’s solicitors requested a range of further documentation, including tax returns for 2003/04 and 2004/05, bank correspondence, statements and any other documents relevant to the third plaintiff’s “contractual obligation to use his best endeavours to obtain finance”.
On 19 July 2006, the plaintiffs’ then solicitor questioned the relevance of such documentation. In response, the conveyancer’s solicitors, in a letter dated 4 August 2006, specifically stated:[16]
Your client’s inability to obtain finance after using their best endeavours is fundamental to their claim and therefore all documents relevant to this issue must be discovered.
[16] Affidavit of Kymberley Alissa Lawrence, sworn 21 August 2008, KAL11.
The letter of 4 August 2006 also added that if the documents requested were not provided within seven days, an application would be made seeking further and better discovery and an adjournment of the trial date. There was no indication in the letter that the pleadings would be amended.
In my view, whilst the requests contained in the identified correspondence flagged the potential for a “best endeavours” argument, as distinct from the 11 May 2006 letter which could not be said to have put this in issue, “best endeavours” was still not then directly relevant on the pleadings as they stood. The defence was focussed on the representations allegedly made by Adelaide Lending Centre and further, whether finance had actually been obtained. Therefore the documents requested by the June and July 2006 correspondence were still not relevant on the pleadings. It follows that any failure by the plaintiffs to provide the requested documents cannot be considered a procedural default at this time.
Orders were subsequently made by Magistrate Panagiotidis on 7 September 2006 pursuant to an application by the conveyancer, dated 25 August 2006, in the following terms:
1.The second defendant has leave to file and serve an amended defence and within 7 days hereof.
2.The plaintiff is to provide further discovery of the following documents within 14 days to both defendants:
(a) Tax returns for the financial years 2003/2004 and 2004/2005;
(b)all correspondence and notes made with Adelaide Bank, Bernie Lewis Home Loans and any other potential financiers or brokers regarding home loan applications;
(c)all bank statements for the financial years 2003/2004 and 2004/2005;
(d) any credit card statements for the same period;
(e)any other documents relevant to the purchase of 71 Glyde Street, Albert Park and relevant to Mr Degiglio’s contractual obligations to use his best endeavours to obtain finance;
3.The Adelaide Bank provide discovery in terms of the draft order initialled by me, and dated 7 September 2006.
4.In view of the orders I have made today with respect to discovery and pleadings I consider that the trial has been listed prematurely. I vacate the present trial date of 25 September 2006 and allocate Thursday 19 October 2006 and Friday 20 October 2006 for hearing of this trial.
5.This matter is listed for mention before Ms Panagiotidis on 5 October 2006 at 9:30am.
Given the nature of the orders made by Magistrate Panagiotidis, the issue of whether the plaintiffs had used their “best endeavours” was clearly raised at that time and was also the specific subject of discovery of documents. I note, however, that following the leave granted by Magistrate Panagiotidis, the conveyancer’s Defence was only amended to include an argument relating to s 41 of the Civil Liability Act 1936 (SA) and the standard of care expected of the conveyancer. It was not then amended to include an argument relating to “best endeavours”. This amendment only occurred after permission was granted for the conveyancer to further amend its Defence for a second time by Magistrate Panagiotidis on 19 October 2006.
The conveyancer further submitted that following the hearing on 7 September 2006 the discovery provided by the plaintiffs fell short of the orders made by Magistrate Panagiotidis.
On 6 October 2006, the plaintiffs’ solicitors sent a letter to the conveyancer’s solicitors enclosing the first and second plaintiffs’ financial statements, bank statement and tax returns for 2003/04 and 2004/05. They confirmed that further documents would be provided “as soon as they come to hand”.
At a mention only hearing on 11 October 2006, the conveyancer again raised the issue of discovery. It is deposed in the affidavit of Kymberley Alissa Lawrence sworn 21 August 2008, that Magistrate Panagiotidis made the following orders:
1The second defendant’s solicitor will advise the plaintiffs’ solicitor of the documents it says it requires to satisfy the orders made by me on the last occasion.
2.The plaintiffs will provide further and better discovery in answer to the second defendant’s application by Friday 13 October 2006 close of business by way of provision of the documents or by affidavit.
…

The Court Record does not contain a record of these orders. It only indicates that the matter was adjourned to 19 October 2006. Whether these additional orders were made at this time does not substantially affect my view of the progress of the matter, as I address hereafter.
On 13 October 2006, the plaintiffs’ solicitor sent a facsimile to the conveyancer’s solicitors serving a copy of the plaintiffs’ “Affidavits as to Documents” (“Affidavits of Discovery”). The affidavits set out, in three schedules, the documents in the possession of each plaintiff; documents which were no longer in the possession of each plaintiff; and documents which were never in the possession of each plaintiff. The affidavits also objected to the discovery of certain documents on the ground that they were subject to legal professional privilege.
The conveyancer’s solicitor deposes that the Affidavits of Discovery did not refer to all of the documents ordered to be provided. The plaintiffs’ counsel submitted that the Affidavits of Discovery did accurately disclose all documents encompassed in the orders of Magistrate Panagiotidis and, if documents were not disclosed, it was because they were not in the possession, custody or control of the plaintiffs.
On 16 October 2006 the conveyancer’s solicitors sent a facsimile to the plaintiffs’ solicitors requesting immediate provision of a number of documents referred to in the Affidavits of Discovery, including specific bank statements and credit card statements. The facsimile asserted that the plaintiffs were in breach of the orders made by Magistrate Panagiotidis on 7 September 2006 and 11 October 2006 (the latter being the order not included on the Court Record) and demanded copies of the requested documents by close of business the same day.
On 17 October 2006, the plaintiffs’ solicitors responded by providing by courier some but not all of the documents pursuant to the conveyancer’s solicitors’ request.
On that same day, the conveyancer filed an application seeking a further adjournment of the trial date. The supporting affidavit asserted that the adjournment was necessary because, in the absence of full discovery, the conveyancer could not make an informed decision on the requirement for expert evidence relating to the issue of “best endeavours”.[17]
[17] Affidavit of Kymberley Alissa Lawrence, sworn 17 October 2006, [35].
The following orders were made by Magistrate Panagiotidis on 19 October 2006:
1.The 1^st and 2^nd defendants will, within 7 days, write to the plaintiff’s solicitor setting out the further and better discovery that is requested.
The supplementary discovery will be given by all three plaintiffs on oath within 21 days of receipt of the request.
The parties will inspect the discovered documents within a further 21 days of the provision of discovery.
The plaintiff has a further 14 days within which to file a reply if so instructed.
I give leave to the 1^st and 2^nd defendants 7 days from today’s date to file an amended defence.
I vacate today’s trial date and make no order as to costs.
At the same time as making these orders, it is common ground, and was accepted by Magistrate Millard, that Magistrate Panagiotidis made the following observation:
I am disappointed as to the state of the proceedings. They have been in the Court system since December last year. It is the second time they have been listed for trial. In the ordinary course it would be hoped, especially with a claim of $20,000.00, that they would be ready for trial within this time. It is clear that it is not ready for trial. Case flow management principles are important. It is not the case that this matter can be determined fairly on its merits without further procedures of discovery and amendment of pleadings. In relation to costs, despite the second defendant’s argument concerning the plaintiffs failure to comply with the Courts order, having regard to the purpose of the adjournment, the adjournment will be granted without a costs order in favour of the first defendant and the second defendant. In my view all parties have failed to proceed with issues diligently and on the eve of the trial have sought further discovery and amendment of pleadings. There will be no order as to costs. I consider the fixing of another trial date today would be foolish in light of further steps that would be required. The orders today are to case manage and I will list the matter for a Directions Hearing to determine when the matter will be ready for trial.
The orders made by Magistrate Panagiotidis on 19 October 2006 reflect that the conveyancer was required to articulate exactly what documents were still required from the plaintiffs. There was therefore an issue as to what documents were still outstanding by way of “further and better discovery”. The plaintiffs should not be held solely responsible for delays in providing documents that they were not previously required to discover. At the same time the plaintiffs had not met all the requests for discovery, hence the order for “supplementary discovery on oath”.
Therefore while the plaintiffs may not have met all the requests for discovery, the overall circumstances resulted in Magistrate Panagiotidis’ observation that all parties “had failed to proceed with issues diligently”. Her Honour made no order as to costs. These observations also encompassed the circumstances of non-party discovery which I address hereafter.
There was in my view no error in her Honour’s observation nor her order on costs. In my view, Magistrate Millard in turn justifiably referred to and relied upon her Honour’s observation in his own reasons. I reject the conveyancer’s argument to the contrary. I am not satisfied that the plaintiffs’ failure to meet the conveyancer’s requests for further and better discovery was the sole cause of the vacation of the trial date on 19 October 2006. I therefore reject the argument of the conveyancer’s counsel as to error by Magistrate Millard on that point.
The second stage
The conveyancer submits that after the vacation of the trial date the plaintiffs were responsible for further delays by taking over eight months to comply with discovery requests and the orders made by Magistrate Panagiotidis.
The argument put in response on behalf of the plaintiffs was that efforts were being made, albeit a little delayed, but in the most part any delay was because they did not have all of the records available.
On 18 October 2006, the third plaintiff provided the conveyancer’s solicitor with documents which he had obtained after the filing of his Affidavit of Discovery.
On 26 October 2006, the conveyancer’s solicitors wrote to the plaintiffs’ solicitors requesting that each plaintiff make supplementary discovery on oath and requesting provision of certain documents which were referred to in the Affidavits of Discovery as being in the plaintiffs’ power or possession.
The documents were not provided by the plaintiffs within the 21 days as prescribed in the 19 October 2006 order.
On 21 November 2006 the conveyancer’s solicitors sent a further letter advising that if the documents were not provided within seven days, an application would be filed seeking enforcement of the 19 October 2006 orders.
The plaintiffs’ solicitors responded with a facsimile on 23 November 2006, advising that much of the documentation was “in the hands of the third parties” and that they expected to be in receipt of same in the following few days. They requested that the application not be made at that time.
On 30 November 2006 the conveyancer filed an application seeking summary dismissal of the plaintiffs’ claim for non-compliance with orders of the Court. The application was listed for 7 December 2006. The supporting affidavit deposed that the conveyancer’s solicitors were yet to receive the documents requested on 26 October 2006.
The plaintiffs’ counsel, in his further written submissions, provided an explanation regarding each of the outstanding documents. On his submission, some of the documents had not previously been requested or been part of a court order, some had already been provided, some were not yet available, and some documents were no longer in the possession, power or control of the plaintiffs.
Shortly before the application for summary dismissal was listed, the plaintiffs changed legal representation and their then solicitor sought and obtained leave to cease acting. The conveyancer’s application was adjourned to 1 February 2007. On that date, Magistrate Panagiotidis was not prepared to list the matter for trial again but instead ordered a case management conference to deal with the future progress of the matter.
On 9 March 2007, at the case management conference, Magistrate Panagiotidis made the following orders:
…
3.That the third plaintiff provide supplementary discovery on oath in relation to documents discovered by letter of the plaintiff’s solicitor dated 18 October 2006.
4.The first plaintiff to provide by way of inspection photocopies of item 7.1(w) of his affidavit of discovery sworn on 13 October 2006.
5.The second plaintiff to provide copies by way of inspection of the documents referred to in para 7(v)(x)(y) of his affidavit of discovery sworn on 13 October 2006.
6.The second plaintiff to provide by way of further discovery a copy of his taxation return for the year 2004-2005 financial year (if such document exists).
7.Leave granted to the second defendant to issue a third party discovery application to the Adelaide Bank, 169 Pirie Street, Adelaide for the following documents…
…
9.The plaintiffs are to comply with orders 3, 4, 5 and 6 hereof with 21 days.
I note that it is the intention of the second defendant to obtain instructions with respect to engaging an expert witness to provide a report before the matter is listed for trial. That decision to be made after discovery has been completed.
Leaving aside the specific orders made in respect of Adelaide Bank Limited (“Adelaide Bank”) which I deal with hereafter, the order required photocopies of particular documents to be provided by the plaintiffs; certain tax returns to be provided if available; and the third plaintiff to give discovery on oath in relation to documents already discovered.
The conveyancer’s solicitors sent a request on 21 March 2007 to the plaintiffs’ solicitors, naming the outstanding documents sought. On 22 March 2007, photocopies of documents were provided by the plaintiffs’ solicitors.
On 7 May 2007 and 23 May 2007, the conveyancer’s solicitors wrote to the plaintiffs’ solicitors requesting documents which they considered to be outstanding. On 21 June 2007, the plaintiffs’ solicitor responded by setting out a detailed response as to why the documents were not available.
It was submitted by the plaintiffs that the conveyancer’s requests for documents were variable over time depending on what stage of completion the defence was at. It was also highlighted that certain documents, including 2005 tax returns or credit card statements from 2006 and 2007, would not have been available to a financier at the relevant time, being the 12 day period up to 26 April 2005. The plaintiffs’ counsel submitted that the plaintiffs had tried the best they could to supply the documents.
In my view, there was clearly some delay by the plaintiffs in supplying copies of documents and the further discovery. The effect of this delay needs to be considered in relation to the alleged delay by the conveyancer on the issue of non-party discovery and the provision of expert reports. I will therefore deal with those issues before drawing conclusions as to the overall effect of any delays by the plaintiffs and the conveyancer and to whether Magistrate Millard erred in his assessment.
Non-party discovery
The conveyancer submits that Magistrate Millard was wrong in his conclusion that the conveyancer’s conduct in respect of non-party discovery substantially delayed the disposition of the action and materially increased the costs for all parties.
Magistrate Millard, in [38] of his reasons, refers to submissions made by the counsel for the plaintiffs that it was the conduct of the conveyancer which unnecessarily delayed the disposition of the matter by reason of unreasonable insistence upon orders for non-party discovery, as well as unnecessary delays in the provision of superfluous expert reports. These arguments appear to have been accepted by Magistrate Millard in his conclusion at [39].
The non-party discovery orders mainly concerned Adelaide Bank. This tactic appears to have emerged after the plaintiffs’ solicitors served a sealed copy of their List of Documents on 24 May 2006. In the discovered documents, the plaintiffs produced an Adelaide Bank loan document. The production of that document apparently led the conveyancer’s solicitors to request the plaintiffs to make further discovery, in the previous letter referred to of 6 June 2006.
On 7 July 2006, the conveyancer’s solicitors requested the third plaintiff to sign an authority to allow them to obtain records held by Adelaide Bank regarding applications to obtain finance. This authority was promptly provided, along with another authority in relation to another lending institution.
The conveyancer’s solicitors wrote to Adelaide Bank on 14 July 2006 enclosing the signed authority. The letter referred to a particular document called “LO DOC EXPRESS LOAN” and stated:
The records held by Adelaide Bank in relation to Mr Degiglio’s loan applications and financial position are directly relevant to these proceedings and in particular to an assessment of whether Mr Degiglio used his best endeavours to obtain finance.
A request was made of Adelaide Bank for the provision of the third plaintiff’s file “relating to applications to obtain finance for the purchase of 71 Glyde Street Albert Park South Australia 2014”.
There was no evidence as to what response was obtained from Adelaide Bank, but in a letter to the plaintiffs’ solicitors on 4 August 2006, the conveyancer’s solicitors wrote:
We have recently spoken with Adelaide Bank and with Bernie Lewis Home Loans regarding Mr Delgiglio’s applications for finance.
Adelaide Bank have informed us that statements (in particular certain ‘RC03’ statements) were regularly sent to Mr Delgiglio. These statements, which your client should have, clarify Mr Delgiglio’s loan history and status to date with Adelaide Bank.
Please provide us with copies of all Adelaide Bank statements within seven days.
The only other reference made to the response from Adelaide Bank is contained in the affidavit of Kymberley Alissa Lawrence sworn 21 August 2008, to a conversation which occurred between the conveyancer’s solicitor and an employee from Adelaide Bank on 28 July 2006. It was deposed that Adelaide Bank indicated that it had located the third plaintiff’s file, but that the third plaintiff had copies of all the statements. There was no reference in the affidavit to any explicit refusal by Adelaide Bank to provide the file or any particular statements.
On 7 September 2006, Magistrate Panagiotidis made a non-party discovery order, as referred to above, on the application of the conveyancer. It was not until 28 September 2006 that a copy of the sealed order was forwarded to Adelaide Bank. On 17 October 2006, only two days before the trial date, a solicitor on behalf of the conveyancer telephoned Adelaide Bank to ask when the documents would be provided. The solicitor was advised that Adelaide Bank would call them back later in the afternoon. This did not occur and on that same day the conveyancer filed an application seeking a further adjournment of the trial date.
As previously discussed, on 19 October 2006 Magistrate Panagiotidis vacated the trial date and indicated her disappointment in the parties in failing to proceed diligently.
The saga of the non-party discovery in relation to Adelaide Bank did not end with the vacation of the trial date. The conveyancer’s solicitors continued to request discovery of Adelaide Bank documentation directly from the third plaintiff.
The third plaintiff had provided an Affidavit of Discovery on 13 October 2006 and had released some 45 separate bank statements from three Adelaide Bank accounts from 2003 until 2006. Solicitors for the conveyancer identified 14 statements which were missing from those bundles. The plaintiffs’ solicitors, in response, submitted that the 14 missing statements were no longer in the possession, custody or control of the third plaintiff and that he had already provided an authority which enabled the conveyancer’s solicitors to recover those missing documents directly from the bank.
These accusations and responses were included in the correspondence between the parties of 18 October, 26 October, 21 and 23 November 2006 and the application of 30 November 2006 which was then the subject of the orders made on 9 March 2007 by Magistrate Panagiotidis.
The orders of 9 March 2007 included an order for further non-party discovery in relation to Adelaide Bank, naming the 14 bank statements which were not able to be provided by the third plaintiff. This was the second non-party discovery order made in relation to Adelaide Bank.
Counsel for the conveyancer submitted that had the plaintiffs made proper discovery of the Adelaide Bank documents, it would not have been necessary for the conveyancer to apply for non-party discovery. I do not consider that the blame should be laid, as the conveyancer suggests, on the plaintiffs. The third plaintiff had given the authority requested and discovery on oath. The conveyancer did not serve the discovery order on Adelaide Bank promptly, and did not follow up Adelaide Bank until two days prior to trial. Further, Adelaide Bank did not respond promptly to the conveyancer’s request. The conveyancer subsequently continued to make requests for discovery against the third plaintiff when it should have been pursuing Adelaide Bank for the specific documents. The requests made by the conveyancer appear to have become more particularised after the conveyancer decided to amend the pleadings to include “best endeavours”. In short, the conclusion drawn by Magistrate Millard is not in error and, in my view, it was apt for him to conclude that:
…the second defendant’s protracted conduct of the issue of discovery – particularly non party discovery – substantially delayed the disposition of this matter and materially increased the costs for all parties.
Expert reports
The plaintiffs in their refutation of the conveyancer’s allegations, also contended that there had been procedural delays on the part of the conveyancer in obtaining and providing two expert reports. The first was from an expert mortgage broker relating to the “best endeavours” issue. The second report sought was from another conveyancer in relation to the standard of care owed by the conveyancer and the reasonableness of the fees charged.
First report
The plaintiffs submitted that it was not until the case management conference on 9 March 2007 that the need for an expert report relating to “best endeavours” was raised by the conveyancer.
On 15 May 2007, at the next directions hearing before Magistrate Panagiotidis, the report was still yet to be obtained, and her Honour made the following orders:
1. Parties will by next adjournment date agree final outstanding discovery issues.
No order made in that respect today.
2^nd defendant to obtain expert’s report prior to next hearing.
Liberty to apply to extend next hearing date if necessary…
The matter was then adjourned to 27 June 2007 for direction.
At that directions hearing, the conveyancer was granted a further extension of 28 days in which to provide the expert report.
On 3 August 2007, the conveyancer’s solicitors informed the plaintiffs’ solicitor by facsimile that they had obtained an opinion from an expert mortgage broker that was “extremely damaging” to the plaintiffs’ case. The conveyancer’s solicitors did not identify the expert mortgage broker they had retained; nor did they provide a copy of the report.

On 6 August 2007 the plaintiffs’ solicitors responded by requesting a copy of the report.
A month later, on 6 September 2007 the plaintiffs’ solicitor wrote again to request a copy of the report, noting that the orders made by Magistrate Panagiotidis required a copy of the expert report to be provided to all parties within 28 days. A report was provided to the plaintiffs’ solicitors on 18 September 2007.
At a directions hearing on 20 September 2007, the issue of the expert report was raised and it was agreed that the letter of instruction and the details of the documents made available to the expert would also be provided to the plaintiffs’ solicitors.
Those documents were not disclosed until two months later in a facsimile of 28 November 2007. It became apparent from the documents that a verbal report was requested from the mortgage broker on 26 March 2007; a written report was requested on 8 July 2007, and a draft report had been in existence in September 2007 until the report was finalised on 14 September 2007.
It was submitted by the plaintiffs’ counsel, and I agree, that there was a significant delay by the conveyancer’s solicitors in providing the first expert report.
Second report
The facsimile of 28 November 2007 also revealed that a second expert report had been sought by the conveyancer. This report related to whether the conveyancer had acted in breach of contract and/or professional duty, and to the reasonableness of the conveyancer’s fees.
A verbal report was initially sought from an “expert” conveyancer on 17 September 2007, and a written report requested on 6 November 2007. On 22 November 2007, the conveyancer’s solicitors requested amendments to the expert’s draft report.
Conclusions on delay
Having regard to this history, I consider that there were delays by the plaintiffs in the provision of discovery. Overall, however, the cause of greater delay was in my view attributed to the conduct of the conveyancer in the amendment of the pleadings; in the manner of pursuit of discovery and non-party discovery; and the process of obtaining and providing the expert reports. There was fault on both sides, but most significantly by the conveyancer, whose conduct through its solicitors contributed to additional costs and the matter not being listed for trial at an earlier time.
Solicitors for the conveyancer seem to have taken an over-enthusiastic approach in determining what documentation was needed and what proof they required to support their client’s defence. They made continuous requests for more and more information, which in many instances did not properly relate to the pleadings as they stood at different points of time. The ultimate defence amounted to a different cause of action altogether, in the form of a set-off to deflect any order for damages made against them on the basis that the plaintiffs were not entitled to the return of their deposit.
Returning to Magistrate Millard’s reasons. I do not consider that the learned Magistrate took into account some matter wholly unconnected with the cause of the action, or that he was without sufficient material to exercise his discretion to award costs, or that he did not exercise his discretion judicially. In my view, no error was demonstrated by Magistrate Millard in concluding as he did. He was entirely entitled to make the findings contained in [39] of his reasons.
In addition, I have considerable doubt as to the appropriateness and relevance of the expert report on the issue of “best endeavours”. There is also no reason why a report from the “expert” conveyancer could not have been organised at an earlier point in time, as the obtaining of such a report was not dependant on any of the discovery issues. The cost involved in the obtaining of both reports is likely to have been considerable.
Offers of settlement
The conveyancer contends that if Magistrate Millard had been aware of the offers of settlement, his Honour would have exercised his discretion differently. In making this submission, the conveyancer referred to a letter dated 29 March 2006 whereby the conveyancer offered to bear its own costs if the plaintiffs were prepared to discontinue. The offer was rejected. This correspondence was not before the Magistrate when he made the orders as to costs.
In my view, this letter was sent too early in the proceedings to amount to anything significant. It was sent prior to the conveyancer amending its defence to reflect the “best endeavours” issue. At that time not all of the issues had evolved, and I do not think that the offer should in any way affect the final costs order.
I was also referred to a letter dated 7 May 2007 in which the conveyancer offered to accept $15,000 for costs on the condition that the plaintiffs discontinued proceedings. By this stage, the issues concerning contributory negligence and “best endeavours” had evolved and the conveyancer was in the process of obtaining at least one of the two expert reports. It is apparent from this letter that costs in the proceedings had risen beyond $15,000 in what was a $20,000 claim. As I have previously indicated, I am doubtful as to the relevance and need of the expert reports. The $15,000 bill for costs, which was stated as being considerably less than the conveyancer’s actual costs, is concerning.
At a directions hearing in May 2007 an offer was made by the plaintiffs and the vendor to the conveyancer that the deposit be returned, and that each party bear its own costs of the proceedings. This was rejected by the conveyancer, who proposed another offer that involved a contribution of $10,000 to the conveyancer’s costs by both the plaintiffs and the vendor, and the payment of $654.50 “plus costs and interest”, being the amount of conveyancer fees allegedly owing by the plaintiffs. Further correspondence took place between the parties throughout 2007 regarding settlement offers. None were accepted.
Under r 263 of the 2006 Rules, the Court may have regard to any offer to settle the action in exercising its discretion to award costs. The correspondence does not indicate to me that either party acted particularly unreasonably in negotiations. Whilst Magistrate Millard could have taken the Calderbank letters into consideration had they been before him, I am not satisfied that the refusals by the plaintiffs were so unreasonable and imprudent that he would have exercised his discretion differently.
Certification of Costs
Turning now to the issue of certification for costs on the complex scale. Rule 106(7) of the Magistrates Court (Civil) Rules 1992 (“Magistrates Court Rules”) provides:
(a)A party may, by notice in writing served on all other parties, certify that the nature of an action entitles the parties to costs on the relevant scale in the Third Schedule as a complex action and, unless any other party by notice in writing objects (including detailed reasons for the objection) within 21 days of the service of the notice, a party entitled to costs in the action is entitled to costs on the relevant scale as a complex action.
(b)If a party so objects, the relevant scale may be determined by the judicial officer hearing the trial of the action.
(c)In any other case, unless the Court orders otherwise, the relevant scale for a complex action will not apply.
The conveyancer submitted that had Magistrate Millard ordered the plaintiffs to pay the conveyancer’s costs, costs should have been ordered on the complex action scale as the matter had been certified accordingly. In substantiating this position, the conveyancer relied on a letter sent by the conveyancer’s solicitors on 24 August 2006 to the plaintiffs’ solicitors stating:
In view of the nature of these proceedings the second defendant considers it appropriate that the costs in this action be assessed on the relevant scale as a complex action pursuant to Rule 106(7) of the Magistrates Court Rules.
Please advise as soon as possible whether your client consents to this matter being certified as complex.
The letter of 24 August 2006 was sent prior to the amendment of the conveyancer’s pleadings; the 7 September 2006 and 19 October 2006 orders vacating the trial dates; and the seeking of expert reports by the conveyancer.
No further mention of the 24 August 2006 letter occurred until nine months later on 13 June 2007, when the conveyancer’s solicitor’s wrote to the plaintiffs’ new solicitors stating that as there had been no response to the 26 August 2006 letter, “this matter will be deemed a complex action for costs purposes”. On 21 June 2007 the plaintiffs’ new solicitors wrote a letter in response asserting that the letter of 24 August 2006 was “no more than a suggestion, rather than a certification as required by rule 106(7).” The letter then stated:
If you provide that certification, we have twenty-one (21) days to object. We place you upon notice that we will object as, in our opinion, this is really quite a simple matter that has become protracted as a consequence of the conduct of the parties and/or their legal advisors. It is not a matter of legal complexity, but a matter that will ultimately turn upon an adjudication as to the facts.
The first defendant has indicated that they will now refund the deposit and retract their counterclaim provided that each party bears their own costs. Accordingly, if your client were prepared to withdraw its counterclaim and bear its own legal costs, then this entire matter can be resolved forthwith.
As your client is not prepared to do so, it will appear that this matter must proceed to trial simply so that the issue of your costs (i.e. who should pay them and at what rate) can be determined.
Almost a year later on 2 April 2008, the conveyancer’s solicitors replied to the 21 June 2007 letter stating that “a notice of objection was not provided to us by your clients within the requisite time frame”, and asserting that the contents of the letter of 21 June 2007 “did not constitute ‘detailed reasons’ required by Rule 106(7)(a) of the [Magistrates Court Rules]”. The letter also set out the reasons why the matter should be certified as complex.
The plaintiffs’ solicitors responded on 22 April 2008, reiterating that the letter of 24 August 2006 did not meet the requirements of r 106(7), and reminding the conveyancer’s solicitors that they had provided notice of an intention to object in the event that the conveyancer’s solicitors decided to serve a notice certifying the matter as complex in accordance with the Magistrates Court Rules.
I have some doubt as to whether the letter of 24 August 2006 would have sufficiently alerted the plaintiffs’ then solicitor that r 106(7) was being triggered and that a detailed notice of objection was required within 21 days in order to prevent an automatic certification of the matter as “complex”.
The Magistrates Court Rules do not state what form of notice in writing is required. There is an informality about the letter relied on by the conveyancer, in that it asserts that the conveyancer “considers it appropriate” for costs to be certified on the complex scale. I also note that the letter requests a reply “as soon as possible”. There was no mention of the time requirement of 21 days. I do not consider that r 106(7) was triggered by the 24 August 2006 letter.
Even if the 24 August 2006 letter did amount to a certification under r 106(7), given the steps taken by the plaintiffs’ solicitors to indicate their clear objection to certification, I consider that it would have been within the discretion of Magistrate Millard pursuant to r 10 of the Magistrates Court Rules to dispense with compliance with r 106(7) in the circumstances.
In addition, I am not satisfied that this action should be treated as complex. The facts and issues were narrow in compass and were made unnecessarily prolix, as distinct from complex, by the skirmishes over discovery, amendments to pleadings and the desire of the conveyancer to seek expert evidence.
I reject the argument that costs, if they were to be awarded, should be awarded on a complex scale.
Conclusion
In my view, there has been no error of principle by Magistrate Millard; I reject each of the arguments by the counsel for the conveyancer. I refuse permission to appeal, and even if permission were granted I reject the proposed appeal on its merits. The continued efforts by the conveyancer through its solicitors to obtain costs on the complex scale in relation to a $20,000 claim, which was ultimately settled, is a sad indictment of the legal profession. There should be greater efforts made to contain unnecessary costs in the lower jurisdictions rather than inflating them. The amount of costs involved in the submissions made before Magistrate Millard, and in turn before me, is highly concerning.