Stavropoulos v Morrow Investments Pty Ltd - [2005] SASC 444

Supreme Court of South Australia
(Magistrates Appeals: Civil)
STAVROPOULOS & ANOR v MORROW INVESTMENTS PTY LTD
Judgment of The Honourable Justice Debelle (ex tempore)
8 November 2005
PROCEDURE - INFERIOR COURTS - SOUTH AUSTRALIA - MAGISTRATES COURT
First appeal against refusal of leave to file counterclaim – second appeal against refusal of leave to reinstate counterclaim – unrepresented appellants – first appellant sought to file counterclaim 14 months after commencement of action – counterclaim for $85,000 – second appellant filed counterclaim but discontinued it during settlement negotiations in December 2004 – sought to reinstate in June 2005 – whether discontinuance operates as final judgment – whether impermissible delay in filing or reinstating counterclaims – held, first appellant’s counterclaim in excess of jurisdiction of Magistrates Court – discontinuance not final judgment – first appeal dismissed, second appeal allowed.
Magistrates Court Act 1991 s 3, s 8, s 40; Supreme Court Rules 1987 r 96B.02, r 96B.03; Magistrates Court Rules 1992 r 87, r 88, r 104, referred to.
State of Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146, applied.
Nash v Lapins (unreported, Supreme Court of South Australia, 27 August 1997, judgment no S6345), distinguished.
David Hurrell & Co Pty Ltd v Hardeake Pty Ltd (2001) 215 LSJS 268, not followed.
Esther Investments Pty Ltd v Markalinga Pty Ltd (1989) 2 WAR 196; Kowalski & Killa Pty Ltd v Lochlee Pty Ltd [2002] SASC 252; McPherson v Groeneveld (unreported, Supreme Court of South Australia, 21 February 1997, judgment no S6052); SA Repairs and Painting Pty Ltd v Trenka Pty Ltd (1993) 171 LSJS 300; Vorassi v Maxwell Property Consultants Pty Ltd (2003) 227 LSJS 1, considered.

STAVROPOULOS & ANOR v MORROW INVESTMENTS PTY LTD
[2005] SASC 444
Magistrates Appeal: Civil

DEBELLE J. Morrow Investments Pty Ltd (“Morrow Investments”) is the registered proprietor of a retail shopping centre at 455 Greenhill Rd, Tusmore. On 25 June 2003 the appellants executed a lease by which they leased premises in the shopping centre from Morrow Investments for use as a restaurant. The lease was for a period of three years, with a right of renewal for a further two years. The rent was $18000 per annum, payable in monthly instalments of $1500 each.
On 14 June 2004 Morrow Investments commenced an action in the Adelaide Magistrates Court against both appellants. In that action it sought to recover $18682.26 being one year’s rental plus GST, as well as damages for repairs, interest on arrears of rent and a security bond payable by the appellants. In its statement of claim Morrow Investments alleged that on a date unknown to it, the appellants had repudiated the lease by vacating the premises and returning possession to Morrow Investments.
The appellants each filed a separate defence. (I will for convenience refer to the appellants as “Mr McNamara” and “Ms Stavropoulos”). In his defence Mr McNamara pleaded that the lease had been terminated by agreement of the parties to take effect from 24 October 2003, that Morrow Investments had informed him that the premises had already been leased to a third party, and that there would be no penalties. Mr McNamara also pleaded that he had paid the security bond and one month’s rent in advance. In addition, Mr McNamara filed a counterclaim, claiming the premises were not suitable for use as a restaurant and, it seems, that Morrow Investments had misrepresented to the appellants that the local council would approve a change of use of the premises to a restaurant. I say “it seems” because the meaning and intent of the counterclaim is not entirely clear. Mr McNamara counterclaimed $29000 being damages for expenditure thrown away in purchasing restaurant equipment and for losses occasioned by rain damage to that equipment.
Ms Stavropoulos filed a defence to much the same effect as Mr McNamara. She did not file a counterclaim.
A conciliation conference was appointed for 22 October 2004. The parties negotiated but did not resolve their differences. The conciliation conference was adjourned. Negotiations continued over a period of about three months but the parties could not reach a compromise. In the meantime, Mr McNamara had, by notice dated 17 December 2004 but filed on 21 December 2004, withdrawn his counterclaim.
The action was listed for trial on 9 March 2005. On 8 March 2005 an order was made, among others, adjourning the trial. Morrow Investments also secured an order permitting it to amend its particulars of claim. The action was listed for trial on 1 August 2005 but was not then reached. Later the trial was listed to commence on 28 November 2005.
On 8 June 2005 Mr McNamara applied to reinstate his counterclaim. The application was heard on 15 June 2005 and refused. The magistrate’s reasons for refusing the application were as follows:
Under the terms of rule 104, no grounds exist for me to set aside the judgment which is effectively a final judgment as a result of the discontinuance of the counterclaim.
Thus the magistrate proceeded on the footing that the consequence of Mr McNamara filing the notice of discontinuance was that there was a final judgment on the counterclaim in favour of Morrow Investments. Mr McNamara did not institute an appeal against that judgment within 14 days, as required by Rule 96B.03 of the Supreme Court Rules.
On 16 August 2005 Ms Stavropoulos applied for leave to file a counterclaim. On 24 August 2005 the application was refused by a different magistrate. I will later refer to the magistrate’s reasons. By notice dated 15 September 2005, but not filed under 16 September 2005, both Ms Stavropoulos and Mr McNamara appealed against the separate orders dismissing their respective applications.
A party to a civil action in the Magistrates Court may, in accordance with the Rules of the Supreme Court, appeal to the Supreme Court from both an interlocutory judgment or a final judgment: see s 40 of the Magistrates Court Act1991 and the definition of “judgment” in s 3 of that Act.
The judgments the subject of this appeal are not final judgments but rather interlocutory judgments. In the case of interlocutory judgments, Rule 96B.02 of the Supreme Court Rules relevantly provides:
96B.02 (1) Unless a Magistrate has certified that the proposed appeal involves:
(a)A point of law of difficulty or importance; or
(b)A point of sufficient importance in the proceedings to warrant an interlocutory appeal being dealt with before final judgment in the action,
any appeal against an interlocutory judgment under Section 40 of the Act is subject to leave being obtained from the Supreme Court.
(2)Such leave may be granted by a single Judge in chambers ex parte or upon such notice to the other parties as the Court may direct:
(a)Upon a summons which is to be issued within 14 days of the making of the judgment complained of;
(b)[Repealed]
(c)On an application taken out within 14 days of the making of the order complained of in any proceedings already before the Court involving the same parties and relating to the subject matter of the proposed appeal.
The appellants have obtained neither a certificate from a magistrate under sub‑rule 1 nor leave of this Court under sub‑rule 2. The appellants face a further difficulty in that their respective appeals are out of time. There is a further procedural question, namely, whether each of the appellants should have instituted a separate appeal.
In the absence of a magistrate’s certificate and in the absence of leave of a judge of this Court and because each appeal is out of time, the appeals are both incompetent.
The appellants are both unrepresented. It is apparent that they are not aware of the distinction between an interlocutory judgment and a final judgment. It is apparent also that they are not aware that they did not have an appeal as of right. Although their affidavits refer to an application for leave to appeal, it is apparent that they have only lately learned of that requirement.
In all the circumstances, I believe that justice and fairness dictate that I should proceed on the footing that the notice of appeal should be treated as an application for leave to appeal. For like reasons, I will also treat the notice of appeal as an application for leave to extend the time within which to appeal. I add that Mr Blight, who appeared for the respondent, very properly conceded that it was appropriate to proceed first to consider whether leave to appeal should be granted and whether an extension of time should be granted within which to appeal. I also add that Mr Blight properly did not take any issue with the fact that the appellants should each have instituted a separate appeal from each of the two orders made in the Magistrates Court.
Thus, the appellants require both leave to appeal and an extension of time within which to appeal. It is convenient to consider first whether they should be granted an extension of time within which to appeal. If they fail in those applications, it will not be necessary to consider whether leave to appeal should be granted. I turn first to consider those issues in relation to Mr McNamara.
As already mentioned, Mr McNamara had initially filed a defence and counterclaim. The counterclaim was discontinued on 21 December 2004. In an affidavit sworn on 8 June 2005, in support of his application to re-institute his counterclaim, Mr McNamara said:
On the 17 December 2004 I sacked my solicitor to defend this action. He took it upon himself to discontinue all claims of defence. I would like to reinstate all claims of counteractions to this matter.
That statement is not consistent with what he said in an affidavit sworn in this Court in support of an application for leave to appeal. He said:
6.I previously filed and served a counterclaim in this action but because of settlement arrangements by the second defendant, which then broke down, the counterclaim was withdrawn. I made the application to file a counterclaim on the basis of expenditure incurred as a result of the plaintiff's premises being unfit for my purpose of running a restaurant. The premises has had a leaking roof for the period of 22 years.
7.I seek leave to file a notice of appeal pursuant to Rule 96B.02(1)(b) of the Supreme Court Rules on the basis that if I was not granted leave to file a counterclaim, I would not be able to recover any of my costs incurred as a result of the plaintiff not providing me with premises suitable for the purpose of running a restaurant pursuant to an agreement to lease signed by myself, the second defendant Georgina Stavropoulos and a representative of Taplins Real Estate, Margot Coles.'
As I have said, there is an obvious inconsistency between those two sets of reasons. However, it is plain that Mr McNamara seeks to prosecute the matters which he set forth in his counterclaim.
The Court has a discretion whether to grant an extension of time within which to appeal. When exercising that discretion, it will have regard to the length of the delay, the reason for it, whether Mr McNamara has an arguable case and the extent of any prejudice suffered by Morrow Investments: Esther Investments Pty Ltd v Markalinga Pty Ltd (1989) 2 WAR 196 and McPherson v Groeneveld (Unreported, Supreme Court of SA, 21 February 1997, judgment no S6052).
On one view the length of the delay is not great. However, the period of about two and a half months must be considered in context, that is to say, in light of the fact that the trial of this action is listed for hearing later this month. Mr McNamara has delayed instituting this appeal notwithstanding the imminence of the trial. The only reason given for the delay is that Mr McNamara did not know of the time limits prescribed by the Supreme Court Rules. That is perhaps understandable, given that the time limit is not spelled out in either the Magistrates Court Act or in the Magistrates Court Rules.
The next question is whether Mr McNamara has an arguable case. For the purpose of determining this question, the question is not whether he will ultimately succeed on his counterclaim but whether he has reasonable prospects of success on his appeal, if leave is granted.
The magistrate refused leave to reinstate the counterclaim because he believed that the consequence of Mr McNamara filing a notice of discontinuance was that there was final judgment for Morrow Investments on the counterclaim. The magistrate said that the terms of Rule 104 of the Magistrates Court Rules did not permit him to set aside the judgment.
Rule 104 applies to final judgments. The Magistrates Court Rules draw a distinction in a number of instances between a judgment and a final judgment. They are separately defined. An instance of the distinction is to be found in Rule 87(1), which permits the Magistrates Court to set aside or vary a judgment other than a final judgment. Two instances where a judgment in the Magistrates Court is not a final judgment are a judgment in default of pleading or appearance and a judgment for non‑attendance at a conciliation conference: SA Repairs and Painting Pty Ltd v Trenka Pty Ltd (1993) 171 LSJS 300 and Vorassi v Maxwell Property Consultants Pty Ltd (2003) 227 LSJS 1.
As I have said, Rule 87(1) of the Magistrates Court Rules authorises a magistrate to set aside a judgment which is not a final judgment. Rule 88 provides for discontinuance of an action. In my view, Rule 88 applies mutatis mutandis to the discontinuance of a counterclaim. Rule 88(4) provides: “A discontinuance of an action has effect as a judgment”. The discontinuance of a counterclaim, therefore, has the effect of a judgment on the counterclaim. However, the judgment is not a final judgment. It is a judgment which is capable of being set aside by a magistrate pursuant to Rule 87(1). It is apparent that the magistrate erred in that he had regard to Rule 104, which applies to final judgments, and he failed to have regard to Rule 87. Mr McNamara, therefore, has reasonable prospects of success on his appeal. I turn to the question of prejudice.
If an extension of time is granted, there will be delay in the hearing of this action. That will, in all likelihood, result in prejudice to Morrow Investments, in that the trial will not be heard in late November but will be delayed for some months further. However, Morrow Investments will still be entitled to a trial. The only prejudice it will suffer is the prejudice in costs and a delayed hearing. The question of costs is capable of being remedied by an order of the Magistrates Court. There is no affidavit filed on behalf of Morrow Investments to the effect that it will suffer incurable prejudice if the trial is delayed.
In my view, notwithstanding the imminence of the trial or the consequential delay and costs to Morrow Investments of an adjournment, a balancing of all the relevant factors requires the application for an extension of time within which to appeal be granted. Morrow Investments will still have its trial, albeit likely a delayed trial. I am satisfied that Mr McNamara was not aware of the precise rules as to the time within which to apply for leave to appeal or that he had to seek leave to appeal.
I turn to the question of leave to appeal. It is apparent that the magistrate has failed to note what was a relevant rule of court. The magistrate has, therefore, erred as a matter of law. The point is of importance, lest other magistrates make a like error. It has considerable importance insofar as its potential effect upon the issues in this action.
I acknowledge that in Nash v Lapins (unreported, Supreme Court of South Australia, 27 August 1997, judgment No S6345) Lander J said:
The purpose of Rule 96B.02 is to discourage appeals being brought from decisions on interlocutory matters because such appeals necessarily increase the cost to the parties of the litigation and, at the same time, interfere with the orderly disposal of the action.
Actions in the Magistrates Court are meant to be disposed of as expeditiously and with as little cost to the parties as possible. Appeals to this Court from interlocutory decisions will necessarily add to the cost of the action and prolong the litigation itself. The rule contemplates that leave would usually only be given in relation to appeals from interlocutory decisions where this Court is satisfied that there is a point of law, of difficulty or of importance, or the particular decision is of sufficient importance to warrant an interlocutory appeal being dealt with before final judgment in the action.
In that case Lander J was dealing with an application which did not involve a question of law which had a real bearing on the issues in the action. The decision has no application to the particular circumstances of this case. Leave to appeal should, therefore, be granted to Mr McNamara. For these reasons I extend the time within which Mr McNamara may institute this appeal to 16 September 2005 and grant him leave to appeal. I turn to the appeal itself.
For the reasons already expressed, the magistrate plainly erred when he applied Rule 104 and not Rule 87 when considering Mr McNamara’s application to re‑instate the counterclaim. The judgment on the notice of discontinuance was not a final judgment. That is apparent from the definitions of “judgment” and “final judgment” and from the terms of Rule 87. I do not share the doubts on this question expressed in Kowalski & Killa Pty Ltd v Lochlee Pty Ltd [2002] SASC 252. That conclusion is also consistent with general practice and procedure. In that respect, I refer to Rule 52.05 of the rules of both the Supreme Court and of the District Court, which provides that discontinuance of an action is not a bar to a subsequent action unless the court otherwise orders.
That conclusion does not dispose of the appeal. It is necessary to consider also whether leave should be granted to re‑instate the counterclaim. Morrow Investments has had notice of the issue in the counterclaims since 4 August 2004. Although Mr McNamara discontinued the counterclaim on 21 December 2004, the issues will not come as any surprise to Morrow Investments, which will be readily able to prepare its defence to the counterclaim. The issues concern representations made to Mr McNamara, some of which will, in any event, be the subject of either his defence or the defence of Ms Stavropoulos.
When initially made, the application was not so late that it should not have been granted. I do not overlook the importance of case management principles but they should not prevent a party from litigating an issue which is fairly arguable: State of Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146 at 155. The issues raised on the counterclaim are fairly arguable. The magistrate should, therefore, have granted Mr McNamara leave to reinstate the counterclaim.
For all of these reasons I would allow the appeal by Mr McNamara. I turn to the appeal by Ms Stavropoulos.
As is the case with Mr McNamara, Ms Stavropoulos requires both leave to appeal and an extension of time within which to appeal. I deal first with the application for an extension of time within which to appeal. I have already stated the relevant principles.
Ms Stavropoulos applied for leave to file a counterclaim on 16 August 2005. The application was heard on 24 August and was dismissed. The time for appeal expired 14 days later on 7 September 2005. The notice of appeal was filed on 16 September. The appeal is, therefore, nine days out of time. Although the delay is short, the trial date is correspondingly more imminent. The delay in lodging the notice of appeal is not explained, other than by a lack of knowledge. I turn to the question whether Ms Stavropoulos has an arguable case.

This action was commenced on 14 July 2004 and the defence of Ms Stavropoulos was filed on 6 September 2004. Ms Stavropoulos has, therefore, delayed some 11 months in seeking to file her counterclaim. In that time she had legal representation. No explanation is proffered for the late application.
Ms Stavropoulos and Mr McNamara intended to be partners in a restaurant business. She would have been aware that Mr McNamara had discontinued his counterclaim. However, she did not make her application until 16 August, some eight months after he had discontinued his counterclaim. These were factors addressed by the magistrate, who was also troubled by the imminence of the trial. The magistrate also noted that in her counterclaim Ms Stavropoulos claimed $85000 damages.
The magistrate was entitled to have regard to all of these matters. What is of a special note is that Ms Stavropoulos seeks to recover an amount which exceeds the jurisdictional limits of the Magistrates Court. Section 8 of the Magistrates Court Act relevantly provides:
8. (1) The Court has jurisdiction –
(a)to hear and determine an action (at law or in equity) for a sum of money where the amount claimed does not exceed –
(i)if the claim is for damages or compensation for injury, damage or loss caused by, or arising out of, the use of a motor vehicle - $80,000;
(ii)in any other case - $40,000;
(b)to hear and determine an action (at law or in equity) to obtain or recover title to, or possession of, real or personal property where the value of the property does not exceed $80,000;
(c)to hear and determine an interpleader action where the value of the property to which the action relates does not exceed $80,000;
(d)to grant any form of relief necessary to resolve a minor civil action.
(2) The parties to an action may waive any monetary limit on the civil jurisdiction of the Court, and, in that event, the Court will have jurisdiction to determine the action without regard to that limitation.
I have considerable reservations whether the jurisdictional limits in s 8 mean that the total of the amount claimed respectively in the claim and counterclaim should not exceed $40000 in claims for damages of compensation which do not arise out of the use of motor vehicles, as was decided in David Hurrell & Co Pty Ltd v Hardeake Pty Ltd (2001) 215 LSJS 268. In that case, Wicks J said:
Section 8 referred to above has application to ensure not only that a claim must not exceed $30000 but also to ensure that the limit of the possible spread of claim and counterclaim also does not exceed that amount in total. If that were not so, the court would have a jurisdiction in respect of a spread of claims generally totalling $60000 being in a claim of up to $30000 and a counterclaim for a similar amount ... It is the claim which must not exceed $30000. If it does, it must be reduced to $30000 and then any amount owing by the plaintiff in the judgment must be set off against the $30000.
[I note that at the time of that decision, the upper limit on compensation claims (not being motor vehicle‑related) was $30000.] The reasoning in that decision would mean that if a claim was made for $40000 against a defendant, that defendant would not be able to bring a counterclaim. I doubt that that is the intention of the Magistrates Court Act but it is not necessary to decide that question because, on any view, the amount of the counterclaim by Ms Stavropoulos exceeds the jurisdictional limits for a counterclaim even without considering the amount of the plaintiff’s claim.
By reason of sub‑s (2) of s 8, it is, of course, possible for the parties to consent to an increase in the jurisdictional limit. However, it is apparent that Morrow Investments does not consent to such an increase.
The jurisdictional limit is a legal barrier to the intended counterclaim by Ms Stavropoulos. Thus, on any view of the matters, Ms Stavropoulos has no reasonable prospects of success on her intended appeal. It follows that it would not be appropriate to grant an extension of time within which to institute the appeal. For like reasons, I would also refuse her application for leave to appeal against the interlocutory judgment. Ms Stavropoulos has, therefore, failed to secure an extension of time within which to appeal and has failed to obtain leave to appeal against the interlocutory judgment. It follows that her appeal is incompetent.