Tey v Optima Financial Group Pty Ltd
[2010] WASCA 219
•12 NOVEMBER 2010
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: TEY -v- OPTIMA FINANCIAL GROUP PTY LTD [2010] WASCA 219
CORAM: NEWNES JA
MURPHY JA
HEARD: 24 SEPTEMBER 2010
DELIVERED : 12 NOVEMBER 2010
FILE NO/S: CACV 78 of 2010
BETWEEN: KOK YONG TEY
Appellant
AND
OPTIMA FINANCIAL GROUP PTY LTD
Respondent
ON APPEAL FROM:
Jurisdiction : DISTRICT COURT OF WESTERN AUSTRALIA
Coram :DAVIS DCJ
Citation :TEY -v- OPTIMA FINANCIAL GROUP PTY LTD [2010] WADC 98
File No :APP 44 of 2009
Catchwords:
Practice and procedure - Application to dismiss appeal on grounds costs of appeal disproportionate - Amount in issue of $550 - Magistrates Court (Civil Proceedings) Act 2004 (WA), s 43(3) - Exercise of discretion
Legislation:
Magistrates Court (Civil Proceedings) Act 2004 (WA), s 43(3)
Result:
Appeal dismissed
Category: B
Representation:
Counsel:
Appellant: Mr J R Ludlow
Respondent: Mr B W Ashdown
Solicitors:
Appellant: In person
Respondent: De Vita & Dixon
Case(s) referred to in judgment(s):
Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd [2000] WASC 178; (2000) 22 WAR 372
Greer v Downs Supply Co [1927] 2 KB 28
Mooney v Williams [1905] HCA 34; (1905) 3 CLR 1
Olsson v Dyson (1969) 120 CLR 365
Siu Yin Kwan v Eastern Insurance Co Ltd [1994] 2 AC 199
Tey v Optima Financial Group Pty Ltd [2010] WADC 98
NEWNES JA: This is an application by the respondent under s 43(3) of the Magistrates Court (Civil Proceedings) Act 2004 (WA) (the Act) for an order that the appeal be struck out on the ground that the likely costs of the appeal to the parties would be disproportionate to the amount of the respondent's claim.
Background
The appeal arises out of proceedings in the Magistrates Court involving a sum of $550. The respondent (the claimant in the proceedings) carried on the business of providing accounting services and business advice. Mr John O'Brien, who is a chartered accountant and a registered company auditor, was a director and shareholder of the respondent. The appellant (the defendant in the proceedings) carried on the business of a travel agent under the name Skyland Travel Services (Skyland).
It was common ground in the proceedings that, in September 2006, a meeting took place between Mr O'Brien and the appellant at which Mr O'Brien agreed to conduct an audit of the financial statements of Skyland for the financial year ended 30 June 2006, for the sum of $550 including GST. It was agreed that following completion of the audit Mr O'Brien would lodge the necessary documents (the audited accounts) with the Travel Compensation Fund on the appellant's behalf. The lodgment was to be done electronically.
It was also common ground that at a subsequent meeting at Mr O'Brien's offices on 22 September 2006, the appellant instead took delivery of the audited accounts and, on 24 September 2006, lodged them with the Travel Compensation Fund.
The appellant did not pay the audit fee of $550 and the respondent commenced proceedings in the Magistrates Court for its recovery. The action went to trial before Magistrate Cockram on 18 June 2009. Neither party had legal representation.
The appellant raised a number of defences to the claim. She said that her contract was with Mr O'Brien and not with the respondent; that the work had not been completed because the respondent had not lodged the audited accounts with the Travel Compensation Fund; that a 'statement by the principal accounting officer' of Skyland had not been prepared by the respondent; that the accounting format and policies of Skyland were changed without her permission; and that, contrary to the Institute of
Chartered Accountants Auditing Standard, an audit engagement letter had not been prepared.
In his decision, delivered on 2 July 2009, the magistrate rejected each of the appellant's defences. He found that on the evidence it was clear that Mr O'Brien had acted as the agent for an undisclosed principal, being the respondent, and that in accordance with established legal principles the respondent was entitled to sue on the agreement. The magistrate found that the respondent had not lodged the audited accounts because subsequent to the agreement the appellant had said that she would do so and in fact had done so. The complaint that a 'statement by the principal accounting officer' of Skyland had not been prepared by the respondent was rejected by the magistrate who found that such a 'statement' was not required and the respondent was under no obligation to prepare it. He also rejected the appellant's defence that Skyland's accounting format and policies had been changed and he found that an audit engagement letter was not required by the Auditing Standard.
The magistrate gave judgment for the respondent in the sum of $550 and allowable costs of $368.05. He allowed interest on the sum of $550 at 6% per annum from 11 October 2006 to judgment.
The appellant filed an appeal against the magistrate's decision in the District Court. The respondent applied under s 43(3) of the Act for an order that the appeal be struck out and, alternatively, under s 43(4) of the Act for an order striking out all the grounds of appeal on the basis that they had no reasonable basis or no reasonable prospect of success.
The respondent's application came on for hearing on 2 June 2010. The appellant again appeared in person but the respondent, being a corporation, was represented by solicitors, as it had to be: see Rules of the Supreme Court 1971 (WA), O 12 r 1(2); Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd [2000] WASC 178; (2000) 22 WAR 372. The primary judge delivered her decision on 25 June 2010, striking out the appeal: Tey v Optima Financial Group Pty Ltd [2010] WADC 98.
In her reasons for decision, the primary judge described the case in the Magistrates Court as a simple one. She noted that the principal issue on the appeal was the appellant's contention that her contract was with Mr O'Brien, not the respondent. There was a secondary issue as to whether the audit work was in fact carried out. The primary judge observed that the respondent, at least, would incur thousands of dollars by way of legal costs if the appeal were to proceed and concluded that costs of such a magnitude were disproportionate to both the amount of the claim and the nature of the case. Accordingly, the appeal should be struck out.
The primary judge went on, nevertheless, to consider the second limb of the application - under s 43(4) of the Act - and found that all of the grounds of appeal should be struck out as having no reasonable basis and no reasonable prospect of success. Her Honour refused an application by the appellant to amend the grounds of appeal, concluding that none of the proposed new grounds of appeal had any reasonable basis or any reasonable prospect of success.
On 15 July 2010, the appellant filed an appeal notice in this court against that decision. On 4 August 2010, the respondent brought the current application to dismiss the appeal under s 43(3) of the Act. In support of that application, the respondent relied, amongst other things, on an affidavit sworn by Mr De Vita, a director of the respondent's solicitors, annexing a draft bill of costs for taxation. In the draft bill, the likely costs of the appeal are calculated at $24,178, plus disbursements of $2,442. In the affidavit, Mr De Vita says that he has entered into a costs agreement with the respondent, as has counsel briefed on the matter, and Mr De Vita expresses the opinion that the costs which would in fact be incurred by the respondent in the appeal would be greater than the party and party costs set out in the draft bill of costs.
I should note in passing, however, that it seems to me that a number of the amounts contained in the draft bill exceed any amount likely to be recovered on taxation. I am inclined to think that the party and party costs of the respondent on the appeal would be more likely to be in the vicinity of half the figure in the draft bill. The appellant's costs would depend upon whether she was legally represented, a matter on which the appellant did not reveal her intentions.
Disposition of the appeal
It is appropriate, before turning to the issues on the application, to describe the relevant statutory framework.
Section 40 of the Act provides, in effect, that a party to a case in the Magistrates Court that is not a 'minor case' (as defined in the Act) may appeal to the District Court against an order or judgment made in the proceedings. I should mention that a minor case is a case where, relevantly, the amount in issue is not more than the prescribed amount (currently $10,000) and the claimant has elected to have the claim dealt with under the minor cases procedure: s 26 of the Act. It has not been suggested that this is a minor case and I infer that the respondent did not elect to have it dealt with as a minor claim.
Section 42 of the Act provides, in effect, that a party to an appeal to the District Court under s 40 may appeal to this court against the judgment of the District Court on the appeal. The jurisdiction of the Court of Appeal to hear appeals under the Act is also contained in s 58(1)(i) of the Supreme Court Act 1935 (WA).
The powers of the Court of Appeal on the hearing of an appeal under s 42 are set out in s 43 of the Act. Relevantly, s 43(3) provides:
The appeal court may strike out the appeal if the likely costs of the appeal to the parties would be disproportionate to the amount of the claim in, or the nature of, the case which is the subject of the appeal.
It is important to note that s 43(3) is not concerned with costs which the parties have already incurred but with the likely costs to the parties of the appeal. The evident purpose of the provision is to bring to an end the days when a litigant who was so minded could pursue an appeal regardless of whether the costs involved were disproportionate to the amount of the claim or to the nature of the case. Of course, whether in a particular case the costs of the appeal are disproportionate will inevitably involve matters of judgment and degree.
While counsel for the appellant accepted that an appeal may be struck out under s 44(3) either because the costs of the appeal were disproportionate to the amount of the claim or because they were disproportionate to the nature of the case, he submitted that the discretion under the former limb would not ordinarily be exercised unless the latter limb was also made out (ts 10). That is, ordinarily a court would not exercise its discretion to strike out a claim on the basis that the costs of the appeal were disproportionate to the amount of the claim unless it was also satisfied that the costs of the appeal were disproportionate to the nature of the case.
It was submitted by counsel for the appellant that the primary judge had erred in concluding that the nature of the case was a simple one and therefore that both limbs of s 44(3) had been enlivened. Counsel argued that if the second limb was not enlivened, that was a relevant factor which favoured the rejection of the respondent's application under the first limb. As the primary judge had erred in concluding that the second limb had been enlivened, the exercise of her Honour's discretion had miscarried.
In support of that proposition, counsel argued that the proceedings in the Magistrates Court had raised an important issue of principle. It was submitted that the respondent had relied upon 'the controversial and relatively uncertain principle' that a person may contract as an agent for an undisclosed principal giving rise to an enforceable contract between the third party and the undisclosed principal. Counsel referred to the decision of the Privy Council in Siu Yin Kwan v Eastern Insurance Co Ltd [1994] 2 AC 199 for a discussion of the principle.
I might observe in passing that in Siu Yin Kwan the Privy Council, in applying the principle, noted that its main features had been settled law 'since at least at the end of the 18th century' (207). I might also observe that the principle has been accepted as the law in the standard textbooks (see, for example, Watts P and Reynolds FMB, Bowstead & Reynolds on Agency (19th ed, 2010) [8‑071]; Dal Pont GE, Law of Agency (2nd ed, 2008) [19.28]) and in numerous decisions in Australia including, for instance, the decisions of the High Court in Mooney v Williams [1905] HCA 34; (1905) 3 CLR 1 and Olsson v Dyson (1969) 120 CLR 365.
It was further contended that the proceedings in the Magistrates Court raised 'a complex and uncertain question' as to whether Mr O'Brien could contract as an agent for an undisclosed principal in circumstances where Mr O'Brien had to sign the audit certificate in person. That, it was submitted, raised a 'novel and potentially important question of law' which was at least fairly arguable. I should say that I did not understand it to be contended that the contract was made with Mr O'Brien for reasons personal to him which excluded the application of the principle: see Greer v Downs Supply Co [1927] 2 KB 28, 35. Rather, it was submitted that as Mr O'Brien had to sign the audit certificate, the respondent could not contract with the appellant. Why that should be so was not explained. No reference was made to any requirements of the audit, or to any legislative provisions dealing with it, which precluded a contract with the respondent.
I am not, therefore, persuaded that the primary judge erred in concluding that the case was a simple one, but it is unnecessary to dwell on that question. That is so for two reasons. First, contrary to the appellant's submissions, in considering whether an appeal should be struck out on the first limb, it is unnecessary for the court to consider whether the second limb is also made out. Secondly, in the exercise of its
discretion this court is not required to consider the merits of the decision below.
Section 44(3) provides two separate and distinct bases upon which a court may strike out an appeal. It may do so because the costs of the appeal are disproportionate to the amount of the claim or it may do so because the costs of the appeal are disproportionate to the nature of the case. The discretion is enlivened once either limb is made out. It is an unfettered discretion, to be exercised according to the justice of the case.
In the present case the likely costs of the appeal are so clearly disproportionate to the amount of the claim as to require no further comment. The amount of the claim is $550. The costs of the appeal to the respondent alone are likely to be in the order of $12,000. Nothing has been put before this court which could conceivably provide any justification for the appeal to proceed in those circumstances. Indeed, this case seems to me a quintessential example of the type of case at which s 44(3) is aimed.
Conclusion
I would strike out the appeal.
MURPHY JA: I agree with Newnes JA.
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