Zardo and Anor v Parisi and Anor [2007] ACTSC 63 (15 August 2007)

Last Updated: 19 September 2008

PETER ZARDO and ANOR v FRANK PARISI and ANOR
[2007] ACTSC 63 (15 August 2007)

APPEAL – practice and procedure – costs – application to tax costs in Magistrates Court dealt with under inappropriate Supreme Court Rule – successful party at hearing deprived of costs.

Evidence Act 1971, s 138
Magistrates Court (Civil Jurisdiction) Rules 2004, r 273, r 278
Queensland Uniform Civil Procedure Rules, r 721
ACT Court Procedures Rules 2006, r 1811
ACT Supreme Court Rules, O 65 r 58
Australian Capital Territory (Self-Government) Act 1988, s 23
Human Rights Act 2004, s 21

ON APPEAL FROM THE MAGISTRATES COURT

No. SCA 45 of 2006

Judge: Connolly J
Supreme Court of the ACT
Date: 15 August 2007

IN THE SUPREME COURT OF THE )
) No. SCA 45 of 2006
AUSTRALIAN CAPITAL TERRITORY )

ON APPEAL FROM THE MAGISTRTES COURT

BETWEEN: PETER ZARDO and TRACEY DENISE CALLAGHAN

Appellants

AND: FRANK PARISI and SUSAN MARY PARISI

Respondents

ORDER

Judge: Connolly J
Date: 15 August 2007
Place: Canberra

THE COURT ORDERS THAT:

1. The appeal should be allowed, with costs.
2. The decision of the learned Magistrate be set aside, and in its place order that the taxation of the appellants’ costs proceed before the appropriate authority in the Magistrates Court.
   

1. This is an appeal from a decision of a Magistrate on a costs matter. Generally speaking, costs decisions are discretionary and rarely amenable to appellate review. In this matter the decision of the learned Magistrate was to deny a party that had successfully obtained orders for costs in a Magistrates Court hearing the right to have those costs taxed. Such a determination is subject to normal review.
2. The substantive dispute between the parties involved an action commenced by the appellants in the Magistrates Court for recovery of money. The matter proceeded to hearing, over some five hearing days, with judgment in the appellants’ favour with costs. The respondents filed an appeal to the Supreme Court, which was eventually discontinued, and the respondents were ordered to pay the appellants’ costs of the appeal. There had been various other costs orders made in the course of the proceedings, going in both directions.
3. It seems the judgment debt and interest were appropriately paid in about May 2005, and on 3 August 2005 the solicitor for the respondents wrote to the solicitors for the appellants stating:

The only remaining matter to be resolved is the question of costs. Your clients were awarded the costs of the Magistrates Court action, but your clients were ordered to pay the Supreme Court costs of the transfer back to the Magistrates Court, and part of the costs of the hearing. In relation to the appeal to the ACT Supreme Court, the Court ordered that your clients pay the costs of two Motions, but that our clients pay the costs of the appeal itself. Your firm also agreed to pay some photocopying costs.
Doing the best we can with these various offsets, we calculate that a balance for costs would be payable by our clients to your clients. We assess that balance at $10,000, and enclose a cheque in that sum, made payable to your trust account. Kindly acknowledge receipt in due course. Please apply these monies for the benefit of your above clients.

4. On 17 November 2005 the solicitors for the appellants wrote to the solicitors for the respondents indicating that they had now had their costs assessed and providing those estimates for both the Supreme Court and Magistrates Court proceedings, and sought agreement or taxation of costs. There was no agreement, and the appellants sought to have their costs in the Magistrates Court go to taxation. The respondents argued that the offer of the sum of $10,000, and the banking of that cheque, precluded the appellants from proceeding further to have their costs taxed. When this argument was put to a taxing Registrar in the Magistrates Court, he exercised his power under the Magistrates Court (Civil Jurisdiction) Rules 2004 (Magistrates Court (Civil Jurisdiction) Rules) as they then stood to refer the question to a Magistrate for determination, pursuant to r 278. This was the basis for the matter going before Magistrate Madden.
5. On 29 August 2006 Magistrate Madden ordered, in the terms of the formal order taken out by the appellants:

1. No taxation of the Bill of Costs by virtue of Order 65 Rule 58(9), (10) and (11).
2. Decision published on file.
3. Each party to pay own costs of application.

6. Counsel for the appellants argue that the decision, on its face, displays a significant error, as the question before the learned Magistrate was whether costs ordered in the Magistrates Court following a hearing in the Magistrates Court should be taxed. Prima facie, pursuant to r 273 of the Magistrates Court (Civil Jurisdiction) Rules a party with a costs order in the Magistrates Court has an entitlement to have the costs taxed. The Supreme Court Rules, as they stood at the relevant time, had no application to taxation of costs in the Magistrates Court.
7. While counsel for the respondents argued, correctly, that the real order is simply the substantive order, that being that there be no taxation and that merely by citing an incorrect statutory provision a decision maker does not fall into error, it seems to me from an examination of the learned Magistrate’s reasons, that he proceeded on the basis that O 65 r 58(9)-(11) applied in the circumstances before him. Clearly it did not, and he has fallen, it seems to me, into appellable error.
8. The relevant provisions of the Supreme Court Rules as they then stood related to the provisions for tender of costs. These provisions were a powerful and self-executing method for shortening disputes about quantum of costs. They stated:

(9) The party liable for costs under an order may, at any time after the order is made but not later than 14 days before the taxing officer commences taxing the bill of the party entitled to costs, tender, by a solicitor’s trust account cheque or by bank cheque, a sum in payment of those costs and accrued interest ( if any).
(10) The tender made under subrule (9) may be replaced by a later tender or tenders but must not otherwise be withdrawn before-
(a) the day on which the bill is to be taxed; or
(b) the end of 14 days after the tender is made; whichever is the earlier.
(11) If a tender is not returned to the tenderer before the end of the period referred to in subrule (10)-
(a) the tender is taken to have been accepted; and
(b) the taxing officer is not to tax the bill.

9. The learned Magistrate at [7] of his reasons stated:

The tender was not returned to the tenderer. The tenderer was permitted, therefore, to have taken that the tender had been accepted within the ordinary contractual principles of offer and acceptance.

10. It seems to me that, to the extent that his Honour was stating that the provisions of O 65 applied and had been made out here, he was clearly in error.
11. I have grave doubts as to whether the correspondence would in fact amount to a tender pursuant to O 65. The consequence of a tender is grave - on its face it is self-executing as a party who does not actively respond within 14 days loses the right to have costs taxed. Where a party has a costs order, which may be for a significant sum, any provision that denies this right must, it seems to me, be clearly complied with. The party seeking to rely on the tender provision must clearly state that they are making a tender, and that if the tender is not returned within 14 days it will be deemed by the rules to be accepted and the party will lose its right to have costs assessed.
12. The letter did no such thing. It was, on its face, a polite offer based on an estimate of costs. It invited an acknowledgement “in due course”. It could well be taken to have been a part payment.
13. The learned Magistrate was rightly critical of the letter. He said at [5] of his reasons:

The correspondence is poorly worded. It could have been couched in more explicit terms using such words as a “first and final offer in full discharge and satisfaction of our liability for costs” made on a “without prejudice basis”. The defendants’ solicitors could have drawn the plaintiffs’ solicitor’s attention to the provisions of Order 65 rule 58 of the ACT Supreme Court Rules seeking a reply within a stipulate term.

14. I would go further and say that, for a costs offer to amount to a tender such as will activate the provisions of these rules, the letter should be absolutely clear in its terms that it is a tender. It should state that if it is not rejected within 14 days it will be deemed to have been accepted, and will have the effect of denying the successful party with the costs order in their favour, the right to have the costs taxed. This letter did not do that, and on its face it seemed like a friendly first estimate in a likely process of negotiation. Order 65 r 58 is an unusual rule with no equivalent in the Rules of the Supreme Courts of New South Wales, Victoria or the United Kingdom. It does have an equivalent provision in Queensland, where r 721 of the Uniform Civil Procedure Rules provides for a written offer to settle costs. Interestingly, both the Queensland rule and the new r 1811 of the ACT Court Procedures Rules 2006 clearly provide that an offer to settle costs must expressly state that it is made pursuant to the rule. I am of the view that this must also be the case with O 65 r 58 tenders.
15. A party who succeeds at trial and obtains a judgment and a costs order has in the costs order a valuable asset. Costs, in long Supreme Court trials, can be very substantial. It would be quite unjust for a party to be deprived of its asset by an unclear, self-executing rule. I would indeed question whether such a rule could validly deny a party its right to a valuable item of property in such a manner, given s 23(1)(a) of the Australian Capital Territory (Self-Government) Act 1988 and s 21 of the Human Rights Act 2004. A self-executing rule of court cannot deprive a citizen of their continued enjoyment of a property right, particularly when they are given no notice that failure to respond within 14 days will supposedly have this effect.
16. I do not consider the letter of 3 August 2005 to have been a tender pursuant to O 65 r 58, and it follows that I am of the view that, although the appellants have accepted the sum of $10,000 as part payment of costs, it remains open for the costs of the proceedings in both the Magistrates Court and the Supreme Court to be properly taxed.
17. I do not accept that under the ordinary principles of contract law, a solicitor who does not immediately reply to a first offer is bound to have accepted that offer. Such a proposition would have a remarkable effect on the ordinary process of negotiation of personal injuries litigation. The reality here is that the litigation seemed to come to a final end in about November 2004, according to the respondents’ chronology, when costs orders in relation to the appeal were finalised. It is apparent from the letter making the costs offer that the final judgment sum and interest were not paid until May 2005. Some three months later the respondents made the costs offer. Some three months later again the appellants replied, indicating their estimate of costs, and seeking agreement or resolution. The delay was not, in the course of this litigation, such that it could be said, if it could ever be said, that failure to respond to an offer at common law has the effect of being deemed to be an acceptance of the offer.
18. The learned Magistrate further fell into error when considering this aspect of the claim, and the associated claim based on a form of estoppel. He states, at [8] of his reasons, that there was no response to the costs offer of August 2005 until February 2006. This is clearly in error, and it was common ground on this appeal that the appellants did write to the respondents in November 2005 with their costs estimates to request agreement or taxation of costs. His Honour found at [9] that:

The lapse of time and the silence of the plaintiff’s solicitor between August 2005 and February 2006, would allow the defendant’s solicitor to draw an inference that the tender of their cheque concluded the costs issue before the itemised Bill of Costs was received.

19. This was based on his Honour’s assumption of a six month delay and silence, when in fact the delay was only some three months, which, as it happened, was about the same as the delay between the payment of the judgment sums, and the offer of costs. It seems to me that this is also an appellable error.
20. I would allow the appeal. It seems to me that there was simply no power for the Magistrate to have considered the effect of O 65 r 58 of the Supreme Court Rules in relation to the application by the appellants to have their costs in the Magistrates Court taxed. There was no basis in common law for the offer of costs, based on its face on an estimate, to have been taken to have been accepted by the appellants and to deny them the opportunity to realise the benefit of their costs order.
21. I set aside the decision, and in its place order that the taxation of the appellants’ costs proceed before the appropriate authority in the Magistrates Court.
22. The appeal should be allowed, with costs.

I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Connolly.

Associate:

Date: 15 August 2007

Counsel for the appellants: Ms M Dolenec
Solicitor for the appellants: Barker & Barker
Counsel for the respondents: Mr DJC Mossop
Solicitor for the respondents: Gillespie-Jones & Co
Date of hearing: 31 July 2007
Date of judgment: 15 August 2007