Tigchelaar v Iyengar [2008] ACTSC 111 (8 October 2008)

Last Updated: 24 October 2008

KLAAS TIGCHELAAR v HARI IYENGAR

[2008] ACTSC 111 (8 October 2008)

APPEAL – Small Claims Court – appeal following the grant of leave – transfer of proceedings to Magistrates Court – failure to consider fairness of transfer – error of law.

PRACTICE AND PROCEDURE – pleading – discretion to order counterclaim be heard separately from claim.

Magistrates Court Act 1930 (ACT), ss 279, 284 and 285

Cheques Act 1986 (Cth), s 16

County Courts Act 1984 (UK), s 41

Court Procedures Rules 2006 (ACT), rr 6(1), 1613, 3293, 3743, 3757, 3772(4), 3776, 3793, 5001, Div 3.12.8

Sharp v Ellis; Re Edward Love & Co Pty Ltd (1971) 20 FLR 199

Hassan v Willson [1977] 1 Lloyd’s Rep 431

Lloyd v Howard [1850] EngR 813; (1850) 15 QB 995

Brien v Dwyer [1978] HCA 50; (1978) 141 CLR 378

Nevard v Harley (1980) 31 ACTR 13

WT Lamb & Sons v Rider [1948] 2 KB 331

Hall v Nominal Defendant [1966] HCA 36; (1966) 117 CLR 423

MV Normar (Owners) v British Transport Docks Board & Ors: The Normar [1968] P 362

South African Republic v La Compagnie Franco-Belge du Chemin de Fer du Nord [1897] 2 Ch 487

Wood v Cross Television Centre Pty Ltd (1961) 79 WN(NSW) 596

Standen v GH Varley Pty Ltd; Williams Third Party (1956) 56 SR (NSW) 346

Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589

Bryant v Commonwealth Bank of Australia [1995] FCA 1299; (1995) 57 FCR 287

Tanning Research Laboratories Inc v O’Brien [1990] HCA 8; (1990) 169 CLR 332

Johnson v Gore Wood and Co (a firm) [2002] 2 AC 1

Yaw Duedu v Yiboe [1961] 1 WLR 1040

EX TEMPORE JUDGMENT

ON APPEAL FROM THE MAGISTRATES COURT

No. SCA 6 of 2008

Judge: Refshauge J

Supreme Court of the ACT

Date: 8 October 2008

IN THE SUPREME COURT OF THE )

) No. SCA 6 of 2008

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: KLAAS TIGCHELAAR

Appellant

AND: HARI IYENGAR

Respondent

ORDER

Judge: Refshauge J

Date: 8 October 2008

Place: Canberra

THE COURT ORDERS THAT:

1. The appeal is upheld.

2. The order of the Learned Magistrate of 17 January 2008 is set aside.

3. The proceedings are remitted to the Small Claims Court to be listed for hearing as soon as can reasonably be done.

4. The respondent is to pay the appellant’s costs of the appeal.

1. As not infrequently happens, apparently small or simple cases have a habit of throwing up complex questions that are not always easy to resolve; so it is with this case.
2. The appellant, Mr Tigchelaar, commenced proceedings in the Small Claims Court constituted by s 279 of the Magistrates Court Act 1930 (ACT) as an informal, simple and cheap court to resolve small disputes, namely those involving less than $10,000 (see r 3772(4) of the Court Procedures Rules 2006 (ACT)).
3. When the appeal was called on for hearing the respondent, Mr Iyengar, did not appear. It seems he has appeared in this court on one occasion but not on the other occasions when it was before a judge or the Deputy Registrar.
4. It appears from the file that he was notified of the hearing. I had him called and he did not appear. In those circumstances I considered I could proceed to hear the appeal, though Mr Iyengar may apply under r 1613 to set aside the orders I make. That rule is made applicable to an appeal such as this by virtue of r 5001.
5. Mr Tigchelaar claimed a total of $4,746.21 made up of a claim of $4,545.00, the fee for commencing the proceedings of $104.00, unspecified “charges and out-of-pocket expenses” of $21.00 and interest accrued to the date of the claim of $76.21.
6. A relatively lengthy statement of Mr Tigchelaar’s claim was attached to the originating process. It referred to only one invoice for $2,345.00 for work done between 25 October and 1 November 2006.
7. In brief, the claim seemed to be that Mr Tigchelaar had been retained by the respondent, Mr Iyengar, on a construction job at Garran for the Embassy of the United States of America. Mr Tigchelaar alleged that there had been continuing money problems between Mr Iyengar and himself and other contractors during the construction.

8. On 3 November 2006 it is claimed that Mr Iyengar informed Mr Tigchelaar that the Embassy had dismissed Mr Iyengar as builder and that he had to vacate the site by 8 November 2006. Mr Iyengar wanted to complete as much work as possible before then. Because of money problems and the unpaid invoice, Mr Tigchelaar was understandably reluctant but was induced to continue, so he claimed, upon receiving two post-dated cheques, one for $2,300 allegedly for the invoice, and another on account of the work to be done for $1,500. Both cheques were dated 13 November 2006. Mr Iyengar is said to have guaranteed that the cheques would be paid, which I understand to mean that they would be met on presentation.
9. Mr Tigchelaar completed work on the project and later banked the cheques. A letter from his bank, attached to his claim, shows that payment was stopped on the cheques.
10. While I have some difficulty in matching the amounts referred to in the details of his claim with the amount of Mr Tigchelaar’s originating application it seems clear that he is suing on the cheques, a relatively simple claim, and on the guarantee given by Mr Iyengar.
11. I do note that the cheques were drawn on the account of a company, Raisha Projects Pty Ltd, and it may be that Mr Tigchelaar will have to add or substitute that company as respondent if he wishes to proceed on the basis of a claim on the cheques. Magistrate Madden was told by Mr Iyengar on 5 June 2007 that there was no written contract; thus there may well be a live issue as to who the contracting parties for the job were. In the same hearing Mr Iyengar indicated that it was his company that was “doing the project for the American Embassy in Garran”. If Mr Tigchelaar wishes to sue on the cheques, however, he will have to join or substitute the company as another respondent.
12. Such a case is not difficult to conduct since there are limited defences to a claim by a holder of a cheque in due course: total failure of consideration, not mere inadequacy (Sharp v Ellis; Re Edward Love & Co Pty Ltd (1971) 20 FLR 199); the cheque was signed under a fraudulent inducement, duress, undue influence or for an illegal consideration (Hassan v Wilson [1977] 1 Lloyd’s Rep 431); failure to comply with terms of delivery (Lloyd v Howard [1850] EngR 813; (1850) 15 QB 995); and one or two other defences not particularly relevant here.
13. That the cheques were post-dated does not affect this position. Under Brien v Dwyer [1978] HCA 50; (1978) 141 CLR 378, such cheques were held not to be cheques, but merely bills of exchange. This has now been changed by amendments to s 16(2), (3) and (4) of the Cheques Act 1986 (Cth).
14. On the claim by Mr Tigchelaar, however, he has another claim in that he argues that Mr Iyengar guaranteed the payment of these cheques and thereby became personally liable as guarantor. This would be a claim against Mr Iyengar personally. It would be a little more difficult to prove, but would again be directed at the cheques and not at the work done or services provided.

The Course of the Proceedings

15. Mr Tigchelaar had the originating application issued on 19 January 2007, just over two months after he was advised that payment of the cheques had been stopped. I do note, however, that the Christmas period and holiday time were included in those two months. Mr Tigchelaar also stated in his claim that he had, as a sensible creditor would do, contacted Mr Iyengar to request payment.
16. Since then, however, matters have seemed to proceed shamefully slowly for a proceeding in a jurisdiction that should be not only informal and inexpensive but expeditious.
17. Mr Iyengar lodged his response to the originating application on 20 March 2007. The papers before me do not enable me to say when the originating application was served (though Mr Tigchelaar suggested that it was a few weeks after it was issued) nor whether Mr Tigchelaar sought judgment under r 3757 of the Court Procedures Rules and, if so, whether that was set aside so as to allow the response to be filed. Mr Tigchelaar did not think that that had happened.
18. In any event Mr Iyengar did not really address the claim on the cheques or on the guarantee but alleged that Mr Tigchelaar had been overpaid and counterclaimed $20,000. His claim was extensive, although lacking in particularity and there was much detail that, if the proceeding on the counterclaim were to continue, Mr Tigchelaar would be entitled to receive. I note, in fact, that the Learned Magistrate on 17 January 2008 made an order for particulars to be supplied. A document was filed on 5 February 2008 purporting to comply with that order but it clearly did not do so.
19. Although in the counterclaim Mr Iyengar described himself as “MD [I assume Managing Director], Raisha Projects Pty Ltd”, no attempt was made to make any alteration to the parties. If the company was actually the contractor then of course Mr Iyengar could not make the counterclaim. The counterclaim itself, of course, is outside the limit of the Small Claims Court, see s 284 of the Magistrates Court Act 1930 (ACT). Accordingly, Mr Iyengar applied under r 3776 to have the proceedings transferred to the Magistrates Court.
20. The application came before Magistrate Madden on 5 June 2007. His Honour, after hearing both parties, refused the application for a transfer on the basis that a transfer would be unfair to Mr Tigchelaar. Rule 3776(2) mandatorily requires that the court transfer the proceedings “...only if satisfied that transferring the proceeding to the Magistrates Court would not be unfair to any party to the proceeding”.
21. The matter then appears to have been listed for a conference on 23 July 2007. I do not know what happened then, but a Notice of Listing for Directions dated that day, listed it for a Directions Hearing on 17 September 2007 with a view to setting a “Hearing” date (called an “inquiry” - see s 285 of the Magistrates Court Act 1930 (ACT) and Division 3.12.8 (Small Claims Court – Inquiries) of the Court Procedures Rules: probably called that because s 279 of the Magistrates Court Act gives the Magistrates Court “...jurisdiction to inquire into and decide applications...”).
22. A notice dated 25 September 2007 listed the proceedings for inquiry on 18 October 2007. I was told by Mr Tigchelaar that the matter was not reached on that day and adjourned. By a notice dated 19 October 2007 the proceedings were listed for inquiry on 17 January 2008. A notice dated 28 November 2007 also listed the matters for directions on 11 December 2007.
23. This seems a lot of appearances and activity for such a jurisdiction and a matter of the size of the amount in dispute.
24. When the matter came on for hearing on 17 January 2008, the Learned Magistrate, on her own initiative, transferred the proceedings to the Magistrates Court on the basis that the matter was beyond jurisdiction because of the amount of the counterclaim. She noted the earlier decision of Magistrate Madden and all but suggested that he was incorrect in not transferring the proceedings. She did not address at all the fairness criterion mandated by r 3776(2).
25. Mr Tigchelaar sought leave to appeal against that decision, as is required under s 275 of the Magistrates Court Act 1930. Leave was granted on 29 February 2008. The delay in having the appeal now heard is at least as regrettable as the other delays in the proceedings.

Issues on the Appeal

25. A number of questions now arise:

(1) Was her Honour’s decision appellable because of her failure to comply with r 3776(2)?

(2) Did her Honour err by sitting on appeal from the order of Magistrate Madden?

(3) Did the matter have to be transferred because of the amount of the counterclaim?

(4) If it is not transferred, what happens to the counterclaim?

I propose to deal with each of these matters in turn.

1. The fairness criterion

26. Rule 3776(2) makes it a precondition of any transfer of proceedings to the Magistrates Court that the court be affirmatively satisfied that the transfer would not be unfair to any party.
27. Her Honour did not address this issue, and in failing to do so, it seems to me, fell into error. The rule is quite clear and places an affirmative obligation on her Honour to consider the issue. It is clear that the court must positively consider the question of fairness, and failure to mention it is a strong indication that the question was not considered.
28. It might be arguable that her Honour could dispense with the application of any provision of these rules under r 6(1). It is not clear on what basis such a dispensation could be made in a case such as this, but it is clear from a reading of the transcript that it was not done.
29. Since this consideration is a pre-condition to the exercise of the power to transfer the proceeding, it follows that the decision, which did not consider this matter, must be set aside.

2. Appeal

30. Mr Tigchelaar also argued that her Honour had in effect sat on appeal from Magistrate Madden. Of course, there is no appeal by one magistrate from the decision of another magistrate. Appeals are a creature of statute: Nevard v Harley (1980) 31 ACTR 13 at 15. No statute gives such a right in this Territory.
31. Mr Tigchelaar pointed out that Mr Iyengar had not appealed against the decision of Magistrate Madden and, unless he did and a properly constituted appeal court overturned that decision, it should stand.
32. That is generally true, but does not necessarily apply here. An interlocutory order is generally not regarded as final in the sense of barring a further application on the ground of res judicata: WT Lamb & Sons v Rider [1948] 2 KB 331 at 334. Thus, even though the application before Magistrate Madden had been dismissed, that did not prevent a further application from being made: Hall v Nominal Defendant [1966] HCA 36; (1966) 117 CLR 423 at 429, 440-1 and 444. Thus, her Honour could have heard and determined a further application, even though the first one had been dismissed. There can be no contention but that such an application as this is an interlocutory and not a final one.
33. Mr Tigchelaar properly pointed out that Mr Iyengar had, however, not made a further application. That, however, does not matter here, as the Court has power under r 3776(2) to act on its own motion.
34. Accordingly, her Honour was not considering conducting an appeal from the decision of Magistrate Madden but was making her own decision. As a magistrate, of course, she was bound to ensure that she had jurisdiction to deal with the case. Having found she did not have such jurisdiction, however, she was entitled to consider under the rule whether to transfer the proceedings.

3. Transfer

35. Her Honour considered that as the counterclaim exceeded the limit of the jurisdiction of the Small Claims Court she could not proceed.
36. It is true that r 3743 limits a counterclaim to $10,000 and, if more might be claimed, to require the respondent to abandon the excess if it is to be raised and prosecuted in the Small Claims Court.
37. Clearly, the Small Claims Court cannot consider a counterclaim for more than $20,000. It appears to me, however, that a respondent has no right to proceed with a counterclaim whatever the circumstances.
38. Rule 3743(2) appears to give a respondent a choice as to whether to proceed with a counterclaim or to take separate proceedings. That rule must be read subject to r 3776(2) which mandates a consideration of fairness before a transfer is effected. The rule does not exclude that consideration where a counterclaim is brought for more than $10,000. Indeed, r 3743(5) merely permits the respondent to apply for transfer where the counterclaim is for more than $10,000 and does not mandate that the application for a transfer must be granted.
39. If the transfer is not made, then the respondent has a number of options. The respondent could abandon the excess; the respondent could seek leave to discontinue the counterclaim under r 3293 with a view to re-commencing the proceedings in the Magistrates Court; or the respondent could do nothing in which case the court could consider the applicant’s claim but would have no power to consider the counterclaim.
40. Here Mr Tigchelaar had a claim either on cheques or on the guarantee of payment of the cheques, both of which were fairly self-contained claims and which could be conducted with relative ease. No issue arose in either case about the quality or adequacy of the work done.
41. On the other hand, the counterclaim was a much more substantial claim which would have involved issues of
    • (a) Who were the contracting parties?
    • (b) What were the terms of the agreement - Mr Iyengar claimed a different hourly rate had been agreed to that claimed by Mr Tigchelaar?
    • (c) What work had Mr Tigchelaar done?
    • (d) What time had he spent on the building site?
    • (e) What work had he done off-site and was it authorised?
    • (f) What was the quality of the work done and was it adequate to justify payment for services rendered?
42. It can be seen that such a claim could involve many witnesses and take some considerable time to conduct.
43. It is clear that a court may refuse to hear a counterclaim at the same time as a claim and order that it be dealt with separately: MV Normar (Owners) v British Transport Docks Board & Ors: The Normar [1968] P 362.
44. That the counterclaim cannot conveniently be dealt with at the same time as the claim is a good reason for making appropriate orders that the claim and counterclaim be dealt with separately: South African Republic v La Compagnie Franco-Belge du Chemin de Fer du Nord [1897] 2 Ch 487; Wood v Cross Television Centre Pty Ltd (1961) 79 WN(NSW) 596.
45. In this case, it seems to me that it was fair for such an order to be made, having regard to the fact that the issues in both cases were relatively different and the fact that the counterclaim would likely overwhelm the hearing of the claim by Mr Tigchelaar.

4. The Counterclaim

46. If Magistrate Madden’s order is affirmed, a question arises as to whether the counterclaim of Mr Iyengar can still be prosecuted.

47. There seem to me to be a number of possibilities.

48. I have indicated above some of the options that Mr Iyengar has. I need to look at the consequences of these.
49. It appears that under r 3776, only proceedings, and not parts of proceedings, can be transferred. If it had been intended that parts of proceedings could be transferred, the drafters could easily have so provided; see, for example, County Courts Act 1984 (UK) s 41. Thus, the Court could not transfer only the counterclaim to the Magistrates Court.
50. It could, however, complete hearing the claim which would be quite a discrete hearing. It could then transfer the proceedings, which would include the judgment on the claim. If Mr Tigchelaar was successful, that would allow Mr Iyengar to set off any judgment on the counterclaim against the judgment gained by Mr Tigchelaar.
51. That this part of the hearing would be in a different tribunal does not seem to be a problem: Standen v GH Varley Pty Ltd; Williams Third Party (1956) 56 SR (NSW) 346.
52. It could also simply make no order or permit Mr Iyengar to discontinue the counterclaim (see r 3793) and then he could commence the proceedings as fresh proceedings in the Magistrates Court. I have given thought about whether there would be problems because of an abuse of process because of the principles set out by the High Court in Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589, namely that all issues that should properly be raised in the proceeding must be raised else the parties are estopped from raising them in other proceedings. This applies to a counterclaim: Bryant v Commonwealth Bank of Australia [1995] FCA 1299; (1995) 57 FCR 287.
53. The principle is not immutable, however. As Brennan and Dawson JJ said in Tanning Research Laboratories Inc v O’Brien [1990] HCA 8; (1990) 169 CLR 332 at 346

A plaintiff who has an unadjudicated cause of action which can be enforced only in fresh proceedings (Duedu v Yiboe) cannot be precluded from taking fresh proceedings merely because he could have and if you will should have counterclaimed on that cause of action in a forum chosen by the opposite party in proceedings in which the opposite party sued him.

We do not read the majority judgment in Port of Melbourne Authority v Anshun Pty Ltd as holding the contrary, except in a case where the relief claimed in the second proceeding is inconsistent with the judgment in the first: see especially at p 599 - 601.

(Footnotes omitted)

54. There must, perhaps, be exceptional circumstances for such a claim to be allowed to proceed but the House of Lords has clearly contemplated that it may be so: Johnson v Gore Wood and Co (a firm) [2002] 2 AC 1 at 22-34. See also Yaw Duedu v Yiboe [1961] 1 WLR 1040.
55. It would be possible also for the court to enter judgment, if such it be, for Mr Tigchelaar and then stay that judgment until any proceedings commenced by Mr Iyengar in the Magistrates Court be completed to allow for a set off between any judgments in those two claims. I do not suggest that that is a course the Court should necessarily follow but it is an option if it feels that fairness in the circumstances requires it.
56. It is to be noted that while the claim and the counterclaim here arise from the one set of events, in that they all arise out of the building contract for work at the site at Garran, they are otherwise really different. The evidence of one would not really be critical evidence in the other and they are in many ways distinct claims.
57. In the circumstances, it would be difficult to see how the claim of Mr Iyengar, if he wished to pursue it, could be stayed under the estoppel principles or as an abuse of process.

Conclusion

58. Accordingly, I find that the decision of the Learned Magistrate was wrong and should be set aside. As this leaves the decision of Magistrate Madden as operative there should now be no bar to an early hearing date which the parties deserve.
59. Accordingly, I will remit the proceedings back to the Small Claims Court with an order that it be listed for hearing as soon as can reasonably be done. So, the orders of the court are, the appeal is upheld and the order of Magistrate Doogan of 17 January 2008 be set aside.
60. I remit the proceedings to the Small Claims Court with a direction that they be listed for hearing as soon as can reasonably be done.
61. I order that the respondent pay the appellant’s costs of the appeal.

I certify that the preceding sixty-one (61) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Refshauge.

Associate:

Date: 22 October 2008

Counsel for the Appellant: Self represented

Counsel for the Respondent: No appearance

Solicitor for the Respondent: No appearance

Date of hearing: 8 October 2008

Date of judgment: 8 October 2008