New South Wales Supreme Court CITATION : Scattergood & Ors v Scattergood [2004] NSWSC 340 revised - 02/09/2005 HEARING DATE(S) : 14 April 2004 JUDGMENT DATE : 29 April 2004 JURISDICTION: Common Law JUDGMENT OF : Master Harrison DECISION : (1) The appeal is upheld; (2) The decision of Keogh LCM of the Local Court dated 4 March 2003 is set aside; (3) There will be verdict and judgment for the plaintiffs namely Ronald Arthur Scattergood, Annette Scattergood and Maureen Lynnette Scattergood; (4) The defendant is to pay the plaintiffs' costs as agreed or assessed. CATCHWORDS : Appeal from decision of Local Court Magistrate - res judicata LEGISLATION CITED : Local Courts (Civil Claims) Act 1980 (NSW) - s 69(2) Allen v Kerr & Anor (1995) Aust Torts Reports 81-354 Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 Chamberlain v Deputy Commissioner of Taxation (188) 164 CLR 502 CASES CITED : Devries v Australian National Railways Commission (1993) 177 CLR 472 Jackson v Goldsmith (1950) 81 CLR 446 Onerati v Phillips Constructions Pty Ltd (1989) 16 NSWLR 730 Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) (1999) 160 CLR 588 Ronald Arthur Scattergood (First Plaintiff) Annette Scattergood (Second Plaintiff) PARTIES : Maureen Lynnette Scattergood (Third Plaintiff) Deborah Ann Scattergood (Defendant) FILE NUMBER(S) : SC 10990/2003 Mr E G H Cox (Plaintiffs) COUNSEL : Mr C Whitelaw (Defendant) Ms R Bird, Hill & Rummery Canberra (Plaintiffs) SOLICITORS : Mr Tal Williams, Snedden Hall & Gallop Canberra (Defendant) LOWER COURT Local Court JURISDICTION : LOWER COURT 243/2002 FILE NUMBER(S) : LOWER COURT J Keogh LCM JUDICIAL OFFICER : IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION MASTER HARRISON THURSDAY, 29 APRIL 2004 10990/2003 - RONALD ARTHUR SCATTERGOOD & ORS v DEBORAH ANN SCATTERGOOD JUDGMENT (Appeal from decision of Local Court Magistrate – res judicata) 1 MASTER: By summons filed 24 July 2003 the plaintiffs seek: firstly an order that the appeal be allowed; secondly, an order that the judgment of Keogh LCM for the defendant against the plaintiffs dated 4 March 2003 be set aside; thirdly, an order that judgment be entered for the plaintiffs against the defendant in the local court proceedings; fourthly, an order that the defendant pay the plaintiffs' costs of the local court proceedings and fifthly, an order that the defendant pay the plaintiffs' costs of the appeal. The plaintiffs are Ronald Arthur Scattergood, Annette Scattergood and Maureen Lynnette Scattergood (defendants in the local court proceedings). The defendant is Deborah Ann Scattergood (plaintiff in the local court proceedings). For convenience, in this judgment I shall refer to Ronald Arthur Scattergood, Annette Scattergood and Maureen Lynnette Scattergood as the plaintiffs. Likewise, I will refer to Deborah Scattergood as the defendant. 2 At the outset, it is useful to make some brief comments concerning the remedy pursued by the plaintiffs. Section 69(2) of the Local Courts (Civil Claims) Act 1970 (NSW) permits a party who is dissatisfied with a judgment as being erroneous in point of law to appeal to this Court. The onus lies on the appellant to demonstrate that there has been an error of law. What is a question of law (as opposed to a question of fact) was considered, inter alia, in Allen v Kerr & Anor (1995) Aust Torts Reports 81-354 and Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 155-156. It cannot be said that the Tribunal member acted on evidence inconsistent with facts incontrovertibly established by the evidence - see Devries v Australian National Railways Commission (1993) 177 CLR 472 per Brennan, Gaudron and McHugh JJ at 479 and State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) (1999) 160 ALR 588. Grounds of appeal 3 The grounds of appeal relied upon by the plaintiffs include that the Magistrate erred: firstly, in concluding that the defendant's rights under the Mortgage dated 26 February 1997 had not merged with the orders made by the Supreme Court of NSW on 1 November 1999, 3 April 2001 and 28 May 2001; secondly, in failing to construe the orders of 1 November 1999 in a fair and reasonable way having regard to the fact that they were entered by consent; thirdly, in construing the orders of 1 November 1999 without reference to and/or failing to have regard to the parties' intentions. That is that both parties to the 1 November 1999 orders intended that that settlement would be a final and binding settlement and resolution of the Supreme Court proceedings; fourthly, in finding that the judgment of 1 November 1999 was not final and left the questions of interest and costs to be judicially determined; fifthly, in concluding that the costs of the Supreme Court proceedings were still in dispute following the settlement and orders of 1 November 1999; sixthly, in failing to find that by reason of the orders made on 1 November 1999, 3 April 2001 and 28 May 2001 and that the plaintiffs' rights pursuant to the Mortgage dated 26 February and Deed of Dissolution of Partnership dated 22 January 1997 had merged in those orders; and seventhly, in failing to find that the doctrine of res judicata was applicable in respect of the proceedings commenced in the Local Court by the defendant relying on the Mortgage dated 26 February 1997 by reason of the orders made by the Supreme Court of NSW on 1 November 1999, 3 April 2001 and 28 May 2001. The Supreme Court proceedings 4 On 18 December 1998 the defendant instituted proceedings in this Court for possession of certain property that being the subject of the security on the mortgage, damages in the sum of $111,692.19, interest on this amount at 11 percent pursuant to the deed mortgage, costs on solicitor/client basis pursuant to the deed and mortgage and interest on costs and expenses. On 15 June 1999 the defendant (having previously obtained default judgment) applied for possession. On 16 June 1999 the defendant obtained a writ of possession in relation to the mortgaged property and on 23 August 1999 application was made for that writ to be enforced. On 13 September 1999 an eviction notice was served on the plaintiffs. The plaintiffs then filed a notice of motion dated 17 September 1999 seeking a stay of the writ of possession. On 22 September 1999 Hulme J granted the plaintiffs a stay on the writ of possession until 1 November 1999. 5 On 1 November 1999 at the hearing before Smart J, His Honour noted that the matter had resolved. I shall reproduce the orders as they appear in the formal order made on 1 November 1999 and entered on 8 November 1999. "The Court orders that: 1. The Defendant pay the amount of $131,711.62 to the Plaintiff in discharge of the mortgage and costs to 31 October 1999 except as provided below. 2. The Plaintiff's solicitor hold the amount of $5,000.00 in their trust account in the joint names of the Plaintiff and the Defendants pending the agreement of the parties or further orders of the following matters remaining in dispute between the parties: (a) as to the whole of the Plaintiff's costs in relation to these proceedings and (b) interest payments to a maximum amount of $3,000.00 which the Defendants claim has been paid by them pursuant to the mortgage and which the Plaintiff claims has not been paid. 3. The Defendants pay the Plaintiff's costs and associated with Court appearances of 1 November 1999 on a solicitor/client basis. 4. The balance of the Statement of Claim and the Notice of Motion is stood over generally with leave to restore on 3 days notice. 5. Liberty to apply." 6 Thus the only two matters that remained in dispute were firstly, the whole of the plaintiff's costs in relation to the Supreme Court proceedings (subject to paragraph 3 of the above orders) and secondly, interest to a maximum of $3,000.00. 7 On 19 December 2000 Mr Greg Walsh, costs assessor, assessed the plaintiffs' costs up to an including 1 November 1999 at $18,581.97. On 3 April 2001 that assessment was entered as a judgment of this court. On 19 November 2000 the interest dispute was resolved and the costs were determined by 19 December 2000. 8 On 10 September 2001 a garnishment notice was issued and an order was made that the defendant was to pay the plaintiffs' costs of the garnishment notice. On about 3 June 2001 a affidavit in support of writ calculated the debt owing which included an amount representing interest from the date of judgment. On 11 September 2001 an enforcement order for seizure and sale of goods issued. An amount of $424.00 was included for the costs of the issue of that notice. The Local Court proceedings 9 In the Local Court in her amended statement of claim (ASC) (Ex B in this Court) the defendant pleaded at paragraph (7) that the plaintiffs had paid to her the amount stipulated in the consent orders made on 1 November 1999 and costs on a solicitor/client basis for all the work done up to the date of those orders. She had incurred further costs in recovering the costs incurred by her in the Supreme Court proceedings and claimed these outstanding costs on a solicitor/client basis pursuant to the mortgage and interest pursuant to the mortgage (at 11%) on the costs incurred by her in the process of recovering the costs in the Supreme Court proceedings. The mortgage referred to in the Local Court proceedings is the same mortgage that was the subject of the Supreme Court proceedings. 10 The plaintiffs submitted that firstly, any rights the plaintiffs had in relation to these conditions were merged in the consent orders made on 1 November 1999 which resolved the dispute by discharge of the mortgage; secondly, the defendant is estopped from claiming solicitor/client costs or interest at the higher rate because of the doctrine of res judicata; thirdly, the defendant is issue estopped from making the claim; fourthly, the claim in respect of costs and interest should have been litigated in the Supreme Court of NSW; fifthly, that the failure or omission to litigate in the Supreme Court of NSW founds an estoppel by omission; and sixthly, that the Local Court proceedings are an abuse of process. The defendant submitted that clause 10 of the mortgage provides that the mortgage will remain in full force and effect until the whole of the principal sum, interest thereon and other moneys payable hereunder have been paid in full to the mortgagee and until all the covenants of the mortgagors under this mortgage have been observed and performed, and paragraph 5 of the memorandum entitled her to recover costs on a solicitor/client basis. The defendant submitted that the orders of the Court of 1 November 1999 were not final and the doctrine of res judicata did not apply. 11 The doctrine of res judicata comes into operation when a party attempts to litigate a cause of action in second proceedings which has already been ventilated and merged into judgment in prior proceedings - see Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at 597. Both parties referred to a text book quote from Spencer, Bower, Turner and Handley's "The Doctrine of Res Judicata" (3rd ed 1996) at paragraph 155 where the learned authors stated: "Judgment for an ascertained sum for debt or damages plus costs is final, although the costs have not been taxed, and may be enforced in the meantime but the judgment is not final and enforceable as to costs until they have been ascertained [f/n 7 to para 154, p 69 … [A plead of estoppel] cannot be based on…a judgment or order which provides for calculation of amounts by an officer of the court [Carpenter v Thornton (1819) 3 B & Ald 52 at 55] [para 155, p 70]." 12 The Magistrate in her reasons for judgment stated: "This is not a matter where nothing was left to be judicially determined. Costs were still in dispute and by implication interest under the deed was still payable. The doctrine of res judicata and issue estoppel depends upon there being a judgement that was final. … So here, as the debt was outstanding and the discharge merely released the land as security on an acceptance by the plaintiff of a certain named amount of money, the personal covenant to pay the amount which included all costs associated with it's recovery which must necessarily include enforcement and interest thereon, was not merged whilst the amount was outstanding. The consent orders did not finalise the issue of costs, they were still in dispute and by the terms of the deed between the parties, costs were deemed to be part of the principal sum and according to the terms, outstanding principal attracted interest at the higher rate. As there was no merger of the covenant in the discharge of the mortgage and as the consent orders did not finalise the issues in dispute there was no question that the matter had been finally determined," 13 On 4 March 2003 Keogh LCM gave judgment in favour of the defendant against the plaintiffs and ordered that the plaintiffs pay the defendant's costs incurred from 28 May 2001 on a solicitor/client basis, and interest on those costs in accordance with the deed at the rate of 11 per cent. The plaintiffs were ordered to pay the defendant's costs in this action on a solicitor/client basis. Those costs to be as agreed or otherwise as assessed. The Magistrate further ordered that thereafter interest on the judgment debt, which was comprised of all the amounts mentioned above, was payable from the date of assessment, and that was at the rate prescribed by the local court rules (a rate less than 11%). Res judicata 14 In their outline of submissions on appeal, the plaintiffs submitted that the broad principle of res judicata ought to have precluded the defendant's proceedings in the Local Court as the defendant had previously commenced proceedings in reliance on the same mortgage seeking costs and interest of the Supreme Court proceedings. In Jackson v Goldsmith (1950) 81 CLR 446 at 466 per Fullagar J: "The rule as to res judicata can be stated sufficiently for present purposes by saying that, where an action has been brought and judgment has been entered in that action, no other proceedings can thereafter be maintained on the same cause of action. This rule is not, to my mind, correctly classified under the heading of estoppel at all. It is a broad rule of public policy based on the principles expressed in the maxims ' interest reipublicae ut sit finis litium ' and ' nemo debet bis vexari pro eadem causa .'" 15 Counsel for the plaintiffs also submitted that the general principle cited above was correctly applied by Giles J in Onerati v Phillips Constructions Pty Ltd (1989) 16 NSWLR 730 to preclude a subsequent claim on the same contract. In upholding the policy principle set out above by Fullager J concerning finality of proceedings Giles J said at 739: "I think that I must find guidance in the present case in the policy behind the principle of res judicata, and the application of that principle in circumstances such as those before me in the previous decisions. The policy is that there should be finality in litigation: thus it is said in Halsbury , 4th ed, vol 16, par 1527 at 1027, that the doctrine of res judicata is 'a fundamental doctrine of all courts that there must be an end of litigation', and Williams J in Jackson v Goldsmith invoked the two Latin maxims to the same effect as founding 'a broad rule of public policy'. That does not of itself provide an answer to the question which I must decide. But it does suggest that where the proprietors have maintained against the builder a claim that the builder was in breach of contract in failing to carry out the work of building the units in a proper and workmanlike manner, have relied in that claim on a great many items of complaint said to constitute that breach, and have had that claim determined after a lengthy hearing, they should not be permitted to maintain against the builder a fresh claim that it was in breach of contract in failing to carry out the work of building the units in a proper and workmanlike manner relying upon other items of complaint said to constitute that breach." 16 Relevantly, in Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502 at 508, Deane, Toohey and Gaudron JJ stated that: "The fact that a judgment is entered by consent may on occasion make it hard to say what was necessarily decided by the judgment, especially where it is the defendant who wishes to bring action at a later date… but the principle of res judicata holds good in such a case." 17 In order then to avoid injustice and the associated waste of judicial time and resources, a party is barred from re-litigating a cause of action already adjudged by a court of competent jurisdiction. As such, the general principle of finality of litigation ought to preclude the defendant from re-litigating on the same contract in respect of the same damage (interest and costs). 18 I have reached a decision which does not accord with that of the Magistrate. It is my view that the causes of action based on the mortgage and/or personal covenants merged with the judgment of this court dated 1 November 1999 as the judgment was final. Quantification of costs was outstanding and there was dispute in relation to interest but this was limited to a maximum amount of $3,000.00. The substance of the dispute had been resolved and the determination was final. If I am wrong in this, the proceedings were finally determined on the date the certificate for the assessment of costs issued, namely 19 December 2000. The interest and costs claimed were incurred after that date and relate to enforcement proceedings. 19 The defendant is entitled to recover costs of enforcing payment of the judgment. She is also entitled to interest pursuant to Part 95 of the SCR (Schedule J) in this Court. 20 The decision of Keogh LCM dated 4 March 2003 is set aside. The appeal is upheld. There will be verdict and judgment for the plaintiffs namely Ronald Arthur Scattergood, Annette Scattergood and Maureen Lynnette Scattergood. 21 Costs are discretionary. Costs usually follow the event. The defendant is to pay the plaintiffs' costs as agreed or assessed. Orders 22 The court orders that: (1) The appeal is upheld. (2) The decision of Keogh LCM of the Local Court dated 4 March 2003 is set aside. (3) There will be verdict and judgment for the plaintiffs namely Ronald Arthur Scattergood, Annette Scattergood and Maureen Lynnette Scattergood. (4) The defendant is to pay the plaintiffs' costs as agreed or assessed. ********** Last Modified: 07/16/2007 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.