New South Wales Supreme Court CITATION : Casali v Broderix [2005] NSWSC 1325 HEARING DATE(S) : 7 December 2005 JUDGMENT DATE : 16 December 2005 JURISDICTION : Common Law Division JUDGMENT OF : Associate Justice Harrison DECISION : (1) The appeal is dismissed; (2) The decision of her Honour Magistrate Keogh dated 17 June 2005 is affirmed; (3) The further amended summons filed 20 September 2005 is dismissed; (4) The plaintiff is to pay the defendant's costs on an indemnity basis. CATCHWORDS : Appeal decision of Local Court Magistrate - Small Claims Division - denial of natural justice LEGISLATION CITED : Local Courts Act 1982 (NSW) - ss 73(2) & 75 Kioa v West (1985) 159 CLR 550 CASES CITED : Swain v Waverley Municipal Council [2005] HCA 4 Enzo Casali (Plaintiff) PARTIES : Kai Broderix (Defendant) FILE NUMBER(S) : SC 13097/2005 Mr Sean Brennan (Plaintiff) COUNSEL : Mr J Horowitz (Defendant) Ms Natalia Veksle, SOLICITORS : Colquhoun & Colquhoun (Defendant) LOWER COURT JURISDICTION : Local Court LOWER COURT FILE NUMBER(S) : 243/04 LOWER COURT JUDICIAL OFFICER : Her Honour Magistrate Keogh IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ASSOCIATE JUSTICE HARRISON FRIDAY, 16 DECEMBER 2005 13097/2005 - ENZO CASALI v KAI BRODERIX JUDGMENT (Appeal decision of Local Court Magistrate - Small Claims Division- denial of natural justice) 1 HER HONOUR: By further amended summons filed 20 September 2005 the plaintiff seeks to appeal the decision of her Honour Magistrate Keogh in respect of the evidence heard by her and the judgment delivered in Local Court proceedings No 243/04 at Ryde on 17 June 2005. The plaintiff is Enzo Casali. The defendant is Kai Broderix. The plaintiff relied on his affidavit sworn 7 October 2005. For convenience I will refer to the parties by name. 2 Casali submitted that there was a denial of natural justice. At the outset, it may be helpful to make some brief comments concerning the remedy pursued by the plaintiff. Section 73(2) of the Local Courts Act 1982 (NSW) allows an appeal to this court on the grounds of lack of jurisdiction and/or denial of natural justice. Section 75 of the Act provides that the court may determine an appeal by either (a) varying the terms of the judgment or order or (b) setting the judgment or order aside (c) by setting the judgment or order aside and remitting the matter to the court for determination in accordance with the Supreme Court's directions or (d) by dismissing the appeal. 3 Recently, in Swain v Waverley Municipal Council [2005] HCA 4, the Chief Justice at [2] reiterated that in the common law system of civil justice, the issues between the parties are determined by the hearing process. The system does not regard the hearing as merely the first round in a contest destined to work its way through the judicial hierarchy until the litigants have exhausted either their resources or their possibilities of further appeal. 4 Mr Casali appeared unrepresented at the hearing in the Local Court and he drafted this appeal. At the hearing before this Court, Mr Casali was represented by Counsel. Grounds of appeal 5 The grounds of appeal are that Magistrate Keogh was in error in that firstly she failed to take into account the effect of the provisions of two deeds, one a "Deed of Rental Guarantee", the other a Collateral Deed of Variation (both dated 13 July 2001), and secondly she determined that the plaintiff bore an obligation to mitigate his damage. At the hearing of this appeal Casali's Counsel submitted that the Magistrate misunderstood the case between the parties when she heard it as a breach of contract and mitigation of loss case. Leaving aside the mitigation of loss issue, the grounds of appeal and the submissions seem to be inconsistent. 6 Casali in his statement of claim pleads: "1. The Defendant is liable to the Plaintiff pursuant to a Deed of Guarantee entered into … July 2001 between the Defendant and LJR Properties … 2. Pursuant to the Deed of Guarantee, the Defendant as guarantor, guaranteed and promised to LJR Properties … that, in the event that certain rental income was not received in relation to the property and premises … for a period of 3 years from then the Defendant would pay a sum in substitution for next calculated at the rate of $2000 per month. … 3. LJR Properties … failed to receive rent for the period April 2003 to June 2003 being 3 months. … 7. Notwithstanding a demand made in writing, the Defendant has failed, refused or neglected to pay the sum due pursuant to the Deed of Rental Guarantee. 8. The Plaintiff claims the sum of $6,000.00." 7 There is no copy of the defence in evidence. However, in a statement made by Casali (which was tendered in the Local Court) he referred to the annexures attached to the statement of claim and that there was no challenge to the documents. They are a deed dated 13 July 2001 between Broderix and LJR Properties Pty Limited which referred to a contract for purchase entered into between LJR Properties as purchaser and Broderix as vendor; an extract from the contract for purchase; a copy of a deed of assignment of debt dated 4 March 2002 between LJR Properties as signor and Casali as a signee; a copy of a commercial lease dated 6 September 2002 between LJR properties and Broderix relating to the leasing of part of the premises 396 Victoria Road, Gladesville; and a copy of a letter dated 17 September 2004 from Broderix's solicitor to Casali. 8 At paragraph [10] of his statement Casali says that firstly, the documents referred to above established an obligation on Broderix to introduce a substitute tenant; secondly, the tenant was at all times well aware that the premises were unoccupied during the relevant dates; thirdly, that Broderix was not entitled to rely on an allegation that he ought to have been invited to introduce the substitute tenant; fourthly, that there had been no other company, party or person in occupation of the subject premises during the dates alleged; and fifthly, he denied that he had an obligation to mitigate loss. These were the issues that were in dispute before the Magistrate. Denial of natural justice 9 In relation to natural justice, or as it is now known, procedural fairness, Professor S A de Smith, Judicial Review of Administrative Action, 5th ed., 432, has stated: "Procedural fairness generally requires that persons liable to be directly affected by proposed administrative acts, decisions or proceedings be given adequate notice of what is proposed, so that they may be in a position: (a) to make representations on their own behalf …; or (b) to appear at a hearing or inquiry (if one is to be held); and (c) effectively to prepare their own case and to answer the case (if any) they have to meet." 10 In Kioa v West (1985) 159 CLR 550 the High Court held that the duty to accord natural justice is a duty to act fairly. In the normal course, a party to judicial proceedings (as are those in a tribunal) could expect to be apprised of the nature of the case sought to be made against it, and of the date and time fixed for hearing such as to give it a reasonable opportunity to meet that case and to advance its own. These statements are similar to those expressed by Professor de Smith referred to earlier. Brennan J (as he then was) at 628 stated: "A person whose interests are likely to be affected by an exercise of power must be given an opportunity to deal with relevant matters adverse to his interest which the repository of the power proposes to take into account in deciding upon its exercise." 11 On procedural fairness, Mason J stated in Kioa that the law had now developed to a point where it may be accepted that there is a common law duty to act fairly, in the sense of according procedural fairness, in the making of administrative decisions which affect rights, interests and legitimate expectations, subject only to the clear manifestation of a contrary statutory intention. Procedural fairness as a notion is a flexible obligation to adopt fair procedures which are appropriate and adapted to the circumstances of the particular case (584-585). 12 It is clear that natural justice or procedural fairness requires that both parties be given a reasonable opportunity to adduce evidence and make submissions in relation to the issues in the proceedings in the Small Claims Division of the Local Court. The Magistrate's reasons 13 In her reasons, the Magistrate referred to Casali's claim as: "The plaintiff's claim is, in effect, for the loss of three months rental income from part of commercial premises owned by … LJR Properties. The debt has been assigned to him by the landlord of the commercial premises … The terms that covered this particular agreement are found in a Deed and then a collateral deed of variation." [t 1.28-55] 14 The Magistrate continued: "The defendant was formerly the owner of the complex and he sold it to LJR Properties, this sale was completed in September 2002 and after the sale he continued as a tenant paying rent to LJR Properties. At the time of sale another part of the premises was subject to a lease and that lease was in its holding over period. The defendant, as the vendor, guaranteed rental income for those premises for a period of three years at a rate of $2000. If a lease was entered into where less than $2000 was payable the defendant would make up the difference. If a lease was entered into where more was paid then the defendant was released from his guarantee. He was also released from and if a tenant associated with LJR went into occupation. The defendant was also at liberty to introduce a tenant to the landlord. The terms that covered this particular agreement are found in a Deed and then a collateral deed of variation." 15 The Magistrate then summarised Mr Casali's and Mr Broderix's contentions. The Magistrate stated: "The terms of the agreement [between the new tenants and LJR Properties] are not disputed and neither is the assignment of debt to Mr Casali. There is a dispute though as to whether there was, in fact, a breach and if there was whether there was any loss suffered by the plaintiff or if there was that that loss could be wholly attributed to LJR's failure to mitigate." [t 3.35-40] 16 In relation to the deed of rental guarantee between the parties the Magistrate said: "the plaintiff said that the terms of the guarantee required the defendant to pay rental in an amount up to $2,000 per month in the event that rental income was not received. He said the building was sold, in effect, with the guarantee that it was fully tenanted and that therefore it would produce an income each and every month. The terms of the guarantee suggest that at least $2000 would be received in rent. I would be of the view that such a term, if that is what was intended should be expressed very clearly. No evidence was adduced as to any particular business practice that would require that interpretation but it seems to me that there is an inference that can be drawn that an income of at least $2000 per month was guaranteed. The defendant submits that averaged out over the 18 month period leave to go of the guarantee period once that new lease had been entered into the amount of rent actually received was over $2000 per month and therefore no loss was, in fact, suffered by the defendant." [t 3-4. 41-9] 17 The Magistrate did consider the effect of both deeds. Whether a particular deed is to be read alone or with another document was a matter for the Magistrate to determine. 18 On the issue of duty to mitigate, the Magistrate summarised the position of the parties by stating: "The defendant's position is that this is the intervening cause of the loss of rent and not any breach by the defendant. The plaintiff submits that there was clearly a breach and that he has no duty to mitigate. I note his statement and submissions that he made. But clearly the law does not allow a plaintiff to recover avoidable loss. A plaintiff must take reasonable steps to mitigate." (t 5.35-41) 19 The Magistrate decided that if there was any loss it was suffered as a result of Casali's intervening decision to offer a rent free period to a tenant who turned out to be a more attractive tenant and one that offered a more lucrative tenancy (J 6). Even if the Magistrate erred in law in her approach in determining the mitigation of loss in relation to the enforcement of terms of a deed, there was no denial of natural justice. Both parties had the opportunity to fully ventilate the issues they put into dispute. The Magistrate chose to adopt Broderix's submissions. The Magistrate confined herself to addressing the issues in dispute put before her. 20 There has been no denial of natural justice. The appeal is dismissed. The decision of her Honour Magistrate Keogh dated 17 June 2005 is affirmed. The further amended summons filed 20 September 2005 is dismissed. 21 Costs are discretionary. Costs usually follow the event. The plaintiff is to pay the defendant's costs on an indemnity basis. The court orders: (1) The appeal is dismissed. (2) The decision of her Honour Magistrate Keogh dated 17 June 2005 is affirmed. (3) The further amended summons filed 20 September 2005 is dismissed. (4) The plaintiff is to pay the defendant's costs on an indemnity basis. ********** 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.