New South Wales Supreme Court CITATION : Networked Sales v Rodrigues [2006] NSWSC 888 HEARING DATE(S) : 11 August 2006 JUDGMENT DATE : 5 September 2006 JURISDICTION : Common Law Division JUDGMENT OF : Associate Justice Harrison DECISION : (1) Leave to appeal the decision of Her Honour Magistrate Keogh made on 8 April 2005 is refused; (2) The decisions of the Magistrate made on 8 April 2005 and 15 December 2005 are affirmed; (3) The appeal is dismissed; (4) The summons filed 13 February 2006 is dismissed; (5) The plaintiff is to pay the defendant's costs as agreed or assessed. CATCHWORDS : Leave to appeal - Appeal of Local Court Magistrate - res judicata Civil Procedure Act 2005 LEGISLATION CITED : Consumer Claims Act 1998 (NSW) - s 36(1) Property Stock & Business Agents Act 1941 (NSW) - s 42A Property Stock & Business Agents Act 2002 (NSW) - s 36 Berowra Holdings Pty Ltd v Gordon [2006]HCA 32 CASES CITED : Chamberlain v Deputy Commissioner (1991) 28 FCR 21 Investmentsource v Knox [2002] NSWSC 710 PARTIES : Networked Sales Pty Ltd - Plaintiff Andre Rodrigues - Defendant FILE NUMBER(S) : SC 10711/2006 COUNSEL : Mr S Glascott - Plaintiff Mr L Katsinas - Defendant SOLICITORS : Birbas Attorneys - Defendant LOWER COURT JURISDICTION : Local Court LOWER COURT FILE NUMBER(S) : 216/2004; 224/2005 LOWER COURT JUDICIAL OFFICER : Keogh LCM LOWER COURT DATE OF DECISION : 8 April 2005, 15 December 2005 IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ASSOCIATE JUSTICE HARRISON SEPTEMBER 2006 10711/2006 - NETWORKED SALES PTY LTD v ANDRE RODRIGUES JUDGMENT (Leave to appeal; Appeal of Local Court Magistrate – res judicata) 1 HER HONOUR: The Magistrate made two decisions. The first on 8 April 2005 and the second on 15 December 2005. By summons filed 13 February 2006 the plaintiff seeks firstly, an order that leave be granted to appeal, out of time, the judgment and orders of Her Honour Magistrate Keogh made on 8 April 2005 in case number 216/2004 (the first case) at the Ryde Local Court; secondly, that the judgment and orders in the first case be set aside and in lieu thereof an order that the matter be remitted to the Consumer, Trader and Tenancy Tribunal for determination, or an order for dismissal of the plaintiff's claim in those proceedings; thirdly, an order that the judgment and orders of Her Honour Magistrate Keogh made in case number 224/2005 (the second case) be set aside; fourthly, an order that the orders made in the second case be stayed pending this appeal; fifthly, an order that the second case be remitted to the Ryde Local Court for determination of the substantive issues on their merits; and sixthly, in the alternative and on the premise that this appeal is dismissed, the plaintiff seeks orders that the Magistrate's cost order handed down in the second case (as to be assessed on an indemnity basis) be varied to assessment on a party/party basis. 2 Networked Sales Pty Ltd is a real estate agency located at Gordon (Networked Sales). By statement of claim in the Local Court Networked Sales sought payment of a commission against Andre Rodrigues and K T Yap, who were the owners of a property located at East Killara. It was alleged that Rodrigues and Yap (the vendors) entered into an exclusive agency agreement with Networked Sales. The property was sold. The real estate agency pleaded that it introduced the property to the vendors, or alternatively was the effective cause of the sale. 3 Dr Wechsler is the director of Networked Sales Pty Ltd. He appeared on behalf of Networked Sales in the Local Court at both the first and second hearings although submissions were prepared by Counsel in the second hearing (tab 17). Extension of time to appeal the first decision 4 Although the time limits prescribed by the Rules may be extended, a case for such an extension must be made. An extension of the time provided for appealing or seeking leave to appeal is not to be had merely for the asking. The decision to grant or refuse such an extension involves the exercise of a discretion. The fact of delay is a relevant consideration in this regard. Time limits for appeals are fixed for good reasons. 5 It is for the party seeking the extension to persuade the Court that it is in the interests of justice that it should be granted. Such persuasion will usually depend on the provision of an acceptable or satisfactory explanation as to why the time limits were not complied with – see Gallo v Dawson (1990) 64 ALJR 458; Jackamarra v Krakouer & Anor (1998) 153 ALR 276 at 283-284). 6 Networked Sales requires leave for an extension of time to lodge an appeal from the first decision. The first decision was given on 8 April 2005. The summons was filed on 13 February 2006. The summons was filed seven months out of time. It is necessary to give a history of what occurred in the Local Court in order to properly consider this application. The Local Court proceedings 7 In the Local Court, the vendors had filed a notice of motion which sought firstly, that the plaintiff's claim be dismissed or struck out; secondly, in the alternative, paragraph 8(i) of the liquidated statement of claim filed 14 May 2004 be struck out in respect to the recovery of the commission claimed; thirdly, the plaintiff pay the first and second defendants' costs of the proceedings; and fourthly, the plaintiff pay the first and second defendants' costs of the motion [tab 6]. The matter was listed for hearing with the motion to be determined as a preliminary issue. The basis for the vendors seeking these orders was that Networked Sales had not complied with s 36 of the Property Stock & Business Agents Act 2002 (NSW)(PSBAA). 8 On 8 April 2005 at the commencement of the hearing the issue in dispute was understood to be whether the statement of claim should be struck out or dismissed. From my reading of the transcript, Dr Wechsler gave a spirited defence. At one stage he tried to have the defence to be struck out as being "nugatory and without substance …" (t 8). Dr Wechsler requested that he be permitted to discontinue proceedings but the Magistrate was of the view that as proceedings had been commenced, they could not be discontinued. 9 The relevant portions of s 36 of the PSBAA read: "Review of commission and fees (1) An action or other proceedings cannot be commenced by a licensee for the recovery of remuneration or any sum as reimbursement for expenses until the expiration of 28 days after a statement of claim has been served personally or by post on the person to be charged with the remuneration or expenses. (2) The statement of claim must be in writing, set out the amount claimed and contain details of the services performed by the licensee in respect of which the remuneration or expenses are claimed. … (4) A person who is served with a statement of claim under this section or is provided with an itemised account of a transaction as provided by this section may apply to the Tribunal for the determination of a consumer claim within the meaning of Consumer Claims Act 1998 in relation to: (a) the entitlement of the licensee to the whole or any part of the amount specified in the statement of claim or the itemised account, or (b) whether the whole or any part of the amount is reasonable, or both. …" 10 Section 36(1) is a "procedural" notification provision intended to give a defendant an opportunity to resort to the consumer claim procedure under the Consumer Claims Act 1998 (NSW). It is in the same terms as the former s 42A of the Property Stock and Business Agents Act 1941 (NSW) – see Investmentsource v Knox [2002] NSWSC 710. 11 Ultimately, the Magistrate in her reasons for decision held that because the s 36 issue was also raised as a defence and the vendor's submission was successful, it was not a matter where Networked Sales' claim should be struck out but rather one where judgment should be entered in favour of the vendors. 12 The following exchange then took place: "WECHSLER: Can I just ask you how is that different from striking out? What are the consequential differences. HER HONOUR: It's not for me to tell you it's a matter where – the defence has been made out and judgment is entered for the defendant-- WECHSLER: But the matter that hasn't been heard on it's merits. The substantive issue as to the – well the obvious question is, are we stopped from recommencing proceedings. HER HONOUR: You'll have to get some legal advice about that, it's not for me to do that. JUDGMENT IS ENTERED FOR THE DEFENDANT." [t 23.8 – 24.04] 13 It is unfortunate that the Magistrate decided to enter a judgment in favour of the defendant rather than dismiss or strike out the statement of claim. Section 36 is a condition precedent of a procedural nature which has to be satisfied before the commencement of proceeding. Proceedings commenced in contravention of s 36 are not a nullity. The appropriate order to be made in these circumstances is that the statement of claim be either struck out or dismissed – see Berowra Holdings P/L v Gordon [2006] HCA 32. Where an original statement of claim has been struck out or dismissed, once the procedural requirement is complied with, the plaintiff can recommence proceedings. Another statement of claim and the second decision 14 On 6 May 2005 Networked Sales filed a further statement of claim in almost identical terms, after s 36 had been complied with. The vendors pleaded issue estoppel and res judicata. On 15 December 2005 the Magistrate held that her decision of 8 April 2005 was final between the same parties and in relation to the same subject matter or cause of action, which meant that the claim could not be maintained, as it was res judicata. Whether an extension of time ought to be granted 15 The vendors opposed leave being granted on the grounds that the appeal was lodged out of time in relation to the first decision, the appeal had no merit and the vendors had suffered the prejudice of incurring costs associated with defending the second hearing. 16 Dr Wechsler did not file any affidavit evidence in support of his application for an extension of time. This is usually fatal. In his submission documents he says that "…the error of law embodied in the first case only became an issue at the time of judgment in the second case…leave ought to be granted…" There is no evidence to the effect that Dr Wechsler believed the Magistrate's decision meant that he could recommence proceedings once s 36 was complied with, nor is there an explanation as to why he did not seek legal advice as to the effect of the Magistrate's order. At the conclusion of the first hearing the Magistrate specifically advised Dr Wechsler to seek legal advice. If he had done so, the result may have been different. Even if Dr Wechsler decided to withdraw the second statement of claim when the issue of res judicata was raised in the defence and filed the appeal in relation to the first decision, I may have been minded to grant the extension of time. But he did not do so, he chose to proceed to hearing on the second statement of claim. 17 Networked Sales also submitted that when judgment was entered at the first hearing an amendment under the slip rule was sought so as to delete the words "And judgment is entered for the defendant." According to Networked Sales submission the Magistrate apparently recited the third last paragraph of the judgment, which stated, "Section 36 of the Act has not been complied with and so this court is precluded from dealing with the matter." According to Dr Wechsler the Magistrate then apparently said words to the effect "I think that makes the issue clear." 18 These statements do not appear in the transcript at the conclusion of the Magistrate's first decision. In any event, because the Magistrate considered that it was more appropriate to enter judgment rather than strike out or dismiss the statement of claim, the slip rule had no application. 19 I accept that the merits of Networked Sales' case have not been tried. However, Dr Wechsler elected to file another statement of claim and proceed to the second hearing rather than seek legal advice or appeal the first decision. He was on notice that the vendors were saying that the proceedings were subject to res judicata estoppel and if that argument was correct his claim would fail. It is my view that justice is best served if leave to extend the time to lodge an appeal against the first decision is refused. The appeal against the second decision 20 The appeal against the second decision was lodged within the stipulated time period. The amended grounds of appeal in the second decision are firstly, that Her Honour erred at law by holding that the plaintiff was estopped from bringing the second case by reason of res judicata in circumstances where she had held in the first case, that the Court was statute barred from hearing the case; secondly, Her Honour erred at law by holding that the plaintiff was estopped from bringing the second case by reason of res judicata in circumstances where she held that its claim had never been decided on its merits; thirdly, Her Honour erred at law by holding that the plaintiff was estopped from bringing the case by reason of res judicata in that the decision in the first case was purely an administrative decision and did not judicially determine the rights of the plaintiff; fourthly, Her Honour erred at law, by applying the rule under s 91 of the Civil Procedure Act 2005 (CPA) in not characterising the first case as a dismissal of proceedings; fifthly, Her Honour erred at law by holding that the plaintiff's cause of action in case number 216/2004 had merged into the judgment of that case; sixthly, Her Honour failed to give sufficient weight to the fact that the pleadings in the second claim were for different causes of action to that of the first; seventhly, Her Honour erred at law by holding that res judicata applied in circumstances were the prior action was a nullity, and eighthly, Her Honour's order that the plaintiff pay the costs of the defendants on an indemnity basis. Networked Sales submitted that the Magistrate erred in deciding that the doctrine of res judicata applied to the second action as that action had not merged in the first judgment, as the first judgment decided an interlocutory or procedural issue unrelated to the action in contract which properly attracted the jurisdiction of the Court. 21 Networked Sales further submitted that the satisfaction of s 36 is not an element of the cause of action commenced by it and that the vendors' pleading of the section was merely the pleading of a procedural matter, which depending on the view this Court takes of the subsection, is either a jurisdictional fact (which, if not satisfied deprived the Court below of jurisdiction to hear the claim), or alternatively, is a notification provision which does not preclude the validity of the proceedings as commenced. 22 Res judicata and issue estoppel were pleaded in the defence. These issues were raised at a directions hearing where Dr Wechsler had requested that he be permitted to file a notice of motion seeking to have these issues determined separately. At the hearing, the issues of res judicata and estoppel were determined first and prior to the calling of witnesses and the like. Dr Wechsler made submissions before the Local Court as to why res judicata and estoppel did not apply. 23 Networked Sales' submissions in both the Local Court and this Court did not address the fact that there was a final judgment entered against the plaintiff. I had reservations whether the decision was final but in Chamberlain v Deputy Commissioner (1991) 28 FCR 21 the High Court said that "…so long as that judgment stands it is not competent for the respondent to bring further proceedings in respect of the same cause of action". The judgment referred to in Chamberlain was a consent judgment, there had not been a determination made on the merits. This is the same position here. It is my view that while the judgment stands, Networked Sales cannot bring further proceedings in the same cause of action. 24 The Magistrate held that "…the decision of the 8th April, 2005 was a final decision, made by a competent tribunal between the same parties and in relation to the same subject matter or cause of action. This claim by the plaintiff cannot be maintained as it is res judicata." (t 5) This decision of the Magistrate is affirmed. 25 Leave to appeal the decision of Her Honour Magistrate Keogh made on 8 April 2005 is refused. The decisions of the Magistrate made on 3 February 2005 and 15 December 2005 are affirmed. The appeal is dismissed. The summons filed 13 February 2006 is dismissed. 26 Costs are discretionary. Costs usually follow the event. The plaintiff is to pay the defendant's costs as agreed or assessed. The Court orders: (1) Leave to appeal the decision of Her Honour Magistrate Keogh made on 8 April 2005 is refused. (2) The decisions of the Magistrate made on 8 April 2005 and 15 December 2005 are affirmed. (3) The appeal is dismissed. (4) The summons filed 13 February 2006 is dismissed. (5) The plaintiff is to pay the defendant's costs as agreed or assessed. ********** 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.