New South Wales Supreme Court CITATION : Ashi Pty Limited v Karasco Investments Pty Ltd [2009] NSWSC 780 This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S) : 27 July 2009 JUDGMENT DATE : 12 August 2009 JUDGMENT OF : Davies J DECISION : (1) Grant leave to the Plaintiff to appeal against the decision of the Local Court at Liverpool given on 28 November 2008. (2) Order the appeal be allowed. (3) Vary the order of the Local Court so that it provides: (a) Order that the Plaintiff pay the Defendant's and the Cross-Defendant's costs of the proceedings, such costs not to include any costs of the second cross-claim by the Cross-Defendant against Zarb; (b) Order that the costs of the application for costs in favour of the Cross-Defendant from 15 August 2008 be costs on an indemnity basis. CATCHWORDS : PROCEDURE - costs - appeal as to costs - unsuccessful claim by real estate agent for commission against vendor - purchaser joined as Cross-Defendant - Cross-Defendant takes over defence of Defendant prior to hearing - order made by Magistrate that Plaintiff pay Cross-Defendant's costs - order varied to require Plaintiff to pay Defendant's and Cross-Defendant's costs. APPEAL AND NEW TRIAL - leave to appeal required - what must be shown for leave to be granted. Courts and Crimes Legislation Amendment Act 2008 Interpretation Act 1987 LEGISLATION CITED : Legal Profession Act 1987 Local Courts Act 1982 Local Court Act 2007 Supreme Court Act 1970 Chapmans Ltd v Yandell [1999] NSWCA 361 Coulter v R (1988) 164 CLR 350 CASES CITED : Gould v Vaggelas (1985) 157 CLR 215 Gundry v Sainsbury [1910] 1 KB 645 Harold v Smith (1860) 5 H. & N. 381, 385 Tarry v Price (No. 2) (1987) 88 FLR 270 Ashi Pty Ltd trading as L J Hooker Commercial Liverpool (Plaintiff) PARTIES : Karasco Investments Pty Ltd (First Defendant) Eric Farmer (Second Defendant) FILE NUMBER(S) : SC 08/16666 COUNSEL : D Marks (Plaintiff) C C Dwyer (Defendant) SOLICITORS : CMC Lawyers (Plaintiff) Michael Parasyn (Defendants) LOWER COURT JURISDICTION : Local Court LOWER COURT FILE NUMBER(S) : 1352/2006 LOWER COURT JUDICIAL OFFICER : Magistrate Giles LOWER COURT DATE OF DECISION : 28 November 2008 - 4 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION DAVIES J Wednesday 12 AUGUST 2009 08/16666 ASHI PTY LIMITED v KARASCO INVESTMENTS PTY LTD & ANOR JUDGMENT 1 This is an application for leave to appeal from a decision of her Honour Magistrate Giles in the Local Court at Liverpool in relation to the costs of proceedings that she had heard. The appeal was said in the Summons to have been brought pursuant to provisions of the Local Courts Act 1982. However, when I pointed out to Mr Marks who appeared for the Plaintiff that that Act had been repealed by the Local Court Act 2007 he sought leave, and I granted it, to amend the Summons to substitute the relevant provisions of the Local Court Act 2007 for the provisions of the Local Courts Act 1982. 2 In fact, the 2007 Act commenced only on 6 July 2009. The present appeal was lodged before that time. Clause 6 of Schedule 4 to the 2007 Act (the Savings, Transitional and other Provisions) provides: "(1) Subject to subclause (2), this Act and the rules apply to proceedings commenced before the relevant repeal date in the same way as they apply to proceedings commenced on or after that date. (2) The Court may make such orders dispensing with the requirements of the rules in relation to the proceedings commenced before the relevant repeal date, and such consequential orders (including orders as to costs), as are appropriate in the circumstances." 3 Clause 6(1) suggests, therefore, that it is 2007 Act that applies to the appeal because those can probably be considered "proceedings" commenced before the relevant repeal date. Although cl 12 in the Schedule deals with appeals to the Supreme Court, that clause is only concerned with the changes that were made by Schedule 15 to the Courts and Crimes Legislation Amendment Act 2008 that provided for appeals as of right from the Small Claims Division of the Local Court under s 39(2) to go to the District Court rather than the Supreme Court. 4 It is not quite clear whether s 30(1) Interpretation Act 1987 operates in the face of cl 6 of Schedule 4 to mean that the proceedings might continue under the 1982 Act. The matter is, in any event, one of form only and not of substance because the appeal provisions of the 1982 and 2007 Acts are relevantly the same. 5 In all of the circumstances, it appears to me that the order I make granting leave to the Plaintiff to amend the summons in the way described is sufficient for present purposes and for what appears in cl 6(2). The claims before the Local Court 6 The litigation before the Magistrate involved a claim for commission by Ashi Pty Ltd trading as L J Hooker Commercial Liverpool (the Plaintiff in the present proceedings) ("Ashi") from Eric Farmer (the second Defendant in the present proceedings) ("Dr Farmer") in respect of the sale of a property at 181 Bigge Street, Liverpool from Dr Farmer to Karasco Investments Pty Ltd (the first Defendant in the present proceedings) ("Karasco"). 7 Ashi sued Dr Farmer for commission in respect of the sale. The proceedings were commenced on 30 November 2006. Dr Farmer cross-claimed against Karasco relying on clause 36 in the contract of sale which provided: "The purchaser warrants that he was not introduced to the property or the vendor by any real estate agent other than the vendor's agent, if any, specified in this contract. The purchaser hereby indemnifies the vendor against any claim for commission by any other real estate agent and against all claims, costs and expenses for the defence and determination of such a claim made against the vendor. This right continues after completion." It is to be noted that the vendor's agent referred to on the front of the contract was Ashi. 8 In its amended defence of 27 March 2007 to Dr Farmer's cross-claim, Karasco admitted that the contract of sale contained clause 36, denied that it was liable to indemnify Dr Farmer for any commission claim by any real estate agent, said that any introduction by Ashi was not the effective cause of the sale, and denied that Karasco entered into the contract of sale by reason of anything done by Ashi. 9 In addition, Karasco cross-claimed against its solicitor Charles Zarb, who acted on the purchase, alleging breach of retainer, negligence and breach of the Fair Trading Act in relation to advice that was or was not given about clause 36 of the contract. 10 Initially, the solicitor acting for Dr Farmer was Stephen Wawn of Stephen Wawn & Associates, and the solicitor acting for Karasco was Michael Parasyn. 11 On 5 October 2007 a deed was entered into between Dr Farmer and Karasco whereby Karasco agreed to indemnify Dr Farmer pursuant to clause 36 of the contract. Because of the importance placed on this deed by the Plaintiff in the present appeal, I shall set out most of its provisions. It relevantly provided: " RECITALS A. On 11 October 2006 Farmer and Karasco entered into a Contract for the sale of land whereby Karsaco purchased from Farmer the property located at 181 Bigge Street, Liverpool (" the property ") for $2, 300, 000.00. B. Ashi Pty Limited trading as L.J Hooker Commercial, Liverpool ("Hookers") have commenced proceedings against Farmer at Liverpool Local Court being proceeding number 1362 of 2006 (" the proceedings ") claiming commission and alleging that agency effectively introduced Karasco to the property. C. Both Karasco and Farmer deny that Hookers effectively introduced Karasco to the property. Farmer has cross-claimed against Karasco relying on the indemnity contained in clause 36 of the Contract for the sale of land of the property. Karasco has agreed to indemnify Farmer pursuant to that clause and this Deed sets out the agreement as to the indemnity and the proceedings. NOW THIS DEED WITNESSES: … 1. INDEMNITY 1.1 Karasco hereby indemnifies Farmer against the claim for commission by Hookers made in the proceedings and for all costs and expenses arising from the proceedings (" the indemnity "). 2. ARRANGEMENT AS TO INDEMNITY 2.1 The parties to this Deed agree to the following arrangement as to the role of Karasco and its solicitor in the proceedings: (i) Karasco agrees to instruct its solicitor, Parasyn or any other solicitor it may retain to represent it in the proceedings or regarding Hooker's claim for commission to; Draft and prepare evidence on behalf of Farmer in the proceedings; Reply to correspondence relating to the proceedings on behalf of Farmer; Send copies of all relevant correspondence relating to the proceedings to Wawn in a timely manner; Appear as agent/for Wawn at all listings of the proceedings including the hearing. (ii) Karasco will pay all legal fees and disbursements incurred by it as a result of its retainer of Parasyn or any other solicitor it may retain to represent it in the proceedings or regarding Hooker's claim for commission. (iii) Karasco will pay all legal fees and disbursements reasonably incurred by Farmer as a result of his retainer of Wawn within 30 days of delivery of a tax invoice and time costs schedule from Wawn to Parasyn by facsimile or post. 2.2 The parties to this Deed agree to the following as the role of Farmer and his solicitor in the proceedings: (i) Farmer agrees to make himself available as a witness in order for Parasyn to prepare and draft evidence on Farmer's or Karasco's behalf (ii) Farmer agrees to appear as a witness at the hearing if so required provided that he is reimbursed by Karasco for the reasonable costs of his loss of income; (iii) Farmer will instruct Wawn to remain as the solicitor on the record in the proceedings; (iv) Farmer authorises his solicitor to provide to Parasyn all documents relating to the proceedings and documents required in order for Parasyn to prepare evidence to defend Farmer and Karasco in the proceedings, including documents requested pursuant to orders made for informal discovery; 3. COSTS 3.1 Karasco will pay the costs of both parties of and incidental to preparation of this Deed. …" 12 Following the execution of the Deed, Dr Farmer's solicitor, Stephen Wawn, filed a Notice of Ceasing of Act dated 10 October 2007. Thereafter, on 22 November 2007 Karasco's solicitor, Michael Parasyn, filed a Notice of Change of Address for Service whereby he went onto the record in the Liverpool Local Court for Dr Farmer. 13 On the same day, consent orders were filed dismissing the second cross-claim between Karasco and its former solicitor, and providing: "2. No order as to costs." The judgments of the Magistrate 14 The proceedings were heard on 29, 30 January 2008, 21 and 28 May 2008, and judgment was given on 29 May 2008. The crucial part of the judgment is as follows (Transcript, 29 May 2008, page 8.19): "I am not satisfied on balance of the Plaintiff's contention that it was an effective cause of this negotiated sale of this property at that price to the Second Defendant (sic) and I am consequently dismissing the Plaintiff's claim and also therefore the cross-claim." 15 Her Honour then noted that costs would normally follow the event but she stood the matter over with liberty to restore if there was to be a costs argument. 16 The proceedings were listed to make costs orders on 1 August 2008. Mr Dwyer of counsel appeared on behalf of Dr Farmer and Karasco. There was no appearance for Ashi. The accounts of Dr Farmer's and Karasco's costs totalled $105,966.23 and an order was made by the Court that Ashi pay Dr Farmer's costs in the sum of $105,966.23 unless there was an election for an assessment. 17 It was subsequently realised that the Court had failed to give notice to Ashi and its legal representatives. That led to a letter from Ashi's solicitors to Michael Parasyn of 11 August 2008 enclosing Short Minutes of Order for execution. The Short Minutes of Order provided that the orders made at the Liverpool Local Court on 1 August 2008 be set aside and that: "2. The Plaintiff pay the Defendant's costs as agreed or assessed." 18 On 12 August 2008 Michael Parasyn wrote to Mr Canceri, Ashi's solicitor saying: "I attach the signed Short Minutes of Order. I note that you will appear on the next occasion and mention the matter on behalf of the Defendant. Please confirm the Orders were received and approved by the Court. …" Enclosed with the letter was a copy of the Short Minutes of Order signed by Mr Parasyn. 19 Mr Parasyn says in an affidavit that on 14 August 2008 he reviewed the Short Minutes of Order and noted that they omitted to refer to Karasco and Karasco's costs. He considered that the Orders would be clearer if they were amended to note specifically that the Order that Ashi pay Dr Farmer's costs also included Karasco's costs. Accordingly, he wrote to Mr Canceri on that day saying relevantly: "The original Order of Magistrate Giles referred to a quantum which included the Defendant's costs and the Cross-Defendant's costs. However, I note the Short Minute of Order did not include the Cross-Defendant's costs. This needs to be added. Please include this amendment. Please let me know that you will make the amendment to save me the time to travel to Court as well." A copy of the Short Minutes of Order that was enclosed now read in paragraph 2: "Plaintiff pay the Defendant's costs and the Cross-Defendant's costs as agreed or assessed." 20 On the same day Mr Parasyn wrote to the Registrar of the Local Court at Liverpool noting that the matter was listed on that day and drawing attention to what was said to be the error in the Short Minutes of Order and saying: "Paragraph 2 should read 'Plaintiff pay the Defendant's costs and the Cross-Defendant's costs as agreed or assessed'." 21 Before court on that day Mr Parasyn and Mr Canceri had a telephone conversation where Mr Canceri said he would not agree to the amendment. The matter came before the Court on that day and the Court was simply prepared to set aside the Order of 1 August 2008 and set down the hearing of the costs matter on 28 November 2008. 22 On 28 November 2008, presumably on the morning of that day, Stephen Wawn filed a Notice of Change of Solicitor which provided that Dr Farmer had appointed him to act as his solicitor in place of Michael Parasyn. It seems likely that this would have been filed in the morning of 28 November because it was on that day that the costs argument took place before the learned Magistrate where Mr Wawn appeared for Dr Farmer and Mr Parasyn instructed Mr Vinden for Karasco. 23 There appeared to be no dispute that Ashi had to pay Dr Farmer's costs of the proceedings in the Local Court, although ultimately no order to that effect was made. The issue was whether Ashi should have to pay Karasco's costs. 24 The learned Magistrate delivered an ex tempore judgment after hearing argument on the costs. During the course of that judgment she said this (at T22.20): "Throughout all my advocates' submissions today we are at one in terms of the Civil Procedure Act talks about a general recitation of principle in terms of being just or reasonable and fair in the circumstances when we are talking about the costs discretion for a cross-claim proceeding to which Ashi Pty Limited, L J Hooker Commercial, our plaintiff, was not technically a party. That wide discretion to decide that always turns on each case's peculiar circumstances because there are no two civils the same, as we have seen as we have been trawling through the cases this afternoon." (emphasis added) 25 After briefly discussing the facts and the parties, the learned Magistrate went on to say: "These [viz. the Plaintiff and Karasco] are clearly the parties in conflict but, as Mr Vindin has said, they had no contractual relationship to bring that dispute to court. The contract exists between the plaintiff and Dr Farmer. But it was clearly inevitable that Karasco Pty Limited had to be joined and not just pursuant to the indemnity. Clause 36 could not be unknown to the plaintiff, a real estate agent, when he chose to sue Dr Farmer. The indemnity was invariably going to bring the potentially, ultimately liable party into the ring and clearly it would have hampered our proceedings were Mr Karasmanas part of those proceedings only as a principal witness, not as a party as he sits in the witness box attempting to forecast and protect his interests in an as yet unnamed and untaken piece of litigation in the future. Clearly that is exactly what Anshun and the High Court were attempting to preclude by saying that all claims and cross-claims that are turning on the same evidence that could be brought and joined, should be brought and joined and be decided on one consistent set of facts or factual findings rather than the commercially undesirable situation of different hearings, same witnesses and possibly different findings. This is that situation. Karasco Pty Limited was inevitably going to be joined, to use those words from Thomas and from Edginton and to be fair and reasonable the key to this, the key to what at first blush may seem an outrageous request but it is, in fact, fair and reasonable. The key to that is that there is really only one set of defendant litigant's costs because the original defendant, Dr Farmer, settled out and stepped aside well before we got to court to the hearing. The costs of defending it fell to the cross-defendant, Karasco Pty Limited in his place as was entirely efficient and proper under the indemnity. CONSEQUENTLY I MAKE THE ORDER THAT OUR UNSUCCESSFUL PLAINTIFF PAY THE CROSS-DEFENDANT'S COSTS AS AGREED OR ASSESSED." (emphasis added) 26 The Cross-Defendant then sought that the costs of the costs application should be paid by Ashi on an indemnity basis. 27 Those that appeared for Karasco on 28 November before the learned Magistrate argued that it was unreasonable of the Plaintiff not to have agreed to the amendment to the Short Minutes of Order to include a reference to the Cross-Defendant's costs. That was ultimately what the Magistrate ordered on 28 November. It was said, therefore, that those costs should be paid on an indemnity basis. 28 The Magistrate's reasons for ordering the indemnity costs were these (at T27.22): "HER HONOUR: Clearly costs follow the cause again in terms of the costs application but for reasons we have ventilated about 1 August it is inappropriate that 1 August form part of the costs award. Also 14 August could have finalised the matter if Mr Parasyn had let the consent orders come up the way they have subsequently ended up coming up. So I am not prepared to allow 14 August. However, from 14 August it was clear, given the amendment Mr Parasyn tried to make to the consent orders, it was apparent then the order which the cross-defendant was seeking. SO CLEARLY THE PLAINTIFF HAS HAD NOTICE SINCE THEN AND SINCE THEN I ORDER INDEMNITY COSTS." Leave to appeal 29 Section 40 Local Court Act 2007 (which is in relevantly identical terms to s 74 Local Courts Act 1982) provides: "(1) A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court on a ground that involves a question of mixed law and fact may appeal to the Supreme Court but only by leave of the Supreme Court. (2) A party to proceedings before the Court sitting in its General Division who is dissatisfied with any of the following judgments or orders of the Court may appeal to the Supreme Court, but only by leave of the Supreme Court: (a) an interlocutory judgment or order, (b) a judgment or order made with the consent of the parties, (c) an order as to costs." 30 Because the order appealed against is an order for costs there is no appeal as of right. Section 40 requires leave before an appeal may be brought. Ashi accepts that leave is required. 31 In Coulter v R (1988) 164 CLR 350 at 359 Deane and Gaudron JJ said: "The requirement that leave or special leave be obtained before an appeal will lie is a necessary control device in certain areas of the administration of justice (e.g. appeals to a second appellate court) in this country. As a filter of the work which comes before some appellate courts, it promotes the availability, the speed and the efficiency of justice in those appeals which are, in all the circumstances, appropriate to proceed to a full hearing before the particular court. It also represents a constraint upon the overall cost of litigation by protecting parties, particularly respondents, from the costs of a full hearing of appeals which should not properly be entertained by the relevant court either because they are hopeless or, in the case of a civil appeal to a second appellate court, because they do not possess special features which outweigh the prima facie validity of the ordinary perception that the availability of cumulative appellate processes can, of itself, constitute a source of injustice." 32 In Chapmans Ltd v Yandell [1999] NSWCA 361 Fitzgerald JA (with whom Mason P and Davies AJA agreed) said: "[10] Given the nature of the appeal under s208M of the [Legal Profession] Act [1987], I am satisfied that a master to whom an application for leave to appeal is made under that section should consider any material evidence which bears upon whether or not leave to appeal should be granted, including evidence which bears upon the likely outcome of the appeal if leave is granted: … [11] On the other hand, it is important to keep in mind the purpose of a requirement of leave to appeal. It is intended to act as a filter to ensure that unsuitable appellant proceedings which are not able to be brought with the demands which that places upon the resources of the Court and the burden which it places upon other parties and the delays which it causes to other litigants. … [12] It is also in my opinion important to keep in mind that s208M must be considered in the context of s208L, which restricts an appeal as of right to matters of law. In considering whether or not leave to appeal is granted, it must be decided whether or not, there not being a matter of law arising in the proceeding and there being an appeal as of right only as to a matter of law, there is some other matter which in justice requires that leave to appeal be granted to allow that matter to be relitigated. The party seeking leave to appeal obviously bears the burden of establishing that justice does require that leave to appeal be granted. Further, the master when considering whether to grant leave to appeal obviously has a very wide discretion: …" (citations omitted) 33 In relation to those remarks of Fitzgerald JA it is to be noted that s 208L Legal Profession Act 1987 gave an appeal as of right in matters of law and that s 208M gave a right to seek leave to appeal in relation to dissatisfaction of a determination of a costs assessor on other grounds. A similar position obtains in the present case where s 39 Local Court Act 2007 gives a right of appeal where it is alleged the judgment is erroneous in point of law but otherwise, and in particular in relation to any order for costs, s 40 requires that leave be granted. 34 The result is, in my opinion, that the party seeking leave to appeal needs to point to some other matter which in justice requires that leave to appeal be granted. 35 Ashi was not able to identify any additional matter over and above the error of principle or law which the Magistrate was said to have made, apart from an assertion that it had suffered a detriment. In my opinion, it could reasonably be expected that any party appealing or seeking leave to appeal had suffered a detriment. That in itself cannot be an additional matter that justice requires leave to be granted. 36 Ashi conceded that if the correct order was made, namely, that Ashi pay Dr Farmer's costs, the net difference between that and the order currently made was about $15,000. By way of contrast, s 101(2)(r) Supreme Court Act 1970 requires leave to appeal to the Court of Appeal from a final judgment of this Court where the matter at issue is less than $100,000. Further, s 101(2)(c) (like s 40 Local Court Act 2007) requires leave to appeal to the Court of Appeal from an order as to costs only. 37 Whilst a direct comparison cannot be made between s 101(2)(r) which is concerned with an appeal to the Court of Appeal, and the appeal that can be made with leave to this Court from the Local Court under s 40, those two provisions suggest that where the matter, in the first instance, is concerned only with a costs order and, in the second instance, only concerns approximately $15,000, there would need to be some significant further factor to justify leave being granted. 38 Ashi also suggested that the behaviour of Karasco's solicitor in the lead up to the costs argument on 28 November 2008 was a matter which ought to be weighed in the balance on the issue of leave to appeal. What was suggested was that Ashi had tried to find out the basis for Mr Parasyn's claim for costs on behalf of Karasco, and that if it had known that basis it would have been prepared in its response to the application and would have put those matters to the Magistrate that had been put to me in this hearing. Ashi says that this produced an injustice that would not have happened if the proceedings had been conducted in a fair and proper manner in the first instance before the Magistrate. 39 I must confess to having some difficulty understanding this argument. There was no doubt, as Mr Marks conceded, that Ashi knew that what was sought was the costs of both Dr Farmer and Karasco, and had known this from 14 August 2008. The right of a cross-defendant in Karasco's circumstances to seek and obtain a costs order from an unsuccessful plaintiff is governed by well known principles associated with Bullock and Sanderson orders. The fact that Mr Parasyn may not have provided some sort of outline of submissions or even something less setting out the basis of why Karasco was asking for its costs from Ashi can hardly be said to be a matter of injustice that acts on the consideration of granting leave to appeal. 40 Ashi's main submission why leave should be granted was because the Magistrate, it was argued, had made an error of principle resulting in Ashi having to pay more costs than it properly should have done. I shall now deal with Ashi's submissions in this regard and return to the question of leave later in this judgment. The Plaintiff' submissions 41 Ashi argues that costs awarded to a successful party are given only as an indemnity (whether fully or partially) for any liability that party has to its solicitor. Ashi points to what was said Gundry v Sainsbury [1910] 1 KB 645 at 649 in the judgment of Cozens-Hardy MR: "What are party and party costs? They are not a complete indemnity, but they are only given in the character of an indemnity. I cannot do better than read the opinion expressed by Bramwell B in Harold v Smith : 'costs as between party and party are given by the law as an indemnity to the person entitled to them; they are not imposed as a punishment on the party who pays them, nor given as a bonus to the party who receives them. Therefore, if the extent of the indemnification can be found out, the extent to which costs ought to be allowed is also ascertained.' Now in the face of the evidence which the learned county court judge has accepted, and which he was perfectly justified in accepting, if he had ordered the defendant to pay these costs he would have been giving a bonus to the party receiving them. That is contrary to justice and to common sense and also to the law as laid down in Harold v Smith ." In that case, the Plaintiff had reached an agreement with the solicitor who acted for him that the solicitor would not be paid any costs for acting for the Plaintiff. 42 Ashi relies on Tarry v Price (No. 2) (1987) 88 FLR 270 where Kearney J followed both Harold v Smith (1860) 5 H. & N. 381, 385 and Gundry v Sainsbury in a case where a solicitor and client had agreed on a limited amount that would be paid to the solicitor by way of costs. The unsuccessful party was ordered to pay the other side's costs but in an amount not exceeding the agreed sum with which that party had agreed with its solicitor. 43 Ashi's argument appears to be put in this way. Dr Farmer did not seek to agitate any of the issues in his cross-claim against Karasco. Accordingly, it should be inferred that that cross-claim was abandoned and that cross-claim included a claim to be indemnified for his costs of defending Ashi's claim. Further, Karasco did not incur any costs in defending Ashi's claim. Secondly, there is no evidence that Karasco paid anything on Dr Farmer's behalf for which it would be entitled to any indemnity by way of a costs order. Thirdly, if Ashi is ordered to pay Karasco's costs, those costs might include matters for which Ashi should not be liable such as Karasco's costs associated with its second cross-claim against Mr Zarb. 44 The argument involves the submission that clause 36 of the contract for sale did not contain any right for Karasco to step in and take over the proceedings on Dr Farmer's behalf. It also involved the submission that the Deed of 5 October 2007 was abandoned shortly after it was executed because particular matters contemplated in that Deed were changed. So, for example, clause 2.2(iii) contemplated that Dr Farmer would instruct Mr Wawn to remain as the solicitor on the record in the proceedings but what in fact happened was that 10 October 2007 Mr Wawn ceased to act for Dr Farmer and Mr Parasyn took his place. Further, it is said there was a gap between these two solicitors acting for Dr Farmer between 10 October and 22 November 2007 and that was not contemplated by the Deed. 45 The argument now put by Ashi was not articulated in this way to the Magistrate at all. Certainly, reference was made to the fact that the cross-claim relied on clause 36 rather than the Deed of 5 October 2007 for the claim of indemnity. 46 Then it was argued before the Magistrate that Part 42.1 UCPR requires the Court to make an order that costs followed the event unless it appears to the Court that some other order should be made. It was submitted, in those circumstances, that on the cross-claim Karasco should pay Dr Farmer's costs (Transcript, 28 November 2008, p 20.40) despite the fact that the cross-claim was dismissed and immediately afterwards in the transcript it was submitted that Dr Farmer, the unsuccessful party on the cross-claim, should pay Karasco's costs (T20.41). Did the Magistrate err? 47 What seems tolerably clear is that the learned Magistrate believed that there was an agreement that Ashi should pay Dr Farmer's costs and the only matter she was deciding was whether Ashi should pay Karasco's costs as well. Mr Marks who appeared for Ashi before me and also before the Magistrate conceded before me that it looked as if all parties before the Magistrate and her Honour worked on the assumption that there was an order in place in favour of Dr Farmer for costs (see for example T2.33 to T3.13, T4.35, T5.47-6.10). 48 Her Honour's reference to Anshun in her ex tempore judgment on costs, and her references to the fact that discretionary issues of who should pay the costs of a cross-claim, and that Ashi must clearly have contemplated that Karasco would be joined by Dr Farmer, indicates to me that her Honour had in mind principles such as those discussed in Gould v Vaggelas (1985) 157 CLR 215 concerning the making of Bullock or Sanderson orders. 49 Although what ultimately happened in relation to the conduct of the principal proceedings before the Magistrate was not quite what the Deed of October 2007 contemplated in a strict sense (because Mr Parasyn went onto the record for Dr Farmer in place of Mr Wawn), in substance it was that Karasco's solicitor went onto the record for Dr Farmer and defended the proceedings on his behalf, there having already been reached an agreement whereby Karasco would indemnify Dr Farmer in the Deed of October 2007. This was really no different to what happens when an insurer's solicitor takes over the conduct of a defence of proceedings by going onto the record for the insured. 50 True it is, that a different approach might have been taken to orders made on Dr Farmer's cross-claim against Karasco in the sense that, Karasco having agreed to indemnify Dr Farmer, rather than dismissing that cross-claim an order might have been made that Karasco indemnify Dr Farmer. However, it was clear in the first place that such an agreement had been reached pursuant to the Deed of October 2007. Further, when Ashi was unsuccessful in the proceedings the only thing that was left for Karasco to indemnify was Dr Farmer's costs of defending those proceedings. 51 In my opinion, it would have been entirely appropriate for the learned Magistrate to have made an order that Ashi pay Dr Farmer's costs of the proceedings and that a Bullock or Sanderson order have been made with the intent that Ashi would be required to pay Karasco's costs of the proceedings on the basis that, technically, it had been successful in resisting the cross-claim brought by Dr Farmer (because that cross-claim was dismissed) but, in substance, because Karasco had been successful in defending the proceedings on Dr Farmer's behalf, it having accepted that it was bound to indemnify him and to do that. The order could have been restricted to exclude Karasco's costs involved in the second cross-claim which might be thought to be outside the purview of any Bullock or Sanderson order, although the consent order providing for "no order as to costs" of the second cross-claim must have been intended to mean that Karasco and the second cross-defendant would pay their own costs of the second cross-claim without them having been able to be claimed under any other costs order. 52 The various accounts annexed to the affidavit of Michael Parasyn of 6 May 2009 show that Mr Wawn sent accounts to Dr Farmer for work done up to and including 16 October 2007 with the four final entries apparently relating to the fact that Mr Wawn ceased to act for Dr Farmer on 10 October. Thereafter, work done in defence of the claim by Dr Frmer appears on accounts Mr Parasyn sent to Karasco. As far as I can understand the submission made by Ashi it is that Karasco had no liability to pay legal costs to Mr Parasyn for his acting for Dr Farmer to defend the claim (see T44.3). The Deed, it is said, does not provide the basis of liability because it must be inferred it was abandoned shortly after it was made for the reasons set out earlier in this judgment. Nor, it is said, can clause 36 be called in aid because that does not provide for Karasco to step in and take over Dr Farmer's defence. 53 I have some doubt that clause 36 of the Contract of Sale is relevant in the circumstances of the claim made by Ashi against Dr Farmer because it appears to be posited on the basis that some other agent than the one mentioned in the Contract claims commission. That was not the case here – Ashi was the agent mentioned in the Contract. The second sentence of clause 36 speaks of a "claim for commission by any other real estate agent" and speaks of an indemnity against the costs for the defence "of such a claim". 54 However, the Deed of 5 October 2007 recited clause 36 on the basis that it was thought to be relevant for the claim being made by Ashi. Moreover, no party, and in particular Ashi, sought to say that clause 36 had no relevance. What was actually argued was that Karasco could not have stepped in to defend Dr Farmer by virtue of clause 36 because it did not go far enough to allow for that substitution. 55 In my opinion clause 36 can be put to one side because by the terms of the Deed Karasco had an obligation to indemnify Dr Farmer for costs incurred in the defence of the claim. The mere fact that the accounts from Mr Parasyn in the first instance were addressed to Karasco rather than Dr Farmer cannot make a difference in that regard. Nor can the fact that Karasco denied in its defence to the cross-claim that it was liable to indemnify Dr Farmer, and the formal order dismissing that cross-claim in the circumstances of the outcome of the litigation between Ashi and Dr Farmer does not alter the clear agreement that was reached and embodied in the Deed of October 2007. 56 In my opinion, the actual mechanics of the conduct of the defence are not to the point. Nor does the fact that there was some departures from the intended arrangements contemplated by the Deed mean that that Deed did not generally govern the arrangements between Dr Farmer and Karasco. 57 However, even if I am wrong in this view, it seems clear to me that the learned Magistrate in her reasons (a) believed that there was an order in place for Ashi to pay Dr Farmer's costs, and (b) properly considered the principles concerned with the making of Bullock or Sanderson orders, so that the costs order she ultimately made on 28 November 2007 in favour of Karasco is entirely supportable. For that reason, and also because the amount really in issue in these proceedings does not warrant the grant of leave to appeal, I would have dismissed the summons had it not been for the misconception of the Magistrate and the parties that the order in favour of Dr Farmer had been made. In all of the circumstances, it does not seem appropriate to me to leave the orders in the unsatisfactory state they are. 58 The proper result ought to have been that Ashi was ordered to pay both Dr Farmer's and Karasco's costs, or that Ashi be ordered to pay Dr Farmer's costs and Dr Farmer ordered to pay Karasco's costs for being, technically, unsuccessful on his costs claim, but with a Bullock order being made that Ashi also be responsible for those costs Dr Farmer was ordered to pay Ashi. For that reason, and that reason alone, I intend to grant leave to appeal and uphold the appeal so that, pursuant to s 41(1)(a) Local Court Act 2007 I can vary the terms of the order made. 59 In her judgment on costs the Magistrate noted (see para 24 above) that all parties before her made submissions on the basis of it being just or reasonable or fair in the circumstances how the costs were to be determined. In my opinion, there is no unfairness or unreasonableness in requiring Ashi to pay both Dr Farmer's costs and Karasco's costs. Although there was an initial denial by Karasco of any obligation to indemnify Dr Farmer, those two parties came to an arrangement well in advance of the hearing of Ashi's claim with the result that there was a considerable saving of costs by there being no doubling up. That is no doubt why the real sum in issue on this appeal is said by Ashi to be about $15,000. 60 In regard to the appeal against the order for indemnity costs in respect of the argument about costs before the Magistrate, nothing has been shown by Ashi to demonstrate that the order was made in the wrong exercise of the Magistrate's discretion and, having granted leave to appeal in the matter as I have already indicated, I would propose that the appeal against the order for indemnity costs be dismissed. 61 When the evidence was being read at the hearing of this appeal, Mr Marks indicated that he would not read the affidavit of Adam Canceri sworn 9 July 2009 because it only went to the question of what the type of costs the appellant on the appeal might be entitled to should the appellant succeed on the appeal. 62 Ashi has only been technically successful in that I have granted leave to appeal and upheld the appeal simply so that I could vary the Magistrate's orders to include an order that all parties in the court below appear to have believed had already been made. In substance, the Plaintiff has been unsuccessful in these proceedings and ought to pay the costs of the proceedings. However, I intend to defer the making of a final costs order until the parties have had the opportunity to consider these reasons and make any further submissions they wish. 63 Accordingly, I make the following orders: (1) Grant leave to the Plaintiff to appeal against the decision of the Local Court at Liverpool given on 28 November 2008. (2) Order the appeal be allowed. (3) Vary the order of the Local Court so that it provides: (a) Order that the Plaintiff pay the Defendant's and the Cross-Defendant's costs of the proceedings, such costs not to include any costs of the second cross-claim by the Cross-Defendant against Zarb; (b) Order that the costs of the application for costs in favour of the Cross-Defendant from 15 August 2008 be costs on an indemnity basis. ********** 10/09/2009 - The word "against" in para [57] replaced by the words "in favour of" - typographical error. - Paragraph(s) 57 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.