New South Wales Supreme Court CITATION : Lal v Patel [2010] NSWSC 390 HEARING DATE(S) : 26 March 2010, 8 and 15 April 2010, 7 May 2010 JUDGMENT DATE : 24 June 2010 JURISDICTION : Common Law JUDGMENT OF : Harrison AsJ (1) The decision of his Honour Magistrate Heilpern dated 24 July 2009 is affirmed. DECISION : (2) The amended summons filed 19 October 2009 is dismissed. (3) The plaintiff is to pay the defendant's costs as agreed or assessed. CATCHWORDS : APPEAL - Mixed fact and law - Appeal against decision of New South Wales Local Court - Calculation of interest LEGISLATION CITED : Local Court Act 2007 CATEGORY : Principal judgment Allen v Kerr & Anor (1995) Aust Torts Reports 81-354 Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 Carr v Neill [1999] NSWSC 1263 Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 CASES CITED : Devries v Australian National Railways Commission (1993) 177 CLR 472 Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 R L & D Investments Pty Ltd v Bisby [2002] NSWSC 1082; (2002) 37 MVR 479 State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (In Liq) (1999) 160 ALR 588 Swain v Waverley Municipal Council [2005] 220 CLR 517 PARTIES : Hasmukh Lal (Plaintiff) Jaswanti (aka Jenny) Patel (Defendant) FILE NUMBER(S) : SC 2009/295921 COUNSEL : 7 May 2010 M Duncan ( Plaintiff) SOLICITORS : H Lal (Plaintiff in person) J Patel (Defendant in person) LOWER COURT JURISDICTION : Local Court LOWER COURT FILE NUMBER(S) : 7615/2008 LOWER COURT JUDICIAL OFFICER : His Honour Magistrate Heilphern LOWER COURT DATE OF DECISION : 24 July 2009 IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ASSOCIATE JUSTICE HARRISON THURSDAY, 24 JUNE 2010 2009/295921 HASMUKH LAL v JASWANTI (aka JENNY) PATEL JUDGMENT (Appeal decision of Local Court Magistrate - calculation of interest) 1 HER HONOUR: This matter has a long history. By amended summons filed 19 October 2009, the plaintiff seeks to appeal the decision of his Honour Magistrate Heilpern dated 24 July 2009. 2 In the Local Court proceedings the plaintiff was Jaswanti (also known as Jenny) Patel and the defendants were Hasmukh Lal and H Lal & Associates Pty Ltd as second defendants. The plaintiffs in this Court are Hasmukh Lal and H Lal & Associates Pty Ltd and the defendant is Jenny Patel. 3 On 16 December 2009, the Federal Court made an order winding up H Lal & Associate Pty Ltd for failure to comply with a statutory demand. Hence, H Lal & Associates Pty Ltd has filed a notice discontinuing these proceedings. That leaves only Mr Lal as plaintiff. For convenience I shall refer to the parties by name. 4 The relief sought in the amended summons is, firstly, that the decision of the Magistrate in proceedings No 7615/2008 be set aside on the grounds that the decision was against the weight of evidence by the defendant in those proceedings; and second, "the interest calculator for the alleged debt was incorrect"; and third, that the proceedings be remitted to a court of competent jurisdiction for a rehearing. There is no stay on the execution of the judgment. There are no other grounds of appeal contained in the amended summons. However, on April 2010 in oral submissions Mr Lal expanded on the relief he sought to include that the Magistrate erred when he dismissed the set off, that the Magistrate's finding as to his demeanour was incorrect and that the Magistrate's award of indemnity costs was in error. 5 Mr Lal sought relief under s 39 of the Local Court Act 2007 which provides that a party to proceedings before the Court who is dissatisfied with a judgment or order of the court may appeal to the Supreme Court, but only on a question of law. The onus lies on the plaintiff 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 in Allen v Kerr & Anor (1995) Aust Torts Reports 81-354; Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 155-156; Carr v Neill [1999] NSWSC 1263 and R L & D Investments Pty Ltd v Bisby [2002] NSWSC 1082; (2002) 37 MVR 479. The judicial officer cannot act on evidence inconsistent with facts that are 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. 6 Section 41 of the Local Court Act provides that the court may determine an appeal either (a) by varying the terms of the judgment or order, or (b) by setting aside the judgment or order, or (c) by setting aside the judgment or order and remitting the matter to the court for determination in accordance with the Supreme Court's directions, or (d) by dismissing the appeal. 7 In Swain v Waverley Municipal Council [2005] 220 CLR 517, Chief Justice Gleeson at [2] reiterated that in the common law system of civil justice, the issues between the parties are determined by the trial process. The system does not regard the trial 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. The hearing of this appeal 8 Both parties appeared unrepresented. The hearing of this appeal was not without its difficulties. This matter had been before the court on 31 August 2009, 12 October 2009, 19 October 2009, 6 November 2009, 20 November 2009, 15 December 2009, 16 December 2009, 18 January 2010, 25 January 2010, 1 February 2010, 12 February 2010, 24 February 2010, 26 March 2010, 8 April 2010 and 15 April 2010. 9 On 26 March 2010, when the matter was listed for hearing, Mr Lal did not appear. Ms Patel tendered a copy of New South Wales JusticeLink printout showing an outcome (Ex B) which reads as follows: "2009/00295921-001/Summons: HASMUKH LAL v JASWANTI (AKA JENNY) PATEL The following hearing dates are vacated: 26 Mar 2010 09:00 AM Reason: Other Other Reason: already listed before Duty Judge" 10 Mr Lal had written to the court seeking an adjournment on the basis of this notification. He says he thought it meant that the hearing date had been vacated. Mr Lal explained in his letter that he had arranged another court appearance on 26 March 2010 in the District Court. Ms Patel opposed the adjournment on 26 March 2010 on the basis that she was employed as a clerk with WorkCover, she could not get any more time off work and the continued adjournments were causing her stress. Because the notice did state that the hearing date of 26 March 2010 had been vacated, the adjournment was granted. On 26 March 2010, my associate wrote to Mr Lal advising that the hearing had been adjourned and that it had been relisted before me on 8 April 2010 at 10.00 am. She further advised Mr Lal that the hearing would proceed on that day save for exceptional circumstances. 11 Notwithstanding the contents of this letter and the fact that the matter had been listed before the court on 31 August 2009, 12 October 2009, 19 October 2009, 6 November 2009, 20 November 2009, 15 December 2009, 16 December 2009, 18 January 2010, 25 January 2010, 1 February 2010, 12 February 2010, 24 February 2010 and 26 March 2010, on 8 April 2010, when the matter had been listed for hearing save exceptional circumstances, Mr Lal attended and sought an adjournment for a further period of six to ten weeks in order to instruct a solicitor or brief counsel. Ms Patel opposed the application for adjournment. The application for adjournment was refused. 12 Mr Lal was granted a short adjournment so that he could organise his papers for the hearing. The adjournment turned out to be substantially longer because, prior to the hearing, Mr Lal had served upon Ms Patel a folder containing about six centimetres of documents that mainly comprised of the Local Court file. A copy of these documents had not been provided to this Court. In order for the hearing to take place, my court officer and associate photocopied this folder which took over one hour. This could have been overcome had Mr Lal requested that the Local Court make available its file to this Court. 13 Mr Lal was articulate and had no difficulty making submissions. He referred to the documents, the transcript and the relevant portions of the Magistrate's extempore reasons. From time to time Ms Patel interjected when she disagreed with what Mr Lal was saying despite being informed that she would have an opportunity to make submissions when Mr Lal's submissions were completed. Neither Mr Lal nor Ms Patel confined their submissions to errors of fact and/or of law. 14 On 8 April 2010, the Court adjourned for the customary luncheon break between 1.00pm and 2.00pm. Both parties were informed that the court would reconvene at 2.00pm, however, Ms Patel did not return to court until 2.30pm. At approximately 3.40pm, Mr Lal concluded his submissions and Ms Patel was given the opportunity to commence making her submissions. Ms Patel's statements were wide ranging and not confined to the topics upon which Mr Lal had sought to appeal. 15 At about 4.00pm Ms Patel asserted that the agreement upon which Mr Lal had made his submission was not the one that was before the Magistrate. She asserted that it was a different document and that it did not appear in the bundle of documents because Mr Lal had left it out. Mr Lal referred to a schedule that was called "the star" document because it had a post-it note with a handwritten star on it. It is flagged in the bundle of documents (Ex D). 16 In order to ascertain what was the actual document that constituted the agreement, the matter was adjourned to 15 April 2010 so that arrangements could be made for the Local Court file to be produced to this Court. On 15 April 2010, the hearing of the appeal continued. The Local Court file was produced. In court both parties agreed that there was a document entitled "Loan Schedule", located at annexure 17(a) of the affidavit and amended statement of claim of Ms Patel's affidavit that was before the Magistrate. In the Magistrate's reasons, there is reference to that document and others. I shall refer to them in more detail later in this judgment. 17 When it came time for Mr Lal to reply to Ms Patel's submissions he repeated his earlier submissions. While this Court attempted to impose a time limit on his reply and asked him not to repeat what he had submitted earlier he did not stop doing so. Overall this appeal took the best part of two days of this Court's time. It took about the same time in the Local Court. The sum in dispute is about $40,000. 18 While the matter was part heard and after the hearing had concluded with judgment being reserved, Ms Patel continually emailed my associate. These documents have been placed in a folder and marked "Correspondence". I have not considered its contents. 19 On about 4 May 2010, my associate telephoned the parties advising them that judgment would be delivered on 6 May 2010. On about 5 May 2010, my associate was advised by Mr Liu, of the People's Solicitors, that he was now acting for Mr Lal and that he would be seeking to reopen the hearing. The matter was relisted on 7 May 2010 to consider whether leave should be granted to reopen. 20 Mr Liu, in his affidavit affirmed 6 May 2010, deposed that on 3 May 2010 Mr Lal approached him concerning this matter. Mr Liu subsequently had two meetings with Mr Malcolm Duncan of counsel. Mr Liu deposed that he received Mr Duncan's advice on the evening of 4 May 2010. Mr Duncan's advice was that there were sufficient reasons for a further amended summons, despite the advanced state of the proceedings. Ms Patel was advised of this application by Mr Liu. 21 On 6 May 2010 at 5.28pm, Ms Patel emailed my associate. The email attached an affidavit opposing leave to file an amended summons. It also attached a medical certificate. The medical certificate that was forwarded to my associate was a curious document. The details of the doctor on the medical certificate had been deleted. The medical certificate reads, "This is to certify that, in my opinion, Jaswanti Patel is/was suffering from Suspected ??? and is unable to attend work/school 6/5/10 to 7/5/10 inclusive." A signature appears and it is dated 6 May 2010. The Court is at a loss to know what ailment or medical condition was "suspected" [my question marks added]. 22 On 7 May 2010, Mr Duncan appeared on behalf of Mr Lal and sought to have leave to reopen the cause and file an amended summons. This Court decided that in the absence of Ms Patel the best way to proceed was by written submissions. Mr Lal's written submissions were due on 21 May 2010. Ms Patel's written submissions were due on 4 June 2010 and then Mr Lal's submissions in reply by 11 June 2010. 23 On 24 May 2010, the People's Solicitors filed a notice of intention to file notice of ceasing to act that was followed by a notice of ceasing to act. On 7 June 2010, the People's Solicitors filed a notice of appointment of solicitor. 24 The amended summons (although incorrectly described as a notice of motion) (Ex H) for which leave is sought relevantly reads: "1. An order that the decision of Magistrate Heilphern in proceedings 7615/2008 given in the Local Court on 24 July 2009 be set aside on the grounds that the Magistrate erred as a matter of law (a) in deciding the matter against the weight of evidence thereby denying the Defendant, Lal, procedural fairness and/or (b) in basing his decision at lines 34-38 on page 26 of the judgment viz: "This is an unfortunate case where in my view Mr Lal betrayed the trust of somebody who placed their trust in him and has continued to do so by his refusal to repay a loan that was due, is due and owing. He did so by engendering trust because of his position, his qualifications and of course his company which is why the judgment is intertwined" 2. A declaration that, obscurantist though it is, to the extent that that passage of the judgment forms part of the ratio decidendi of the case, it is based on an irrelevant consideration namely that there was a relationship of trust between the Plaintiff and Defendant below whereby the Defendant owed the Plaintiff a fiduciary duty and constitutes an error of law on the face of the record by reason that the passage quoted above in paragraph 1(b) constitutes a decision based on an equitable principle which was neither pleaded below nor which the Local Court had jurisdiction to make under the Local Courts Act or the Uniform Civil Procedure Act or Rules. 3. Further or in the alternative, a declaration that the decision of the Magistrate below was ultra vires the power of the Local Court for the reasons pleaded in paragraphs 1(b) and 2 above and consequently of no force and effect and is liable to be and should be set aside." 25 On the morning of Monday 24 May 2010 (the submissions were due the previous Friday), by email, my associate received Mr Lal's written submissions together with another draft amended notice of motion (it should have been a summons). Ms Patel provided more voluminous material in response to the direction to file submissions in relation to whether leave should be granted to reopen the case and to file an amended summons. So far as I can discern, she does not appear to address the issue of breach of fiduciary duty and/or trust. 26 The further amended notice of motion relevantly reads: "Orders sought: 1 On the grounds set out in the submissions filed by his counsel, that the plaintiff be given leave to amend the Summons herein as follows: 2 A declaration that the interest calculations for alleged debt were incorrectly calculated by the magistrate and were not due and owing 3 That the Plaintiff be given leave to amend the Summons herein to seek the orders sought and the relief claimed below. RELIEF CLAIMED 6 An order that the decision of Magistrate Heilpern in proceedings 7615/2008 given in the Local Court on 24 July 2009 be set aside on the grounds that Magistrate Heilpern erred as a matter of Law a) In deciding the matter against the weight of evidence thereby denying the defendant, Lal procedural fairness and/or b) In basing his decision at lines 34-38 on page 26 of the judgement viz "This is an unfortunate case where in my view Mr Lai betrayed the trust of somewhat who placed their trust in him and has continued to do so by his refusal to repay a loan that was due, is due and owing. He did so by engendering trust because of his position, his qualification and of course his company which the judgement is why judgement is intertwined." Order 7 is a declaration that is the same as reproduced in the earlier amended summons at paragraph 2. "8 Further or in alternative, a declaration that the decision of the Magistrate below ultra vires the power of the Local Court for the reasons pleaded in paragraphs 5(b) and 6 above and consequently of no force and effect and is liable to be and should be set aside. 9 An order that the matter be remitted to the Local Court constituted by a Magistrate other than Heilpern LCM for determination according to law. …" 27 In so far as orders 7 and 8 refer to paragraph 5(b), paragraph 5(b) does not exist. Nor do orders 4 and 5. 28 Mr Lal's further submissions were prepared by Mr Duncan. Mr Duncan submitted that the Local Court lacked jurisdiction to make the decision it did because it did so on equitable grounds or grounds which should properly be characterised as equitable; and, secondly, on the basis that Mr Lal had not properly articulated an appeal alleging that he had been denied procedural fairness. 29 On 4 June 2010, Ms Patel emailed to my associate her written submissions together with a document entitled "Proposed cross claim". Cross claims are not filed in response to an appeal. I have read her further submissions. 30 On 11 June 2010, Mr Lal wrote to my associate requesting an extension in which to file and serve his written submissions in reply as he had not received Ms Patel's submission until 8 June 2010 by post. I extended the time in which to file and serve his submissions until 4.00pm on Tuesday 15 June 2010. On 15 June 2010, Mr Lal wrote to my associate requesting a further extension. I declined to grant a further extension. On 15 June 2010, Mr Lal filed his written submissions. On 16 June 2010, my associate emailed Mr Lal's submissions together with his chronology to Ms Patel. In Mr Lal's submissions in reply at paragraph 5, Mr Lal refers to Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537. It does not assist Mr Lal's case. 31 Counsel for Mr Lal submitted that the passage set out in the judgment of the Magistrate forms part of the ratio decidendi of the case on the basis that the Magistrate taking into account the relationship between Ms Patel and Mr Lal of client and accountant, Mr Lal was in a position of trust qua, either breached that trust or breached some other obligation arising out of a fiduciary relationship arising out of the trust. Counsel says that those are pure equitable concepts solely within the original or supervisory jurisdiction of the Supreme Court and that the Local Court has no power to base a decision on them. I would not grant leave as Mr Duncan is quite right in that there was no pleading of breach of fiduciary duty. Nor do the findings as to Mr Lal's credit establish a breach of fiduciary duty. The adverse findings of credit are more general and address a number of topics. 32 It was further submitted that Mr Lal, being an unrepresented self-litigant may have failed to properly articulate in the "amended summons" filed on 19 October 2009 as his true grounds of appeal and he may have failed to properly present his case. This is not a matter for which I would grant leave to reargue because, firstly, Mr Lal chose not to instruct legal representatives for the hearing despite having plenty of opportunity to do so; secondly, this appeal has already had two days of court hearing time; and finally, Mr Lal presented his case in an articulate manner and addressed the topics . Leave to file a further amended summons is refused. The Local Court proceedings 33 In the Local Court Ms Patel sued Mr Lal and H Lal & Associates for the sum of $53,000. Mr Lal admitted owing $15,000 but submitted that it was set off by various matters including the expenses due to a cancelled auction. Judgment was entered in favour of Ms Patel against Mr Lal and H Lal & Associates in the sum of $58,296.73. The Magistrate awarded costs in favour of Ms Patel on an indemnity basis. 34 There were three important documents before the Magistrate, namely, the Loan Schedule, the Account Reconciliation (Ex 2 in this Court) and Schedule of Transactions. For convenience they are reproduced at pages 12, 13 and 14 of this judgment. Loan Schedule (Annexure 17(a) to Affidavit and Amended Statement of Claim of Ms Patel) Account Reconciliation (Ex 2) Schedule of Transactions (the star (*) document) The amount of interest owing 35 In the Loan Schedule, there is a reference to "6.6%" and "review term quarterly" and then reference to "6%" and "quarterly". The Loan Schedule is signed by both parties. In the document entitled Schedule of Transactions, the amount of the loan outstanding is calculated as $23,138.61 and the interest calculations are $34,913.19. 36 It was not disputed by Mr Lal that interest was payable on the loans. What he does dispute is the amount of interest payable. Essentially, this is a question of fact not law and leave to appeal is required. Mr Lal submitted that he owed only $15,000. 37 In the Local Court, Ms Patel gave evidence and explained that in the North Sydney Local Court she claimed the sum of $32,110. Her evidence (T 18/3/09, 11.38-45): "At that time I was relying on the accounts that Mr Lal and I had been exchanging over the years where he would say, "This is an interest amount," and I would credit it to interest. He'd say, "This is a loan amount that I am repaying," and I credited to that. And – but when he continued failing – it was like keep on saying it was out of statute of limitations et cetera, et cetera, I went back to bank statements and I retrieved from them exact notions. Therefore the figures are going to change and no matter which way you look at it it should come to a similar – similar figure." 38 Ms Patel gave further evidence (T 39.48-50; 40.1-7) that she had: "…due to the authority of quarterly review and in consultation with other solicitors and the courtroom applied or anything that I saw fit as a quarterly review. Otherwise I can apply the penalty or calculated that interest – because this interest is calculated as simple interest, a simple spreadsheet. I could have calculated at compound interest, which our documents here for that, which have come to $23,000 if you are borrowing this money from a bank. And if I was using the bank awarded rate it will come to $25,309 - $25,309 interest would come at the court rates, so I have given you advantage of the minimal rate applicable still depending on that loan document that we executed and you still borrowed a tax refund cheque of mine." 39 And (T 44.9-17) Ms Patel was asked: "Q So how do you complete your outstanding amount of $38,000 more than – it's double the amount of the principal amount. A. Well, if you were to look at the second last column that's the interest calculated column. It's simple interest and if you just add that up it'll come to $38,578 from which you offset $3,006 because you've paid that. I mean, you've given that $3,006 which you've paid; reduces by $3,006. $38,578.24 by any standard is very low interest rate. I have calculations what a bank will charge you and I have calculations what a court has deemed necessary if I had started this back in 2006." 40 In so far as interest is concerned, the Magistrate stated (T 24/7/2009, 22.22-27): "…I find that her method of calculating the amount that was still owing when cross-examined on it, was truthful evidence. She was giving truthful evidence as to the interest rate that was applicable; the payments that were made from time to time, and when documents were presented to her in cross-examination that challenged that she answered each of those challenges cogently, clearly and in a manner that in my view, was utterly convincing." 41 There was evidence from Ms Patel as to how the interest was calculated. The calculations are set out in the "star document". The Magistrate accepted her evidence. Leave to appeal is refused. Findings against the weight of evidence 42 In so far as the Magistrate made a finding as the amount of interest owing, the Magistrate accepted Ms Patel's evidence. It was open to the Magistrate to do so. One issue Mr Lal raised during the hearing of this appeal was, as I understand it, that the judgment should only have been entered against one defendant not both, and the Court issued judgment for a lesser sum, and then it was changed. This did occur but it was an oversight by the Registry. The amended defence did not put in issue who was the correct defendant. 43 Mr Lal referred to the statute of limitations and submitted that the Magistrate did not deal with that issue. The limitation issue was pleaded in paragraph 5 of the amended defence dated 10 November 2008. However, it was not addressed in submissions in the Local Court, nor was it raised in the summons in this court. In any event Mr Lal admitted that he owed $15,000. In these circumstances there was no error of law. The set off 44 In the Local Court Mr Lal pleaded in his amended defence (at [6]) that: "6. Further or in the alternative the first defendant is entitled, based on the conduct of the plaintiff: (1) as set out in the judgment of his Honour Brereton J in annexure ("A") to this Amended Defence; (2) in not removing the caveat despite the judgment in annexure "A"; and (3) thereby preventing the auction by the first defendant of one of his properties mentioned at paragraph 2 in annexure "A" to set off the following amounts against the monies claimed by the plaintiff in the further amended statement of claim: (a) $31,726.39 as at 26 October 2008; and (b) Continuing as the first defendant has not been able to attract bidders willing to pay as much or near the amount offered by bidders at the auction prevented by the conduct of the plaintiff. ...." 45 It is necessary to refer to equity proceedings No. 4468/08 between Patel v H Lal & Associates [2008] NSWSC 864 ("the equity proceedings"). In the equity proceedings Ms Patel claimed, in substance, an order that caveat AE62583 be extended until further order. 46 Referring to the reasons of Brereton J, the equity proceedings concerned the caveat that Ms Patel lodged on or about 1 July 2008. It affected land comprised in folios B/412067 and 1/1054775 of which the first defendant H Lal & Associates was the registered proprietor, and claimed an interest as follows: "Notice of default judgment $40,000 plus notice of writ." That interest was said to arise by virtue of a statement of claim dated 15 May 2005 and a notice of default judgment dated 19 June 2008 in proceedings in the North Sydney Local Court, in which Ms Patel sued the second defendant Mr Lal personally (not the corporate first defendant H Lal & Associates Pty Ltd), and apparently recovered a default judgment, which judgment had been set aside. 47 H Lal & Associates applied for a lapsing notice on 6 August 2008. There was some suggestion that 21 days from date of service expired on 31 August 2008, although it was not clear whether or not evidence of service has been lodged with the Registrar General, nor whether the caveat had, in fact, already lapsed. 48 On 3 September 2008, Ms Patel sought an adjournment. Brereton J declined to grant Ms Patel an adjournment for two reasons, namely, that the argument that there was a caveatable interest simply could not succeed, and secondly, that an adjournment would result in the inevitable lapsing of the caveat and therefore there was no utility in acceding to the application for an adjournment. Brereton J made an order that there be no order for costs. 49 On 17 October 2008, in the equity proceedings, a notice of motion seeking costs came before Rein J. Mr Lal asserted that Ms Patel had interfered with the process of sale. Ms Patel stated to the Court that she went to a public action and Mr Lal called three policemen to evict her. She says that they did not evict her because she did not cause any disruption. She says she had known Mr Lal for a long time and that he owed her $56,000. She says she had never said to him in the doorway to give her the money and "why was she going to do it on an auction day." (T 17/10/08, 2.18.22). 50 During the equity proceedings, Mr Lal submitted that Rein J advised him to file a set off in the Local Court. 51 Rein J stated (T 17/10/08, 5.14-29): "You could do it in this Court, you could bring separate proceedings in this Court but it will be so far below the jurisdictional ambit. I mean, you would run the risk that you wouldn't get any costs for those proceedings if you brought them here and you might be – you have got proceedings in the Local Court, I think you should get advice about it but one possibility is that you could seek to bring that in the Local Court either separately or as an addition to what you have got there at the moment and then it can be ventilated and Ms Patel can have the opportunity to look at the details and see whether she agrees that that's occurred. … So there's some options for you there but it's not appropriate for this Court to be now dealing with those additional matters. They are not part of what's before the Court then and they are not really before the Court now." 52 Rein J dismissed the notice of motion filed 12 September 2008 with no order as to costs. The application before his Honour was whether an order for costs should be made. His Honour stated that Mr Lal seek advice about the possibility that he could bring proceedings in the Local Court either separately or in addition to what he already had there. This does not in my view amount to advise to file a set off in the Local Court. He was advised to seek legal advice. 53 On the topic of set off, Magistrate Heilpern stated (T 24/7/09, 24.25-50; 25.1-9): "Now because his Honour either Brereton J or Rein J in the Supreme Court wish to make an order for costs he could have, and indeed, in at least one of those hearing that was invited, but they did not. It is true that in some circumstances one can sue for costs engaged in litigation where that litigation is abandoned, for example, or where judgment is made in favour of a person and there is an order for costs. But there is no authority for the proposition presented, and I have been unable to find any, nor I trust has Mr Salama to show that where there is no order for costs in unrelated proceedings that that can be set off against a loan. In my view it cannot be part of the set off is rejected. To make it perfectly clear, I am satisfied on the balance of probabilities that that is not a proper set off. As to losses for the property, the defendant claims that he has lost money because the plaintiff misbehaved at an auction. He has quantified that variously in his statement, in the pleadings and in the written submissions received today. Certainly the last set are in excess of the amount owed, being estimated at somewhere between 100,000 plus. That is said to be because the property has still not sold, because there are still interest payments and because the defendant has suffered loss as a result of those. I am satisfied, after considering all of the evidence, that there was some disturbing conduct attempted by the plaintiff. She went to the auction with the view to making the auction more difficult for the defendant. In essence that is her evidence. However, I am not satisfied as to any losses sustained by the defendant, partly that is because they are not properly quantified. There is no evidence to say why it has not been relisted for sale. There is no evidence to suggest that it stopped the entirety of the auction being able to be repeated at a later time or otherwise. All that what is claimed is interest and the like on an unsuccessful sale of a property some years prior and in those circumstances there being no evidence as to mitigation of loss or attempts to resell or anything of that type, and in the light of my comments on credit that claim for set off is also rejected. Further any expenses relating that are outlined in the set off are also rejected for the same reasons." 54 The Magistrate did not award damages for the set off because they were not properly quantified. While Ms Patel was present at the auction, there is no independent evidence that her actions stopped it. Nor was there evidence of mitigation of that loss. The Magistrate was entitled to dismiss the set off. There is no error of law. Indemnity costs 55 Mr Lal submitted that he should not have been liable to pay costs on an indemnity basis and the Magistrate by making such an order made an error of law. 56 Costs are discretionary. The principles relating to the awarding of indemnity costs are discussed in the judgment of Sheppard J in Colgate Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225 and the distillation of authorities are set out between pages 232-234. 57 Some of the categories warranting the indemnity costs include: (1) exercise of a discretion to award; (2) the making of allegations of fraud, knowing them to be false; (3) evidence of particular misconduct causing loss of time to the court and to other parties; (4) the fact proceedings were commenced or continued for some ulterior motive, or in wilful disregard of known facts or clearly established law; (5) undue prolongation of litigation by groundless contentions; (6) and imprudent refusal of an offer to compromise. 58 The substance of the reasoning in Colgate Palmolive is that costs on an indemnity basis are exceptions to the general rule and is justified only in a case where there are special or unusual features. 59 On the topic of indemnity costs the Magistrate stated (T 28.22-46): "In relation to this matter an application has been made for indemnity costs. The situation with costs is ordinarily costs will follow the cause and ordinarily costs will follow the cause on a party/party basis. What is being sought in this case is unusual for two reasons. Number 1, because indemnity costs mean that all of the costs of the plaintiff ought be paid by the defendants. That is not a usual order. Secondly, because the defendant is unrepresented, it is unusual for indemnity costs to be made, but not unheard of, on the basis that those persons who are unrepresented often do not understand the various machinations and technicalities of the court and it is more difficult for them to keep away from the various traps and the various difficulties that can lead to an award for indemnity costs. In this case, however, what is clear is that Mr Lal sought to mislead the court and sought to do whatever he could to ensure that these proceedings were defeated, whether it meant telling the truth or whether it meant telling lies. I have made a very clear finding on credit and in my view this is one of those exceptional cases where the plaintiff who trusted Mr Lal as her financial advisor ought not to be out of pocket one cent. For that REASON I AM MAKING AN AWARD OF COSTS ON AN INDEMNITY BASIS. That is not to punish, Mr Lal, but it is to compensate fully for a case that should never have been defended, that has been dragged out and dragged through the courts in a most unreasonable way, maintaining a defence which was not blessed by truth. …" 60 Essentially, the reasons why the Magistrate made an award for costs to be payable on an indemnity basis was because Mr Lal dragged the case through the courts in a most unreasonable way, maintaining a defence that was not truthful. In these circumstances it was open to the Magistrate to make such an order. The Magistrate's findings on credit 61 The last issue raised by Mr Lal was that the Magistrate should not have impugned his credit. It is not necessary to reproduce the Magistrate's findings in relation to Ms Patel here other than to say that the Magistrate accepted her as a witness of truth. 62 As to Mr Lal's credibility, the Magistrate stated: "… Mr Lal was not a witness that falls within the same category. Indeed, I found his evidence to be untruthful, and in my view, deliberately so. Mr Lal and his qualifications, whatever they may have been in the past, the manner in which he answered questions can only be described, well I refer to my notes at the time, were that this evidence was simply not to be believed. The evidence as to the status, in particular on the matter of the tax agency, appear to have been that Mr Lal was in some sort of arrangement with another person, whereby he could undertake the work on behalf of another person, and therefore be covered by his licensed tax agent status. This was not irrelevant to this case. This goes to the heart of this case, as to whether Mr Lal is a witness of truth, and as he was being cross-examined it became quickly apparent that no matter how much Mr Lal wished to squirm under cross-examination he was simply doing what he should not have been doing: putting himself forward in a role that he was not, as a tax agent. His answers to question as to his CPA status; his status as an accountant; his status as a chartered account ant, only strengthened my view that he was simply not telling the truth about his status, and that the representations he was making to the public by way of business cards; by way of his actions with the plaintiff; were those of a man who was not to be believed. As he began to seek to explain the interest rate; the circumstances under which there was a sign-off on the interest rate, as it was from time to time in reviews, in those circumstances each of the evidence, as it was cross-examined was not only tarnished by his answers to earlier questions, but was also tarnished by the answers to those questions themselves. At all time he was portraying himself as somebody who was honest, straightforward, and despite the fact that he was borrowing money effectively from his own client, he sought to portray himself as somebody who had done absolutely nothing wrong in the circumstances. Clearly, that was not the case. Even on his own version of events, he owes the sum of $15,000 before set off to his client, and she was, on any version of events, his client." 63 The Magistrate then gave examples of Mr Lal's evidence and highlighted where it was not consistent with written documentation (T 23.35 – 24.12). 64 The Magistrate continued: "In short, when it comes to issues of credit, this is one of those rare cases where there is a stark contrast. So that is perfectly clear the plaintiff is to be believed and the defendant is not. …" 65 The Magistrate did not base his findings on demeanour alone. His Honour gave reasons for his findings and highlighted examples of where Mr Lal's evidence was not consistent with the written documentation. It was open to the Magistrate to make these findings. 66 There is no error of law. Leave to file a further amended summons is refused. The decision of his Honour Magistrate Heilpern dated 24 July 2009 is affirmed. The amended summons filed 19 October 2009 is dismissed. 67 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 file a further amended summons is refused. (2) The decision of his Honour Magistrate Heilpern dated 24 July 2009 is affirmed. (3) The amended summons filed 19 October 2009 is dismissed. (4) 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.