Gower v Ferguson[2022] QDC 114

DISTRICT COURT OF QUEENSLAND

Introduction

1. [1]
   This an application for leave to appeal a costs decision given by the Brisbane Magistrates Court on 17 September 2021. The application is for leave to appeal under s 45 of the Magistrates Courts Act. To succeed, the appellant must show there was an important question of law or justice to be decided.
2. [2]
   In this matter, the Magistrate ordered the appellant to pay the costs of the action on the standard basis until 28 January 2021 and thereafter on an indemnity basis.
3. [3]
   In order to consider whether leave should be granted it is necessary to consider whether the appellant has reasonable prospects of success.

Background

4. [4]
   On 21 September 2020, the appellant filed a claim and statement of claim claiming damages as a result of a motor vehicle collision in the sum of $5,001.06 and motor vehicle assessment fee of $484. Attached to the claim was an assessor’s report claiming repair costs to the vehicle would be $5,001.06.
5. [5]
   On 4 January 2021, a defence was lodged in effect not admitting the allegations as more information was required.
6. [6]
   On 3 February 2021, an amended defence was filed in which the defendant alleged the vehicle had been fixed by Bumper Pro Pty Ltd at a cost of $833.59 as per an invoice dated 25 August 2020. The claim by the plaintiff was said to be exorbitant.
7. [7]
   A trial was listed for 28 June 2021. The week before the trial the appellant forwarded to the court a notice to discontinue proceedings. The respondent did not consent to this. The matter was heard on 20 July 2021 and by a reserved decision the Magistrate made the orders I mentioned previously.

Evidence

8. [8]
   The evidence revealed that the respondent was insured by Auto and General Insurance (“A&G”).
9. [9]
   On 12 August 2020 the collision occurred.
10. [10]
    On 18 August 2020 the vehicle was checked by Bumper Pro a repairer.^[1] Also on 18^th August 2020 Bumper Pro quoted the cost of repairs at $833.59 to Drive Happy Accident Management Pty Ltd trading as Statewide Auto repairs (“Drive Happy”).^[2]
11. [11]
    Drive Happy authorised repairs to the vehicle on 19 August 2020.^[3]
12. [12]
    On 24 August 2020 instructions were received by National Assessing to assess the vehicle.^[4]
13. [13]
    On 25 August 2020 the vehicle was repaired and Bumper Pro forwarded a tax invoice to Drive Happy for $833.59. On the same day the Plaintiff took delivery of the vehicle. I infer that it had been returned to its pre-accident state. The Plaintiff signed the receipt stating that she was happy with the repairs.^[5]
14. [14]
    On 26 August 2020 Statewide Auto Repairs issued a Tax Invoice claiming the repairs cost $5001.06 and that the vehicle had been with it from 14 August until 26 August 2020.^[6] I consider this to be a false invoice. Statewide did not repair the vehicle; it did not have the vehicle during those times alleged; and the cost of repairs was not $5001.06.
15. [15]
    On 31 August 2020 Nationwide Assessing assessed repairs to the vehicle at $5001.06.^[7]      
16. [16]
    On 31 August 2020, A&G received an email from State Lawyers on behalf of the appellant demanding payment of $5,001.06 for the costs of repair and $484 for an assessment fee.^[8] Also a claim was made for the cost of a hire car. That claim was settled.
17. [17]
    On 2 September 2020, A&G sent a letter requesting documents in support of the appellant’s claim.^[9]
18. [18]
    A&G, at the time it was unaware of the true cost of repair, on 4 September 2020 offered to settle the claim for $2,500.^[10]
19. [19]
    On 7 September 2020, A&G offered to settle the claim for $3,000 which offers were repeated on 10 September 2020 and 16 September 2020.^[11]
20. [20]
    I note that State Lawyers offered to settle the matter for $4,100 on 14 September 2020.^[12]
21. [21]
    I also note in an email dated 4 September 2020 State Lawyers alleged that:

“Our client’s car was very badly damaged and in the assessment report provided every single expense incurred in restoring the vehicle in possible pre-accident condition was narrated … our client maintains all repairs were necessary to restore the vehicle to its pre-accident structural condition. Any proposed alterations to the repair methodology or suggestions of elements of repairs and parts being unnecessary would adversely impact on the safety and performance of our client’s vehicle.”^[13]

22. [22]
    This was completely misleading when the car was repaired back in August for less than $900. It was untrue that every single expense was incurred.
23. [23]
    On 21 September 2020, the claim and the statement of claim were filed.
24. [24]
    On 23 December 2020, Ligeti Partners the lawyers for A&G sent a letter to State Lawyers requiring disclosure of the tax invoice for the repairer and parts invoices and enclosing a request for further and better particulars.^[14] The request sought particulars of the “repair claim”; the name of the repairer, the date the repairs commenced, the date they concluded, the date of payment for the repairs and the amount paid. 
25. [25]
    On 22 January 2021, State Lawyers sent an email advising there were no parts invoices. Enclosed was the tax invoice of Statewide Auto Repairs dated 26 August 2020 totalling $5001.06, the list of documents and the further and better particulars.^[15]
26. [26]
    In my view a number of false representations were made:

    1. (a)
       The List of documents did not disclose any of the Bumper Pro documents or the Drive Happy documents.
    2. (b)
       The letter purported to represent that the repairs were caried out in the amount of $5001.06 as per the tax invoice and they were carried out by Statewide.
    3. (c)
       The further particulars provided by the appellant alleged the repairer was Statewide Auto, the repairs occurred on 14 August 2020 and were completed on 21 August 2020. These representations were false. The car was in fact repaired by Bumper Pro for a cost of $833.59 on or about 25 August 2020.
27. [27]
    It was by chance that the respondent discovered that Bumper Pro had repaired the car. A claims officer of A&G contacted Compass Claims and discovered that the repairer was in fact Bumper Pro. The claims officer contacted Bumper Pro and received the true repair invoice of $833.59.
28. [28]
    On 28 January 2021, Ligeti Lawyers sent this tax invoice to State Lawyers and on 3 February 2021 the amended defence was filed.
29. [29]
    On 10 March 2021, the matter did not settle at a settlement conference and the matter was listed for trial.
30. [30]
    The evidence reveals that Bumper Pro negotiated the rate of repair with Daniel at “Drive Happy Accident Management Pty Ltd.” Drive Happy approved the repairs and paid for them.^[16] ASCIC searches reveal the following:

• Danil Nerezov is a director of Accident Management Global Pty Ltd.
• Danil Nerezov is a solicitor at State Lawyers.
• Danil Nerezov is also the sole director and shareholder of Drive Happy. 

31. [31]
    By reason of the discovery of the true cost of repair on 28 January 2021 Ligeti Lawyers offered to settle the appellant’s claim for $452.89 ($833.59 less costs).^[17] This letter correctly pointed out that on 21 September 2020 the claim and the statement of claim were filed. It also pointed out that the parts were wrongly claimed, that Statewide was the repairer and the truth was the repairs were only $833.59. It was pointed out that this letter would be relied on concerning costs. The costs at that point incurred by the defendant totalled $13,167.76. In a third affidavit these costs were updated to $18,320.17.
32. [32]
    The appellant also relied on a number of affidavits. In his first affidavit, Mr Hiramanek of State Lawyers sets out the history of settlement offers and discontinuance. At the settlement conference on 10 March 2020, the respondent was not prepared to change its offer for $452.89. On 16 March 2020, the appellant sent the respondent an email offering to settle the amount of $3,000 inclusive of costs and interest.
33. [33]
    In his second affidavit filed 25 June 2021 Mr Hiramanek says that on 4 September A & G sent an assessment report which assessed repair costs at $1512.60.
34. [34]
    On 17 June 2021, Mr Hiramanek received instructions to discontinue the proceedings. An offer was made to the respondent on the basis the appellant paid the respondent’s costs of the proceeding but this was rejected and no counteroffer was made.
35. [35]
    Mr Hiramanek swears that State Lawyers was engaged by Accident Management Global Pty Ltd trading as CARS Claims and Accident Management.
36. [36]
    Mr Nerezof informs Mr Hiramanek that he is a director of both CARS Accident Management and Statewide Auto Repairs. CARS Accident Management provides a claim management and debt recovery service. Statewide Auto Repairs provides an associated repair service for vehicles. In August 2020, Statewide Auto Repairs did not offer a car yard in Brisbane. Statewide Auto Repairs would engage subcontractors (in this case Bumper Pro) to carry out repair work on its behalf. Due to the volume of work, Statewide Auto Repairs was able to offer subcontractors work at below market rates. Statewide Auto Repairs issued an invoice to the plaintiff for what it determined to be the reasonable costs of the repairs. It was also said that State Lawyers was registered on 26 April 2013. Mr Nerezof is a director of that company and assists the company in primarily marketing activities and also on occasions performs legal work. He ceased his directorship of that business on 12 June 2014. Since then he has not been an employee of State Lawyers but has provided ad hoc consulting services. From 2015 to 2020 Mr Nerezof has maintained a restricted practicing certificate. He says that Mr Nerezof did not perform legal work for State Lawyers in relation to this matter.
37. [37]
    In a final affidavit dated 22 July 2021, Mr Hiramanek alleges that the appellant’s claim is for diminution in the value of the vehicle and therefore the claim for damages is more than the $833.59 asserted.
38. [38]
    I disagree with this affidavit. The fact is that all material times it was represented by the appellant the cost of repair was $5,001.06 and not the true cost of repair of $833. It was specifically noted in the statement of claim and the particulars that this was a repair case.

Decision of the Magistrate

39. [39]
    The Magistrate in his decision analysed the issues in the case and correctly set out the chronology of the matter. The Magistrate correctly gave the plaintiff leave to discontinue the proceeding. He correctly noted that r 307 of the UCPR provided a discretion in the court to make an order for costs the court considers appropriate. The Magistrate correctly identified that indemnity costs were exceptional and are only awarded for good reason. He referred to relevant authorities on this point. He also referred to the Calderbank offers in this case. Ultimately the Magistrate was of the view that State Lawyers acted precipitately in issuing proceedings in the matter and had enquires been made at an earlier stage the impossibility pursuing the amounts sort would have been apparent. He made no findings as to when the appellant was aware of the actual repair costs. In those circumstances, costs were ordered on the standard basis up until 28 January 2021. Thereafter the appellant litigated the matter for an unrecoverable amount and in those circumstances the Magistrate ordered costs from that date on an indemnity basis.

Appellant’s submissions

40. [40]
    The appellant submits the Magistrate erred in this case. It is submitted the Magistrate made no findings about the assessment fee and erred in failing to take into account that a plaintiff is entitled to claim damages for diminution in value of the damaged property, which may be different from the costs of repairs. It is submitted that the Magistrate conducted a hypothetical trial which was impossible to do in the circumstances. It is submitted that the notice of appeal raises a number of important principles of law or justice including whether a plaintiff is entitled to pursue a claim for damages for diminution in value to damaged property; whether the Magistrate was entitled to conduct a hypothetical trial; whether that was possible; whether it was possible for the Magistrate to reject the contents of an independent expert report and whether a party who seeks to discontinue proceedings should be exposed to an indemnity costs order. The appellant points out authorities justifying the submission that a claim for diminution in value is available. It is submitted there were triable issues in this case concerning this and it is further submitted the Magistrate should not have conducted a hypothetical trial. It also submitted the quantum of costs was disproportionate to the modest sum of the money in dispute.
41. [41]
    In oral submissions the Appellant’s counsel submitted:

    1. (a)
       That the claim was for more than repairs and in any event the simplified procedures applied.
    2. (b)
       Damages can be for more than repair costs.
    3. (c)
       Statewide in this case subcontracted the repairs to Bumper Pro.
    4. (d)
       Two experts gave reports greater than the cost of repair.
    5. (e)
       The decision of Coles and Ors v Hetherton and Ors^[18] was authority for the proposition that the scheme here was legitimate.
    6. (f)
       The Magistrate was not in a position to conduct a hypothetical trial. He erred in finding the amount claimed was unreasonable.
    7. (g)
       The Magistrate did not deal with the principle relating to the assessment of damages.
    8. (h)
       The Magistrate should have given the appellant her costs after the notice of discontinuance i.e. 21 June 2021.

Respondent’s submissions

42. [42]
    The respondent on the other hand submits that the decision of the Magistrate shows no error of fact, erroneous assumption, error of law or misapplication of the law. It is submitted the Magistrate was alert to the issue of the likely outcome of the hypothetical hearing. He made accurate findings. The Magistrate correctly set out the chronology. Prolongation of litigation after reasonable offers to settle was sufficient to give the Magistrate a reason to grant indemnity costs. There is no reasonable basis to grant leave.
43. [43]
    In oral submissions it was submitted:

    1. (a)
       The appellant falsely represented the cost of repairs was $5001.06.
    2. (b)
       The offers by the appellant on 16 March and June 2021 recognised the claim was only for the cost of repairs.
    3. (c)
       It was noteworthy there was no disclosure of the Bumper Pro invoice in the list of documents.
    4. (d)
       The case was framed by the pleadings here. 

Discussion

44. [44]
    In my view, there are no prospects of success here and I would not grant leave to appeal. To my mind, it is very concerning that despite this vehicle having been repaired for $833.59 in August 2020, pleadings were filed in the court (and particulars given) alleging that the costs of repair was in excess of $5,000.
45. [45]
    It is true that a claim for diminution in value may exceed the actual cost of repairs but nowhere in the pleadings, correspondence (until more recent times) or the particulars was it suggested the claim was for any thing other than the actual cost of repairs. Of course a claim for damages to a chattel caused by a tortious act is usually measured by the reasonable cost of repairing the chattel.^[19]     
46. [46]
    It is true the simplified procedure applied to this claim^[20] but that does not mean the rules of pleading can simply be cast aside.^[21] Pleadings are still important as they allow the other party a fair opportunity to meet the case against it; they define the issues in dispute, they enable determinations to be made as to the relevance and admissibility of evidence and they enable a defendant to understand the plaintiff’s claim and make a payment into court.^[22] Also the simplified procedures do not exclude Rule 5(1) of the UCPR, namely there should be the just and expeditious resolution of the real issues.^[23] 
47. [47]
    In any event where the rules of evidence and procedure are dispensed with there is still an overriding duty to observe procedural fairness.^[24] This to my mind would include the giving proper notice of the type of and quantum of damages sought so that a defendant is given the opportunity to be heard on the question.^[25]  
48. [48]
    In this case there was no claim for diminution in value and I accept the respondent’s arguments that the documents including the offers point to the conclusion that at all relevant times the claim was for actual repair costs. I also note that a certificate of readiness was signed and there no suggestion that the appellant intended to amend the claim or the particulars.
49. [49]
    In this case in those circumstances the offers to settle by the respondent commencing in September 2020 were all far more favourable to the plaintiff than the ultimate result.
50. [50]
    Also, at all material times the appellant continued to represent that the costs of repair were in excess of $5,000 which was simply not true. Such representations were made in the correspondence dated 4 September 2020 and in the particulars. Also the Bumper Pro documents were not disclosed by the Appellant in the list of documents.
51. [51]
    If I had been exercising the discretion I would have been inclined to order indemnity costs from the commencement of the action, in light of the misrepresentations made in this matter and the prolongation of the matter after reasonable offers to settle were made.
52. [52]
    I consider this is a markedly different case from the ones relied on by the appellant.
53. [53]
    For example in Coles and Ors v Hetherton and Ors^[26] the difference between the costs of repair and the “inflated” invoices was only about 25%. Contrast that with the 82% difference in this case. Also in Coles there was no suggestion of false invoicing. Also the claims were not limited to actual repair costs unlike the present case. 
54. [54]
    It is true that in such cases the reasonableness of the cost of repairs can be a triable issue^[27], but on the question of costs in this case to my mind the overriding factor here was the state of the pleadings and the fact there were misrepresentations made as to the actual cost of repair by the appellant.
55. [55]
    Also because of the state of the pleadings the cases concerning whether it is appropriate to conduct a hypothetical trial may be distinguished.^[28]   
56. [56]
    Ultimately I consider the Magistrate’s approach a moderate one in this case.
57. [57]
    It is true that indemnity costs should only be granted in special circumstances.^[29] I consider such special circumstances existed in this case for the reasons given.

Conclusion

58. [58]
    In those circumstances, I dismiss the application for leave to appeal. I will hear the parties on the question of costs.