(tho95008)
IN THE SUPREME COURT
OF THE NORTHERN TERRITORY
OF AUSTRALIA
AT DARWIN

SC No. 223/94

IN THE MATTER of an appeal under the Local Court Act

BETWEEN:

GINO FAVARO
		Appellant

AND:

WILFRIED LICHTENBERG
		Respondent

CORAM:  THOMAS J

	REASONS FOR DECISION

	(Delivered 29 June 1995)

	This is an appeal from a decision of the Local Court in which the learned stipendiary magistrate made an order on 14 September 1994 awarding judgment in favour of the plaintiff in the Local Court and the respondent to this appeal.

	The order made by the learned stipendiary magistrate was as follows:

	1.	Judgment for the plaintiff in the sum of $11,278.69 together with interest pursuant to rule 38.02 (of the Local Court Rules) in the sum of $1,687.10 the total amount of the judgment being $12,965.79.

	2.	Interest to run on judgment from 14 September 1994 on the sum of $11,278.69 only.

	3.	That part of the plaintiff's claim contained in paragraphs 6, 7 and 8 of the Statement of Claim on which no evidence was offered be dismissed.

	With respect to Costs, the learned stipendiary magistrate made the following orders:

	Costs

	1.	The plaintiff's cost of the proceedings to be standard costs.

	2.	The defendant to have his costs on the dismissal.

	3.	Otherwise the defendant to pay the plaintiff's costs.

	4.	Certify the matter fit for counsel.

	5.	Costs to be agreed or taxed.

	The Notice of Appeal sets out the following grounds of appeal:

		"1.	The learned Magistrate, having found that the sum claimed by the Respondent was entirely for patent attorney fees in respect of the matters set out in sub-clause 9(h) of the Joint Patent Licence Investment Agreement, erred in law in construing the said Agreement to mean that the Appellant was liable to pay the Respondent 30% of those fees.

 		2.	The learned Magistrate erred in law in construing sub-clause 9(h) of the Joint Patent Licence Investment Agreement to mean that the Appellant was liable to pay the Respondent 30% of the sum paid to patent attorneys in respect of the matters set out in sub-clause 9(h).

 		3.	The learned Magistrate erred in law in failing to construe sub-clause 1(f) of the Royalty Deed and sub-clause 9(h) of the Joint Patent Licence Investment Agreement according to the maxim generalia specialibus non derogant (general words do not derogate from special words) and so erred in finding that the Appellant was liable to pay the Respondent 30% of the sum paid to patent attorneys in respect of the matters set out in sub-clause 9(h).

 		4.	The learned Magistrate erred in law in allowing the Respondent to amend paragraph 11 of the Statement of Claim which had the effect of allowing the Plaintiff to discontinue or withdraw a discrete and separate claim without requiring the Respondent as a condition of the amendment to pay the Appellant's costs on that question."

	The appellant abandoned ground 3 in the Notice of Appeal at the hearing of this appeal.

	The plaintiff before the Local Court, Wilfried Lichtenberg, hereinafter referred to as the respondent, is the inventor of a device called a V-clamp.  The respondent is by trade a tool maker and cabinet maker.  He served his apprenticeship in Germany and returned to Darwin in 1981.  The novel aspect of the V-clamp is that by its design it is useful for joining unusual shaped pieces of timber together.  The V clamp does not rely on one long shank to hold two pieces of wooden material together.  It adapts a new locking device with pivoting and sliding jaws.

	The respondent applied for patents for the V clamp firstly in Australia and then overseas.  He utilised the services of a patent attorney, Griffith Hack.  Letters patent dated 21 March 1994, were granted giving the Australian patent a priority dated 9 February 1990. The respondent's efforts during 1990 to find a financial backer failed. In 1991 he met the appellant Gino Favaro.  The respondent and the appellant executed two documents "Joint Patent Licence Investment Agreement" dated 17 January 1992 tendered and marked Exhibit 3 in these proceedings and a "Royalty Deed" also dated 17 January 1992 tendered and marked Exhibit 4 in these proceedings.  These two documents formed a single contract between the two parties.  At this time the respondent had made application for patents both overseas and in Australia but at the time of entering into the contract no patents had actually been granted.

	The two documents were prepared jointly by the appellant and the respondent.  They did not seek legal advice.  They modified pre-existing documents to produce the contract.  The two documents were signed on the same day.  The intention of the parties was to commercialise the V clamp patents.

	The appellant paid to the respondent $30,000 and was to receive 30% as royalties which might later be paid by manufacturers licensed to produce the V clamp.  The respondent was to receive 70% of such royalties.

	The recital to the Royalty Deed reads as follows:

		"A.Lichtenberg is the holder of certain patent applications, and trade secrets with respect of the manufacture and sale of a "Clamp with pivoting and sliding jaws" and as improved by Lichtenberg as detailed in accordance with the International Patent Application Number PCT/AU91/00046 in the name of Wilfried Lichtenberg entitled "Clamp with pivoting and sliding jaws" ("V Clamp") and improved versions thereof including patents and/or trade secrets with respect to the equipment used to manufacture the device.

 		B.Lichtenberg and Favaro have entered into a Joint Patent Licence Investments Agreement of today's date whereby Lichtenberg jointly licences with Favaro to, inter alia, manufacture, have manufactured, use, market, distribute and sell the device.

 		C.Lichtenberg and Favaro have agreed to share the gross proceeds of income received from the manufacturer/s directly or indirectly derived from the said Joint Patent Licence Investment Agreement as set out in this Royalty Deed."

Clause 1(f) of the Royalty Deed reads as follows:

	"NOW THE PARTIES AGREE AS FOLLOWS:

	1.(f)		To divide the operational expenses and administration
			costs of patent administration and patent renewal fees, 
			on a basis of seventy (70%) per centum 'Lichtenberg' 
			and thirty (30%) per centum 'Favaro', or as otherwise 
			agreed to in writing from time to time."

	The dispute between the parties is in respect of the first part of this clause.  The essential issue between the parties is whether the operational expenses and administration cost of patent administration included the cost of applying for the patents.

	The definition of the word patents in the Royalty Deed is contained in clause 5 which reads as follows:

	"The term 'patents' means all present and future patents and applications filed (including but not limited to Lichtenberg's improvements insofar as patent applications have been made in respect thereto) in any jurisdiction in the world insofar as they relate to the device, the equipment to manufacture the device and the process pursuant to which the device are made and/or divisions, continuation, continuation in part, supplemental disclosure and reissues thereof and thereto."

	The definition of the word "patent" in the Joint Patent License Investment Agreement is as follows:

	"'patents' means all present and future patents and applications filed (including but not limited to licensor's improvements insofar as patent applications hav ebeen made in respect thereto) in any jurisdiction in the territory (including without limitation those set out in Schedule 1) insofar as they relate to the devices, the equipment to manufacture the devices and the process pursuant to which the devices are made and all divisions, continuations, continuation in part, supplemental disclosure and reissues thereof and thereto."

	The respondent was successful before the Local Court in his claim that the "administration costs of patent administration", as it appeared in clause 1(f) of the Royalty Deed, included the administration costs of applying for patents.  The amount claimed in the Local Court related almost entirely to the cost of applying for patents.  The respondent had paid $37,922.00 to patent attorneys to process his applications for patents.

	The appellant's had argued in the Local Court that the respondent, Wilfried Lichtenberg, who is described as "the licensor in the Joint Patent Licence Investment Agreement" is solely responsible for the cost of making application for the patents.  This argument was based on clause 9(1)(h) of the Joint Patent Licence Investment Agreement which reads as follows:

	"9(1)		the licensor hereby represents warrants and undertakes to the licensee/manufacturer that:

 	(h)		the licensor will use its best endeavours to obtain the grant of any of the patents or any patentable licensors improvements to the devices in any jurisdiction in the territory throughout the term and (without prejudice to the foregoing) will at its own expense.

(i)	procure publication thereof;

			(ii)	make request to the patent office in the prescribed form for a preliminary examination and search and pay the prescribed fee;

			(iii)	request the patent office to make a substantive examination and pay the prescribed fee;

			(iv)	so far as may be required make observations and amend the application;

			(v)	in respect of the patents pay all renewal fees necessary to keep all patents in force, each such payment to be effected no later than seven days demand produce to the licensee each renewal certificate in respect thereof; and

			(vi)	notify the licensee/manufacturer forthwith of any withdrawal of or amendment to any application and if any application is treated as refused."
	These matters comprehend all of the steps necessary to obtain a patent.

	The appellant concedes he is responsible for 30% of the patent renewal fees but argues the initial expense in obtaining the patents should in accordance with clause 9(1)(h) of the Joint Patent Licence Investment Agreement be the sole responsibility of the respondent Lichtenberg.

	The appellant contends the amount claimed by the respondent was in respect of expenses to obtain a patent.  An amount of $37,922 was paid to patent attorneys for the patent application.  It is the appellant's argument that this amount was in accordance with the agreement, in particular, clause 9(1)(h) of the Joint Patent Licence Investment Agreement to be paid by the respondent "at its own expense".

	At the hearing in the Local Court the respondent claimed 30% of $38,990.72.  The amended paragraphs 11 and 12 of the Statement of Claim reads as follows:

		"11.During the period 17 January 1992 to April 1993, the plaintiff incurred and paid operational expenses and administration costs of patent administration and patent renewal fees in the sum of $38,990.72, full particulars of which have been provided to the defendant.

 		12.The plaintiff claims from the defendant an amount equal to 30% of $38,990.72, namely $11,697.21, pursuant to the term of the Royalty Deed pleaded in paragraph 4 hereof."

	The amount of $38,990.72 was made up of $1,068.72 paid by the respondent for patent renewals.  The appellants conceded in the Local Court that they were responsible for 30% of $1,068.72.  The amount of $408.52 was paid by the appellant at the time of the hearing before the Local Court.  The balance of $37,922 represents the amount paid by the respondent to Griffiths Hack patent attorney for the patent applications.  The appellant disputes that it has any responsibility to pay 30% of the amount paid to Griffiths Hack patent attorney and appeals from the decision of the learned stipendiary magistrate.

	The appellant submits that on the correct construction of the two deeds entered into by the parties the appellant is not liable for this or any of the amount paid by the respondent in making application for patents.

	I accept the principle that where there are two contemporaneously executed documents between the same parties they are construed together (Hoyts Pty Ltd v Spencer (1919) 27 CLR 133).

	I adopt the principle expressed in Anderson 7 Ch D 75 at 99:

	"Where there are two contemporaneous documents executed and assented to by the same persons at the same time (and these really are so substantially, and are therefore to be treated as contemporaneous documents), it appears to me that the ordinary rule applies, according to which contemporaneous documents are to be read together, so that if there is any ambiguity in one it may be explained by the other; and even if there is any inconsistency, you must take the two documents together and see how you can explain the inconsistency."

	Counsel for the appellant submits there is an apparent internal contradiction in the contract with respect to Clause 9(1)(h) of the joint patent licence investment agreement; the learned stipendiary magistrate interpreted this section to mean that Lichtenberg would pay for these things and be reimbursed later.  The appellant submits the words "will at its own expense" have a commercial purpose and cannot mean that Lichtenberg is to pay the prescribed fee and subsequently recover 30% from Favaro.

	The essential question is what would reasonable business people in the position of the parties have taken the clause to mean (Shenker v Maplas (1990) VR 834 McGarvie J at p840).

	It is the appellant's submission that the phrase "at its own expense" does not simply mean the respondent would pay the prescribed fee and collect later on.

	The appellant asserts the plain and reasonable meaning of the words is that the respondent alone is liable for the cost of applying for the patents.

	The appellant states this construction reflects the plain and ordinary meaning of the words in clause 9(1)(h) of the Joint Patent License Agreement as would be understood by reasonable business people. The appellant's submission is it provides mutual benefit for both parties (Cheshire and Fifoot Law of Contract 6th Aust Ed. at para. 426):

	"Resolution of ambiguities generally.  Disputes over meaning are by far the most common of contract disputes.  The variety of such disputes is too great to allow for the close application of strict rules of interpretation.  In most cases the ascertainment of meaning is a pragmatic process conducted without explicit resort to such rules: "no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements".  The interpretation of contracts differs from statutory interpretation, which is saddled with maxims and presumptions.  Its methodology must necessarily be flexible and resourceful.  It must rest on the premise that the contract was made in good faith with the object of at least potential mutual benefit by due performance."

	The appellant referred to the following statement by the learned stipendiary magistrate during the course of his reasons for decision (transcript p83):

	"The defendant's submission that the clear intention of the documents is that the licensor will bear the costs of patent application steps albeit using a patent attorney and thereby save the defendant harmless from the liability to contribute to expenses indicates that the licensor patentee must be making a bad bargain. If this be the case the licensor has foregone more than the 30 per cent share he has for good consideration given to the defendant, or that he is losing more than 30 per cent share he has given to the defendant."

It is the appellant's argument this statement is incorrect for the following reason: The respondent received $30,000 at a time when the future of his invention was very uncertain.  It is reasonable to expect that the appellant would wish to protect himself from further unquantifiable liability under the contract by making the respondent liable for the cost of obtaining the patents.  It was understood at all times the respondent would retain sole ownership of the patent.  The subsequent conduct of the parties, in particular the appellant's request for a greater share of any royalty in return for a payment to Griffiths Hack, is not consistent with the construction proposed by the respondent.

	The appellant submits that there is no evidence to justify a finding that it was a bad bargain for the respondent to be totally responsible for the expenses of making applications for a patent.

	The appellant submits that if the construction proposed by the respondent is correct, most of clause 9(1)(h) of the Joint Patent Licence Investment Agreement is otiose.  It adds nothing whatsoever to the agreement.  The plain meaning of the words is not capricious, unreasonable, inconvenient or unjust and should be adopted (Lewis Construction (Engineering) Pty Ltd v Southern Electric Authority of Queensland (1976) 11 ALR 305 Gibbs J at 315):

	"It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied.  Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another. If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different.  The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust.  On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, 'even though the construction adopted is not the most obvious, or the most grammatically accurate'..."

	The appellant further submits that by paying $30,000 to the respondent the appellant was to receive 30% of the royalty payment.  There is a clear calculation in the contract to that effect.  It was understood at all times that the respondent would retain sole ownership of the patent.  The cost of application for patents was unknown.  The appellant asserts it is not reasonable to expect the appellant to enter into a contract to be responsible for 30% of the cost of making applications for patents when it was not known what that cost would be.

	On the appellant's submission the contract between the parties is clear, it provides mutual benefits for both parties and is not a bad bargain for the respondent.

	The appellant submits the learned stipendiary magistrate's construction was a pedantic approach, he did not look at the intention of the parties but rather involved a tortuous construction of the contract and not one in which reasonable business people would have seen merit.
	It is the appellant's argument that the general term in clause 1(f) of the Royalty Deed which says that the administration costs will be shared 70/30 must be subject to the express terms of clause 9(1)(h) of the Joint Patent Licence Investment Agreement.

	I accept the principle that the Court must ask what is the governing intention of the parties.

	The respondent submits that the two documents should be read together.  The Joint Patent Licence Investment Agreement sets up the joint licence to use the invention so as to create royalties.  The Royalty Deed creates the account between the parties.  Each document has a different purpose and there is no conflict between them.  It is the respondent's argument that paragraph 9 of the Joint Patent Licence Investment Agreement set out all things necessary to maintain the subject matter of the licence.  The appellant agrees to pay his share in respect of the renewal fees 9(1)(h)(v) of the Joint Patent Licence Investment Agreement because these are unambiguously operational expenses and administration costs of patent administration.  The respondent states the two deeds put the relationship between the parties on a normal business footing.  The respondent owner has to maintain the patent but the partnership pays the cost of that maintenance.  It is the respondent's submission that this interpretation is common-sense and makes the terms harmonious.  It is a normal allocation of liabilities and avoids a detailed semantic and syntactical analysis of the words. It is the respondent's argument that the operational cost and administration cost of the patent administration include the management of the applications and the granted patents.  That is, things which are included in 9(1)(h) of the Joint Patent Licence Investment Agreement and which can only be done by the patent attorneys are all the things the respondent paid for and which needed to be done to protect the subject matter of the agreement.  The respondent was to maintain the subject matter and then there was to be an accounting between the parties.  The respondent argues there is no need to distinguish between patent renewal fees referred to in clause 9(1)(h)(v) and the other provisions of clause 9(1)(h).  The unambiguous interpretation of the two documents is that the respondent will make all payments as required under clause 9(1)(h) of the Joint Patent Licence Investment Agreement and there will then be an accounting in accordance with clause 1(f) of the Royalty Deed.
	The respondent submits if the timing of the execution of the documents is important then the latter should be considered an amendment of the former and should thus prevail.  The preamble of the Royalty Deed clearly states that the Joint Patent Licence Investment Agreement was executed prior in time.

	In his reasons for decision at transcript pp75-76, the learned stipendiary magistrate stated as follows:

	"	By 1990 the plaintiff was looking for a manufacturer.  He by this time to protect his idea, at least in Europe and in Australia, had made an application pursuant to the Patents Co-operative Treaty.  The plaintiff had engaged a firm of patent attorneys in 1989 at the earliest and used them to report on the novelty of his invention, that is he needed assistance to scour the world for any kind of clamp which was at all like his, and those patent attorneys were Griffith Hack.  It is to be noted, and I think it's accepted on both sides, that a person cannot himself avoided (sic) using patent attorneys as far as Australia is concerned.

	Patent attorneys are essential, necessary, for the development of any successful application for a patent to any device.  That firm remained the plaintiff's agent in all matters concerning the working up of the patent application, filing of applications in Australia and overseas et cetera.  And in all matters the agent, Griffith Hack, the patent attorneys, communicated and consulted frequently with the plaintiff over a number of years and continued to do so. ....."

	This finding is not in dispute.

	The appellant concedes he is responsible for 30% of fees incurred as a consequence of clause 9(1)(h)(v) of the Joint Patent Licence Investment Agreement but not for any fees incurred as a consequence of clause 9(1)(h)(i), (ii), (iii), (iv) and (vi) of the same clause. I do not accept this was the intended construction by the parties.

	I find the two documents were executed contemporaneously.

	I consider the two documents read together do not create an ambiguity.  Clause 9 in the Joint Patent Licence Investment Agreement placed the responsibility on the respondent to obtain and maintain the patents and do what was necessary to preserve the subject matter of the agreement.  To do that he had to engage a patent attorney and was responsible for paying the patent attorneys' fees.  The Royalty Deed then provided a method of accounting between the appellant and the respondent including the provisions of clause 1(f).  I do not consider clause 1(f) in the Royalty Deed conflicts with clause 9(h) of the Joint Patent Licence Investment Agreement.  It only serves to define the method of accounting between the parties.

	Accordingly, I dismiss the appeal under grounds (1) and (2) of the Notice of Appeal.

		Costs - Ground 4 Notice of Appeal states: 

 		"4.The learned Magistrate erred in law in allowing the Respondent to amend paragraph 11 of the Statement of Claim which had the effect of allowing the Plaintiff to discontinue or withdraw a discrete and separate claim without requiring the Respondent as a condition of the amendment to pay the Appellant's costs on that question."

	This appeal relates specifically to the fact that the learned stipendiary magistrate made no order for costs referrable to the respondent's amendment on the morning of the trial to paragraphs 11 and 12 of the Statement of Claim.

	Counsel for the appellant was clearly conscious of the costs implications resulting from an amendment to paragraphs 11 and 12 but for various reasons his submissions on this aspect were side tracked and the issue was never properly addressed.  Although counsel for the appellant must bear some responsibility for this he was not wholly responsible for the confusion.  In my opinion, this is not a case in which it would be correct to find that the learned stipendiary magistrate decided the issue of costs in the manner he was invited to by the appellant's counsel.

	The order for costs involves the exercise of a discretion by the learned stipendiary magistrate.

	In this appeal, the Court assumes the learned stipendiary magistrate has exercised a discretion as to costs and will not entertain an appeal unless it is satisfied that the learned stipendiary magistrate has not exercised his discretion but has applied some rule which he considered as excluding it (Talbot v Truslove (1926) WAR 86 McMillan CJ at 87).

	I apply the following principles as expressed by the Court in Keddie v Foxall (1955) VLR 320 at 322:

	"	The duty of a Court of appeal on an order made in the exercise of a Judge's discretion was enunciated by the House of Lords in Charles Osenton & Co. v. Johnston, [1942] A.C. 130, at p. 138, in these words:
		The appellate tribunal is not at liberty merely to substitute its own exercise of discretion for the discretion already exercised by the judge.  In other words, appellant authorities ought not to reverse the order merely because they would themselves have exercised the original discretion, had it attached to them, in a different way.  But if the appellate tribunal reaches the clear conclusion that there has been a wrongful exercise of discretion in that no weight, or no sufficient weight, has been given to relevant considerations such as those urged before us by the appellant, then the reversal of the order on appeal may be justified.
	....."

	Counsel for the respondent argues that what the learned stipendiary magistrate did was ambiguous but can still be interpreted as an exercise of discretion and should not be interfered with on appeal.  Further, in making the amendments to paragraph 11 and 12 of the Statement of Claim, the plaintiff did not do anything calculated to cause unnecessary expense and accordingly this Court should not interfere with the learned stipendiary magistrate's order as to costs.

	I agree the amendment saved the expense of conducting a trial on an aspect of the claim no longer in issue.  Nevertheless, the plaintiff/respondent did not make the amendment till the morning of the trial.  The defendant/appellant was unnecessarily put to the expense of preparing for a hearing in respect of a claim for a substantially larger amount of money as particularised by the plaintiff in its Statement of Claim than the plaintiff proceeded with at trial.
	The respondent argues that the appellant is bound by the way in which he conducted the case before the learned stipendiary magistrate and that only if there are exceptional circumstances should the appellant be entitled to put an argument on appeal which he has deliberately or through inadvertence failed to put at trail (University of Wollongong v Metwally 2 (1985) 59 ALJR 481, 483; See also National Australia Bank Ltd v KDS Construction Services Pty Ltd (In Liquidation) (1987) 163 CLR 668, 679-80).

	Relevant passages in the transcript before the learned stipendiary magistrate are as follows: transcript p2 Mr Barr, counsel for the plaintiff, seeks leave to amend; paragraphs 11 and 12 of the Statement of Claim, no formal order is made by the learned stipendiary magistrate to allow the amendments.  Mr Young, counsel for the defendant/appellant, then makes amendments to the Notice of Defence.  A reading of the transcript gives rise to an assumption that, although no formal order was made, all parties were proceeding on the basis the amendment to clause 11 and 12 of the Statement of Claim had been made.

	There was a further discussion as to the amendments and Mr Barr then opened his case.

	At transcript p56 Mr Young raises the matter again in respect of his concern that the plaintiff by simply amending paragraphs 11 and 12 of the Statement of Claim has left matters hanging and could bring another action in respect of this part of the claim.  At transcript p57, Mr Young made reference to the usual procedure being for the plaintiff to discontinue this part of his claim and the plaintiff pay the costs for this aspect of the proceedings.

	At transcript p59, Mr Barr submitted that paragraphs 11 and 12 had been amended by consent that no cost order had been sought at the time of the amendment and it was now too late to argue costs.

	Mr Young disputed this submission and referred to the submission he had made at the commencement of proceedings when he had asked Mr Barr to clarify whether he was proposing not to call evidence in respect of the part of the claim he had abandoned or whether he was discontinuing in respect of this part of the claim.  In reply Mr Barr had asked the learned stipendiary magistrate not to deal with the issue at that time and Mr Barr would return to it at the conclusion of his opening (transcript p4).  At transcript p60, Mr Young indicated his consent to the amendments of paragraph 11 and 12 was conditional.  There was further discussion on the whole issue and at transcript p61 the learned stipendiary magistrate stated the whole matter could be argued at the end of the proceedings.  Mr Alderman, counsel for the respondent, submits at transcript p84 that the learned stipendiary magistrate exercised a discretion in respect of paragraph 11 of the Statement of Claim when he stated, inter alia:

	".... while I find for the plaintiff as far as paragraph 11 is concerned I find against the plaintiff as far as paragraphs 6, 7 and 8 are concerned and I find - I'm satisfied that they are not established and that lack of establishment is due to the fact that no evidence was offered concerning them. ...."

There then follows some further submission from Mr Barr as to calculation of interest.

	With respect I do not interpret this extract from the learned stipendiary magistrates reasons for decision as being an exercise of his discretion on the question of costs in respect of the amendment to paragraphs 11 and 12 of the Statement of Claim.

	There was no order made by the learned stipendiary magistrate with respect to the issue of costs following the amendment to paragraphs 11 and 12 of the Statement of Claim.

	At the commencement of the hearing before the learned stipendiary magistrate, the plaintiff respondent sought to amend the Statement of Claim.  The effect of the amendment was to reduce the amount the plaintiff claims he incurred from $101,068.17 to the sum of $38,990.72.  The consequential amendment to paragraph 12 was that the plaintiff claimed 30% of $38,990.72 in lieu of $101,068.17 namely $11,697.21 in lieu of $30,320.45.  Counsel for the plaintiff/respondent then indicated that the amount of $11,697.21 plus interest was the total amount claimed by the plaintiff in the proceeding in the Local Court.

	The appellant/defendant had no notice that this application for amendment was to be made until the day of the hearing.  The learned stipendiary magistrate did not seek nor did counsel for the defendant/appellant give consent to the amendment.  The appellant then applied to amend the Notice of Defence and an Amended Notice of Defence was handed to the learned stipendiary magistrate.  The Amended Notice of Defence was to the whole proceeding and had been drawn prior to the notification that paragraphs 11 and 12 of the Statement of Claim was to be amended.
	Counsel for the defendant/appellant in these proceedings referred to amending the Notice of Defence and stated (transcript p. 2):

	"In the light of this mornings amendment I think there should be some small changes - small further changes to this (Amended Notice of Defence) your Worship, but I'll explain those as I go through."

	Counsel for the appellant then took the learned stipendiary magistrate through the Amended Notice of Defence.  It appears from a reading of the transcript of proceedings in the Local Court, that counsel for the appellant accepted the amendments to the Statement of Claim was a fait accompli.  The learned stipendiary magistrate understandably appears to have drawn the inference that the appellant had consented to the amendments to the Statement of Claim and proceeded immediately to further amend the Amended Notice of Defence.  The appellant states the learned stipendiary magistrate did not make it clear in reading his order which paragraphs in the Statement of Claim were being dismissed.  At transcript p88, the learned stipendiary magistrate made the following order:

	"...  Judgment for the plaintiff in the sum of $11,278.69 together with interest pursuant to rule 38 of $11,278.69 together with interest pursuant to rule 38 of $1680.10, total amount adjudged therefore being $12,965.79.  Interest to run on judgment from today's date on the sum of $11,278.69 only.  That part of the plaintiff's claim contained in paragraph 6, 7 and 8 upon which no evidence  has been offered is dismissed.  We move then to of course the question of costs."

There then followed submissions on the question of costs.  At transcript p90 the following exchange took place:

	"MR BARR:  Your Worship, if I may assist my learned friend here.  I'm instructed to concede to his application, namely that the defendant be given costs with respect to the amounts dismissed as per Your Worship's order.

	HIS WORSHIP:  Right, that solves that then does it Mr Young?

	MR YOUNG:  It does. ....."

Submissions then followed on the question of cost in respect of the offer of compromise.  At transcript p98 appears the following exchange occurred:

	"MR YOUNG:  If Your Worship pleases.  Would you then please be able to read out the orders that you intend to make today.

	HIS WORSHIP:  Yes.  Firstly is the plaintiff's costs of the proceedings be standard costs and the defendant to have this costs on the dismissal and (incomprehensible) otherwise the defendant to pay the plaintiff's costs.  I certify the matter is fit for counsel and costs to be agreed or taxed."

This order combined with the orders of the learned stipendiary magistrate appearing on transcript p88 and set out above, make it clear the dismissal referred to paragraphs 6, 7 and 8 of the Statement of Claim.  The order did not, as Mr Young for the appellant had assumed, include costs in respect of the amended paragraphs 11 and 12 of the Statement of Claim.

	On 14 September 1994 the learned stipendiary magistrate signed the following written orders:
	
	"Judgement for the Plaintiff in the sum of $11,278.69.  Interest awarded pursuant to Rule 38.02. L.C.R. $1,687.10: Total amount adjudged $12965.79.

	Interest to run on Judgement from todays date in the sum of $11,278.69 only.

	That part of Plaintiffs claim contained in paragraphs 6.7.8 of the Statement of Claim upon which no evidence was offered be dismissed."

	It becomes a little more confusing because counsel for the plaintiff indicated at the hearing before the learned stipendiary magistrate at transcript p90 that he conceded "the defendant be given costs with respect to the amounts dismissed as per Your Worship's order."

	With the benefit of hindsight, it would appear the issue of costs in respect of the amended paragraph 11 and 12 of the Statement of Claim was never properly addressed.  In the concluding submissions, counsel for the defendant did not specifically draw to the learned stipendiary magistrate's attention that his application for costs was also in respect of the amended paragraphs 11 and 12 of the Statement of Claim.  However, the issue of costs in respect of the amended paragraphs 11 and 12 of the Statement of Claim had been raised by counsel for the defendant in the Local Court proceedings at the commencement of the hearing (transcript p3):

	"MR YOUNG:  Your Worship, if I may just raise one point.  I would like Mr Barr to clarify if he can, or if he's willing, how he puts the abandonment of the rest of his claim.  Whether he simply proposes not to offer any evidence or whether he is seeking to discontinue in respect of that part of the claim.  They're two different matters and have costs implications, Your Worship.  So perhaps he could explain."

	As a consequence, there were misunderstandings that occurred in the Local Court, not all of which are attributable to counsel for the defendant.  I have outlined how these misunderstandings arose in some detail.  I am satisfied that the learned stipendiary magistrate did not exercise his discretion in that he never specifically addressed the issue of the defendant's costs in respect of the plaintiff's amendments to paragraphs 11 and 12 of the Statement of Claim.  I accept counsel for the defendant did seek such an order.

	Accordingly, I am of the opinion the learned stipendiary magistrate's discretion miscarried and I should now make an order in respect of the appellant's application for costs consequent upon the amendment to paragraphs 11 and 12 of the Statement of Claim.

	I accept that the amendments to paragraph 11 and 12 meant that the plaintiff before the learned stipendiary magistrate had, on the morning of the hearing, substantially reduced his claim and the formula on which he had calculated his claim.  I consider the appellant is entitled to his costs thrown away in respect of that part of the claim abandoned by the amendment to paragraph 11 and 12 up to the time of trial.

	I note the provisions of Order 63.11.7 of the Supreme Court Rules which states:

	"	(7)	A party who amends -

(a)	a pleading without leave of the Court; or

(b)	a pleading or other document by leave,

	shall pay the costs of and occasioned by the amendment and the costs thrown away because of the amendment."

Ground 4 on the appeal is allowed.

	Accordingly, I order that the respondent/plaintiff pay the appellant/defendant's costs consequent upon the respondent amending paragraphs 11 and 12 of the respondent's Statement of Claim on the morning of the hearing before the learned stipendiary magistrate.

	The parties are at liberty to apply in respect of the issue of costs in respect of this appeal.