A40 Construction and Maintenance Group Pty Ltd v Smith
[2021] VSC 575
•10 September 2021 (given ex tempore, revised)
| IN THE SUPREME COURT OF VICTORIA |
AT MELBOURNE
COMMON LAW DIVISION
EMPLOYMENT AND INDUSTRIAL LIST
S ECI 2021 01543
| A40 CONSTRUCTION AND MAINTENANCE GROUP PTY LTD AS TRUSTEE FOR THE A40 CONSTRUCTION UNIT TRUST | Plaintiff |
| v | |
| AMANDA SMITH | First Defendant |
| ANDREW GOULSBRA | Second Defendant |
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JUDGE: | Ierodiaconou AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 9 September 2021 |
DATE OF RULING: | 10 September 2021 (given ex tempore, revised) |
CASE MAY BE CITED AS: | A40 Construction and Maintenance Group Pty Ltd v Smith & Anor |
MEDIUM NEUTRAL CITATION: | [2021] VSC 575 |
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PRACTICE AND PROCEDURE – Stay application pursuant to s 57 of the Domestic Building Contracts Act 1995 (Vic) – Whether proceeding was an action arising wholly or predominantly from a domestic building dispute – Defendants’ application dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D T J Stavris | Kyard Business Law |
| For the Defendants | Mr I Fatah, solicitor | Boutique Lawyers |
TABLE OF CONTENTS
Background......................................................................................................................................... 1
Pleadings.............................................................................................................................................. 1
Defendants’ submissions................................................................................................................. 6
Plaintiff’s submissions..................................................................................................................... 7
Applicable Principles........................................................................................................................ 8
Conclusion......................................................................................................................................... 11
HER HONOUR:
Background
By summons filed on 30 August 2021, the defendants apply to have this proceeding stayed on the basis it could be heard by the Victorian Civil and Administrative Tribunal (‘the Tribunal’) pursuant to s 57(2) of the Domestic Building Contracts Act 1995 (‘the Act’). The plaintiff opposes the application.
I will dismiss the defendants’ application for reasons that follow.
Pleadings
This proceeding was commenced by writ and statement of claim filed on 11 May 2021 and was entered into the Employment and Industrial List (Common Law Division) on 12 May 2021.
On 30 July 2021, the defendants filed a defence.
On 27 August 2021, the plaintiff filed a reply.
The following facts are agreed:
(a) the plaintiff operates a building business;[1]
[1]The plaintiff pleads it operates a business as a licensed builder. The defendants deny this and say that the plaintiff has been a registered builder since 1 July 2021 and one of its directors, Mr Landy, has been a registered builder since 9 November 2011.
(b) there was an employment relationship between the first defendant and either the plaintiff company or its trustee, from about February 2014 until about July 2017;[2]
(c) the second defendant is the registered proprietor of the land known as 469 Healesville-Koo Wee Rup Road, Healesville (‘the property’);[3] and
(d) building works were undertaken on the property and the plaintiff invoiced the second defendant for building works.[4] The second defendant paid some of those invoices.[5]
[2]Statement of claim filed 11 May 2021 [4]; Defence filed 30 July 2021 [2].
[3]Ibid [2]; Ibid [3].
[4]Ibid [6]; Ibid [6].
[5]Ibid.
On 5 April 2016, the second defendant executed a written contract with a cover page titled “Victorian New Homes Contract” and with his property listed.[6] The defendants say that the building contract was with Mr Thomas Landy, who is named as the “registered building practitioner” in the contract.[7] The plaintiff says it is a party to the contract. The contract names A40 Construction Unit Trust as the builder.[8] The signature page provides for the Owner and Builder to sign the contract.[9] Below the heading “Builder”, Mr Landy appears to have signed the contract.[10] Underneath Mr Landy’s signature on the contract are the words “signed for and on behalf of A40 Construction Unit Trust”.[11] The first defendant appears to have signed the contract underneath the heading “Owner”.[12]
[6]Exhibit ‘IF-1’, Contract, to the affidavit of Imran Fatah affirmed 20 August 2021 (‘Fatah affidavit’).
[7]Ibid.
[8]Ibid.
[9]Ibid.
[10]Ibid.
[11]Ibid.
[12]Ibid.
The plaintiff pleads that the first and second defendants were in a romantic relationship and were domestic partners.[13] This is denied.[14]
[13]Statement of claim filed 11 May 2021 [2]; Defence filed 30 July 2021 [2].
[14]Defence filed 30 July 2021 [2], [7].
The plaintiff pleads, amongst other things, that the first defendant breached her employment contract, fiduciary duties, and duties under the Corporations Act 2001 (Cth) (‘the Corporations Act’).[15] The plaintiff seeks compensation and damages from the first defendant. The claim includes the following pleadings:
[15]Statement of claim filed 11 May 2021 [22]-[24].
(a) The plaintiff sent invoices to the second defendant.[16] It relied upon the first defendant discharging her duties as an employee to honestly and competently prepare the invoices.[17] In a review of the invoices, the plaintiff discovered that the majority of invoices contained errors to the advantage of the second defendant.[18]
[16]Ibid [10].
[17]Ibid.
[18]Ibid [11].
(b) The first defendant prepared a draft final invoice to the second defendant.[19] It was in the amount of $37,000.[20] It was determined by the plaintiff, at the time, the final invoice should have been $189,239.81.[21] The first defendant was given an opportunity to provide an explanation for the discrepancy in the invoice but did not.[22] The second defendant admitted an obligation [both by her and the second defendant] to pay the invoice.[23] Following this, the plaintiff terminated the employment of the first defendant.[24] It issued the final invoice in the amount of $189,239.81 to the second defendant.[25]
[19]Ibid [12].
[20]Ibid.
[21]Ibid [13].
[22]Ibid [14].
[23]Ibid.
[24]Ibid [16].
[25]Ibid [17].
(c) The plaintiff demanded the defendants pay the final invoice and they have failed to do so.[26]
[26]Ibid [18].
(d) The plaintiff reviewed their records later, in early 2021, and discovered further amounts that should have been included in the final invoice.[27] The true amount owing is $209,879.51 (‘the wrongful invoices claim’).[28]
[27]Ibid [19].
[28]Ibid.
(e) Between 23 November 2016 and 26 April 2017 the first defendant initiated seven payments, totalling $7,502.56 from the plaintiff to her personal bank account without authorisation (‘the unauthorised payments claim’).[29] Notwithstanding the descriptions referred to Coates Hire and Telstra, the account into which the amounts were paid was the same as the account into which the first defendant’s wages were paid.[30]
[29]Ibid [25].
[30]Ibid.
(f) The plaintiff claims, as against the first defendant, compensation for loss suffered by it as a result of her negligence or breaches of her duty of loyalty, damages in the amount of $209,879.51 in respect of the wrongful invoices claim and in the amount of $7,502.56 in respect of the unauthorised payments claim.[31]
[31]Ibid.
(g) The plaintiff makes claims of accessorial liability against the second defendant as a knowing participant in the first defendant’s dishonest breaches, and receiving benefit for work outside the scope of the contract for which the plaintiff has not been paid.[32] It is also claimed that the second defendant contravened ss 182 and 183 of the Corporations Act.[33]
(h) The plaintiff claims, as against the second defendant, an account of profits for the knowing receipt of benefit from the first defendant’s dishonest breach of fiduciary duty.[34] The plaintiff claims damages against the second defendant on either a quantum meruit basis or compensation pursuant to sub-s 38(7) of the Act.[35]
(i) The plaintiff claims, as against both defendants, an order for compensation of $209,879.51 pursuant to s 1317H of the Corporations Act 2001.[36]
[32]Ibid.
[33]Ibid.
[34]Ibid.
[35]Ibid.
[36]Ibid.
The defendants deny key allegations and also plead that the plaintiff has failed to adequately particularise the claims and allegations and accordingly they are vague, embarrassing and liable to be struck out.[37]
[37]Defence filed 30 July 2021 [10].
Further, the defendants plead that in or around August 2018 the plaintiff reported them to Victoria Police for criminal offences alleged to be in relation to the first defendant’s employment and the second defendant’s conduct with respect to the building contract.[38] They plead that in or around February 2019, Victoria Police advised the second defendant that the complaint against him would not be investigated.[39] They plead that in or around December 2019, Victoria Police ceased the investigation of the complaint against the first defendant.[40]
[38]Defence filed 30 July 2021 [24A].
[39]Ibid.
[40]Ibid.
The defendants say this proceeding is required to be heard by the Tribunal pursuant to s 57 of the Act.[41]
[41]Ibid [30].
The plaintiff, in reply, pleads that this proceeding is not required to be heard by the Tribunal and cannot be.[42] It pleads that s 57 of the Act requires the Court to stay the action “arising wholly or predominantly from a domestic building dispute” and this is not such a dispute.[43] The plaintiff refers to a number of pleadings in its statement of claim, including that the first defendant breached her contract of employment, her fiduciary duties, the Corporations Act and was negligent.[44] The plaintiff pleads that the only parts of its claim that fall within the Act are the claims against the defendants for neglecting or refusing to pay the final invoice rendered in respect of the building works and the claim against the second defendant for compensation on a quantum meruit basis.[45]
[42]Reply to the defence filed 27 August 2021 [8].
[43]Ibid.
[44]Ibid.
[45]Ibid [8].
Further the plaintiff pleads, in its reply, that the proceeding could not be heard by the Tribunal because ss 182 and 183 of the Corporations Act are civil penalty provisions and that only ‘the Court’, within the meaning of s 58AA of the Corporations Act, has jurisdiction to declare whether there has been contravention of such provisions.[46] It says the Tribunal is not such a court within the meaning of s 58AA.[47] Moreover, it is pleaded that given the under-resourcing of the Tribunal at present, the purpose of the Act to “provide a single, inexpensive, time-efficient and expert forum for the resolution of domestic building dispute” is arguably frustrated by the current delays for such proceedings to be heard in the Tribunal.[48]
[46]Ibid [8].
[47]Ibid.
[48]Ibid; Impresa Constructions v Oxford Building [2021] VCC 1146 (Burchell J).
Defendants’ submissions
In support of their application for a stay, the defendants rely on the affidavit of their solicitor, Imran Fatah, affirmed 20 August 2021 (‘Fatah affidavit’) and their written submissions filed on 7 September 2021.
The key submissions made by the defendants are as follows:
(a) The proceeding arises wholly or predominantly from a domestic building dispute. The defendants rely on Presser v Ocean View Properties Pty Ltd (‘Presser’).[49] Once the issue of the domestic building dispute is resolved then “everything else will fall into place”.[50] The core of the plaintiff’s claim against the defendants, both separately and jointly, is the allegation that the sum of $209,879.51 is owed. The claim is based on what the plaintiff alleges are validly issued invoices for a major domestic building contract under that Act. The invoices relate to works undertaken at the property, which were major domestic building works under the Act. Once the issue of the sum of $209,879.51 is resolved, all other matters in contention in this proceeding fall into place. In respect of the unauthorised invoices claim, that is not the majority of the claim. The majority is the claim of $209,879.51.
[49][2006] VSC 143; the defendants also relied on: Radojevic v JDA Design Group Pty Ltd & Anor (No 2) [2017] VSC 796, Nettleton v Vero Insurance Limited [2008] VCC 672, Krongold Constructions (Australia) P/L v Freeman [2007] VCC 716.
[50]Presser [43].
(b) The action itself need not be a domestic building dispute. However it must arise wholly or predominantly from a domestic building dispute. That is the case here.
(c) The defendants, either jointly or separately, intend to bring a claim against the plaintiff and/or Mr Landy, a director of the plaintiff and signatory to the contract. The proposed action will allege breaches of the Act and make other claims relating to the contract and the works undertaken at the property.
(d) There remain issues related to the domestic building dispute which are also to be litigated given they have been raised in their defence. These issues include whether: the plaintiff was a party to the contract; it was varied in accordance with the Act and other statutory requirements; and the works at the property were done legally.
(e) The plaintiff’s letter of demand dated 1 August 2017 (‘2017 letter of demand’) for the sum of $189,239.81 is solely in relation to the alleged debt under the contract.[51] The letter states the claim against the defendants to be for “unpaid labour, material and other costs incurred in relation to building and construction works completed at the Site.” Accordingly, it is clear the plaintiff believes that any alleged damages result solely from the alleged debt.
(f) The Tribunal has jurisdiction to hear the plaintiff’s claim pertaining to s 1317H of the Corporations Act because it is empowered to hear and make orders in relation to a domestic building dispute pursuant to s 53(1) of the Act.
[51]Exhibit ‘IF-4’, 1 August 2017 letter of Mr Zac Griffiths, to the Fatah affidavit.
Plaintiff’s submissions
The key oral submissions made by the plaintiff follow.
(a) It is incorrect to say that this is a matter that ought be heard by the Tribunal pursuant to s 57 of the Act. The plaintiff relies on paragraph 8 of its reply. Not all of its claim can be determined by the Tribunal. It is incorrect to say that this matter has arisen wholly or predominantly out of a domestic building dispute.
(b) The defendants have not filed a counterclaim in respect of the foreshadowed claim. It is now out of time. Pleadings closed after the plaintiff’s reply was filed.
(c) The delays in the Tribunal mean that it cannot possibly meet the overarching purpose of the Act.[52]
[52]Impresa Construction v Oxford Building [2021] VCC 1146 (Burchell J) [46]-[60].
Applicable Principles
Section 57 of the Act provides:
VCAT to be chiefly responsible for resolving domestic building disputes
(1)This section applies if a person starts any action arising wholly or predominantly from a domestic building dispute in the Supreme Court, the County Court or the Magistrates’ Court.
(2)The Court must stay any such action on the application of a party to the action if-
(a) the action could be heard by VCAT under this Subdivision; and
(b)the Court has not heard any oral evidence concerning the dispute itself.
(3)This section does not apply to any matter dismissed by VCAT under section 77 of the Victorian Civil and Administrative Tribunal Act 1998.
(4)If an action is stayed under this section, any party to the action may apply to VCAT for an order with respect to the dispute on which the action was based.
(5)If a person applies to VCAT under subsection (4) VCAT must notify the Court and on such notification the Court must dismiss the action.
(6)Subsection (5) does not apply if VCAT refers the matter to the Court under section 77(3) of the Victorian Civil and Administrative Tribunal Act 1998.
I gratefully adopt the following description of s 57 of the Act recently given by Ginnane J:
Section 57 is located within Part 5 headed ‘VCAT Jurisdiction’ and Division 2 headed ‘Proceedings before VCAT’ and Subdivision 1 headed ‘Domestic building disputes’. It enables an application for a stay to be made by a party when an action has been commenced in a court ‘arising wholly or predominantly from a domestic building dispute’, that could be heard by VCAT under Subdivision 1, and the court has not heard oral evidence concerning the dispute. As indicated by the headings of the DBC Act to which I have referred, the provisions appear intended to direct ‘domestic building disputes’ to VCAT.
…
Section 53 gives VCAT broad powers in resolving ‘building disputes’, including ‘domestic building disputes’, and s 54 defines ‘domestic building disputes’.
Section 3 states ‘domestic building work means any work referred to in s 5 that is not excluded from the operation of this Act by section 6’. The words of ss 5 and 6 are clear, setting out the ‘building work’ to which the Act does and does not apply, which in turn determines the content of the definition of ‘domestic building work’ applicable to s 54.
...
The main purposes of the DBC Act are set out in s 1, namely, to regulate contracts for the carrying out of domestic building work; to provide for the resolution of domestic building disputes and other matters by VCAT; and to require builders carrying out domestic building work to be covered by insurance in relation to that work. The objects of the Act include, inter alia, to ‘enable disputes involving domestic building work to be resolved as quickly, as efficiently and as cheaply as is possible, having regard to the needs of fairness’.
As appears from the specific provisions already considered, the structure of the DBC Act is quite detailed and specific. The Act comprehensively sets out a legislative scheme intended to achieve its identified purposes and objects. Indeed, in this regard the Attorney-General referred to the relevant bill as constituting a ‘comprehensive and integrated package’.
Section 57(1) applies if a person starts any action arising wholly or predominantly from a ‘domestic building dispute’. That term is defined in s 54(1) to include a dispute or claim in relation to any design work carried out by the architect or building practitioner in respect of domestic building work. Domestic building work means any work referred to in s 5 that is not excluded from the operation of the DBC Act by s 6.[53]
[53]Radojevic v JDA Design Group Pty Ltd & Anor (No 2) [2017] VSC 796 [29]-[32], [40]-[42] (emphasis in original) (citations omitted).
I adopt the following statement of principle given by Habersberger J in Presser:
... I consider that the correct construction is that one looks at the plaintiffs’ action as a whole, including any subsequent claims against additional parties, at the time the application for a stay is made in order to decide whether the action started by the plaintiffs arose “wholly or predominantly from a domestic building dispute”.[54]
[54]Presser [39].
In Presser, Habersberger J held that once the issue regarding which contracting party was liable to the plaintiffs had been decided, “everything else will fall into place”.[55] Presser concerned defects in the plaintiffs’ parquetry flooring. Habersberger J described it as a dispute that “essentially centres on responsibility for the allegedly unworkmanlike carrying out of an item of domestic building work.”[56] Here, that is not the case. There is an employment relationship and the allegations that the first defendant has breached her obligations arising from that relationship are central to the dispute.
[55]Presser [43].
[56]Ibid [44].
Looking at the plaintiff’s action as a whole, I reject the defendants’ submission that it arose “wholly or predominantly from a domestic building dispute”. In particular, the claims against the first defendant arise wholly or predominantly from the employment relationship. I refer specifically to the claims in paragraphs 22-24 of the statement of claim filed 11 May 2021 that allege breaches of her employment contract, breach of fiduciary duties, negligence, and breach of the Corporations Act. Whilst some of the relief relates to the Act, other relief sought does not. Moreover, there is a claim that is wholly unrelated to the property being the unauthorised invoices claim. This is not a case where resolution of the wrongful invoices claim will resolve the entire proceeding.[57]
[57]Cf Presser, where resolution of a domestic building dispute would do so.
I reject the defendants’ submission that the action arises wholly or predominantly from the domestic building dispute because the largest sum itemised, namely the sum of $209,879.51, relates to the wrongful invoices claim. It is one element of a loss that has been itemised. Similarly, reliance on the 2017 letter of demand is misplaced. The letter was sent well prior to these proceedings. It relates to one category of loss claimed in these proceedings. Relief is pleaded on a number of bases here. Moreover, the test is not whether or not the largest amount of relief claimed relates to a domestic building dispute. Section 57 of the Act requires examination of how the dispute arises.
As to the claims against the second defendant: there are claims of accessorial liability pleaded here, together with a claim under the Act.
Whilst the defendants have foreshadowed making a claim against Mr Landy or the plaintiff pursuant to the Act, no such claim has been made here. As the plaintiff says, no counterclaim has been made. Moreover, there is dissonance between the defendants’ submission that such a claim will be made in this proceeding and their plea that there is no contract between the plaintiff and the second defendant. Furthermore, Mr Landy is not a party to this proceeding.
Giving the findings above, the parties’ other submissions need not to be addressed.
Conclusion
I will make orders dismissing the defendants’ application. Costs follow the event. Orders will be made that the defendants pay the plaintiff’s costs of and incidental to the application.
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