Apr Structural Steel Pty Ltd v Devco Project and Construction Management Pty Ltd
[2021] VCC 1577
•19 October 2021
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
BUILDING CASES LIST
Case No. CI-21-01908
| APR Structural Steel Pty Ltd (ACN 164 423 125) | Plaintiff |
| v | |
| Devco Project & Construction Management Pty Ltd (ACN 007 223 332) | Defendant |
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JUDGE: | Her Honour Judge Burchell | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | On the papers | |
DATE OF RULING: | 19 October 2021 | |
CASE MAY BE CITED AS: | APR Structural Steel Pty Ltd v Devco Project & Construction Management Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2021] VCC 1577 | |
RULING
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Subject:CONTRACTS
Catchwords: Building contract – payment claim – where defendant failed to issue payment schedule in response to payment claims – contractual defences – excluded amounts – reference dates – calculation of amounts due
Legislation Cited: Building and Construction Industry Security of Payment Act2002 (Vic) ss4, 9, 10A, 10B, 12, 14(2), 15, 16(2) and 48; Civil Procedure Act 2010 (Vic) ss61 and 63; County Court Civil Procedure Rules 2018 r63A.04, r63A.07 and r63A.24
Cases Cited:APR Structural Steel Pty Ltd v Devco Project & Construction Management Pty Ltd [2021] VCC 1048; Colgate-Palmolive Co v Cussons Pty Limited (1993) 46 FCR 225; IMC Aviation Solutions Pty Ltd v Altain Khuder LLC [2011] VSCA 248; BHP Billiton Olympic Dam Corporation Pty Ltd v Steuler Industriewerke GmbH (No 3) [2012] VSC 414; Aljade and MKIC v OCBC [2004] VSC 351; Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435; Protec Pacific Pty Ltd v Steuler Services GMBH & Co KG (No 2) [2015] VSCA 123; Hannover Life Re of Australasia v Colella [2014] VSCA 205; Chen v Chan [2009] VSCA 233; Boz One Pty Ltd v McLennan (No 2) [2015] VSCA 145; 3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd [2018] VCC 674; SJ Higgins v The Bays Healthcare Group Inc [2018] VCC 805; Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449; John Beever v Roads Corporation [2018] VSC 635; Best Fab Pty Ltd v Australian High Bay Installations Pty Ltd [2018] VCC 1053; Titcher v Marcelis [2015] VSC 578
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms C Jones | Level Playing Field Lawyers |
| For the Defendant | - | Piper Alderman |
HER HONOUR:
Introduction
1The plaintiff (“APR”) brought a proceeding in this Court for judgment against the defendant (“Devco”) pursuant to s16(2) of the Building and Construction Industry Security of Payment Act2002 (Vic) (“SOP Act”).
2The Court delivered judgment on the SOP application on 3 August 2021.[1] The result was that Devco succeeded in resisting the APR’s claims for payment in relation to Payment Claims 1, 2, 4, 5, 6, 11, 12 and the Shop Drawing Payment Claim (total $45,093.68 including GST), and APR succeeded only in its claims for payment in relation to Payment Claims 3 and 10 (total $7,728.59 including GST) plus interest of $1,652.04. The originating motion initially sought judgment in the sum of $52,909.17 which was revised after APR did not press payment claims 1 and 2 in its reply submissions dated 29 July 2021 (total $16,307.50). The judgment sought amounted to $36,601.67.
[1] APR Structural Steel Pty Ltd v Devco Project & Construction Management Pty Ltd [2021] VCC 1048 (“APR Structural Steel”).
3Timetabling orders were made providing for submissions to be made on the question of costs.
4Devco submits that APR should pay Devco’s costs on an indemnity basis from 26 May 2021, alternatively, from 13 July 2021.
5APR submits Devco should pay its costs on a standard basis to be taxed in default of agreement, alternatively, fixed in the amount of $15,000.00 (being 60% of its actual costs) to avoid the parties incurring further costs.
Legal Framework
6As a general rule, the court will order costs to be taxed on the standard basis.[2]
[2] County Court Civil Procedure Rules 2018 (“the Rules”) O63A and r31.
7The discretion to make a special costs order is an unlimited one, though it must be exercised judicially and not unreasonably, and the circumstances should be "special".[3]
[3] Aljade and MKIC v OCBC [2004] VSC 351 at [10].
8In Colgate-Palmolive Co v Cussons Pty Limited[4], Shepherd J set out many categories of circumstances which will warrant the making of a special costs order:
(a) the making of allegations of fraud knowing them to be false;
(b) the making of irrelevant allegations of fraud;
(c) evidence of particular misconduct that causes loss of time to the court and to other parties;
(d) the fact that the proceedings were commenced or continued for some ulterior motive or with wilful disregard of known facts or clearly established law; and
(e) the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions.
[4] (1993) 46 FCR 225 at [23]–[24].
9In the recent matter of IMC Aviation Solutions Pty Ltd v Altain Khuder LLC[5], the Court of Appeal also stated that:
Special circumstances may be found where, for instance, the unsuccessful party has made serious unfounded allegations, pursued the proceeding for an ulterior purpose, wasted the court’s time, committed a contempt of court or engaged in some other improper conduct. But in each case it is a question to be determined in the light of the particular facts and circumstances.[6]
[5] [2011] VSCA 248.
[6] Ibid at [325].
10In considering whether or not a party should have their indemnity costs, the principles that guide the court are set out in the decision of Justice Habersberger in BHP Billiton Olympic Dam Corporation Pty Ltd v Steuler Industriewerke GmbH (No 3)[7] as follows (citations omitted):
[7] [2012] VSC 414 at [59]–[67] (with reference to Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435).
First, the fact that a less favourable result is achieved does not give rise to a presumption of a special costs order. The making of an offer and its rejection are “but two albeit important circumstances” to which the Court will have regard in the exercise of its costs discretion.
Secondly, the competing policy objectives relevant to the exercise of the costs discretion are principally the desirability of promoting settlement and reducing litigation costs as against the undesirability of discouraging potential litigants from bringing their dispute to the courts.
Thirdly, the critical question is whether the rejection of the offer was unreasonable in the circumstances. As the Court of Appeal said in Hazeldene:
In our view, these competing considerations can be sufficiently accommodated by applying a test of (un)reasonableness. The critical question is whether the rejection of the offer was unreasonable in the circumstances. We see no justification for a more stringent test such as “manifestly” or “plainly” unreasonable.
Fourthly, a court considering submissions that the rejection of a Calderbank offer was unreasonable should ordinarily have regard at least to the following matters:
(a)the stage of the proceeding at which the offer was received;
(b)the time allowed for the offeree to consider the offer;
(c)the extent of the compromise offered;
(d)the offeree’s prospects of success, assessed as at the date of the offer;
(e)the clarity with which the terms of the offer were expressed; and
(f)whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it.
Fifthly, as the determination of whether it was unreasonable for the offeree to have rejected the offer is made “as at the time, or within a reasonably short time after, the offer” was made,9 the Court should not too readily embrace submissions that it was inevitable that the proceedings would fail. As Hamilton J put it in Grynberg v Muller:
These submissions focus the bright light of hindsight. Hindsight sings a siren song of which Judges must be cautious…
Sixthly, the onus lies on the offeror to demonstrate the unreasonableness of the offeree’s rejection of the offer. This means that it is necessary to analyse what was proposed.
Seventhly, there is no general rule that the Calderbank offer must set out with specificity the basis for the offeror’s contention that the offeree should accept the compromise. Whether there is a need to do so depends upon a consideration of all of the circumstances existing at the time of the offer.
Eighthly, it is not necessary for the applicant for an indemnity costs order to establish matters which might be relevant to other, well-recognised, grounds for indemnity costs. Such conduct is not a pre-requisite for a finding that the rejection of the Calderbank offer was unreasonable.
Ninthly, an “all in” offer is permitted in a Calderbank offer.
11Justice Habersberger’s decision was upheld on appeal to the Court of Appeal.[8]
[8] Protec Pacific Pty Ltd v Steuler Services GmbH & Co KG (No 2) [2015] VSCA 123 at [55]. The above principles established by Habersberger J were referred to by the Court of Appeal in Hannover Life Re of Australasia v Colella [2014] VSCA 205 at [91] without any criticism.
Costs Application
12Devco makes 3 cascading costs submissions as set out below.
13The primary ground relies on various settlement offers made to APR as follows:
14First, on 26 May 2021, Devco offered to pay APR the amount of $30,000.00 plus GST in final settlement of each of APR’s claims against Devco in relation to the Project being the claims in the proceeding plus retention interest and costs. This offer was provided to APR at 10:08am on 26 May 2021 and expressed to be open for acceptance until close of business. Devco submits that this offer was made with reference to the open letter of that date at a time when the proceedings commenced, but before Devco had filed a notice of appearance, which was due the following day on 27 May 2021. The offer was expressly rejected at 3:48pm on 26 May 2021 by email from the plaintiff’s solicitor.
15Second, on 13 July 2021, Devco offered to pay APR the amount of $40,000.00 plus GST in final settlement of each of APR’s claims against Devco in relation to the Project. Devco submits that this offer was provided to Devco on 13 July 2021 at 6:17pm and expressed to be open for acceptance until 12 noon on 16 July 2021. This offer was made after all affidavit materials and APR’s first submissions had been filed, but before Devco had filed its submissions. Devco submits that it was reasonable for APR to have accepted this offer at this time.
16Alternatively, Devco relies on r63A.04 of the County Court Civil Procedure Rules 2018 (“the Rules”) which permits the Court, in its discretion, to make an order for costs not only as to a distinct question or pleaded issue, but also to any part of the proceeding.[9] Devco contends that it substantially succeeded in successfully resisting APR’s claims (both in number of claims and in overall quantum), and it is submitted that absent of any order for APR to pay Devco’s costs, the Court should order that each party bear their own costs.
[9] Chenv Chan [2009] VSCA 233 at [10].
17Finally, Devco relies on r63A.24 of the Rules in the event that the Court is disposed to make a costs order in favour of APR. Devco says that APR is only entitled to recover any costs on the Magistrates’ Court scale of costs by reason that APR was successful in recovering less than half the jurisdictional limit of that Court.
18APR submits that costs ought to follow the event.[10] It says that the two letters relied on by Devco do not displace the usual orders.
[10] Boz One Pty Ltd v McLennan (No 2) [2015] VSCA 145 at [31], [41].
19I accept ARP’s submission that the two letters dated 26 May 2021 and 13 July 2021 do not satisfy the criteria for valid settlement offers as they are not expressed to be Calderbank offers.
20Further, in my view, the rejection of the offers was not unreasonable in circumstances where:
(a) the 26 May 2021 letter was open for acceptance until close of business that day;
(b) the 13 July 2021 letter was open for acceptance for less than 36 hours — having been sent under cover of an email of 6:17pm on 13 July 2021 and expressed to be open until 12:00pm on 16 July 2021;
(c) the terms of the letters were vague and uncertain as they were said to include all amounts owing under the construction contract which extended beyond the payment claims sought in the proceeding;
(d) the reasons provided for justifying the offers were different to the Court’s judgment; and
(e) the 26 May 2021 letter was provided before APR had the benefit of Devco’s affidavits and submissions.
21APR was successful in satisfying the preconditions to judgment under s16(2) of the SOP Act in relation to payment claims 3 and 10; however, the remaining payment claims have not been issued by the 25th day of the month. Devco did not challenge the payment claims on this basis. They relied on factors that were rejected by the Court being:
(a) payment claims 1, 2, 3, 4 and the shop drawings payment claim were invalid on the basis that they included works performed after reference dates arose, however, payment claims can include works referable to future work under the SOP Act (at [83]); and
(b) payment claims 5, 6, 10, 11 and 12 were invalid on the basis that they included excluded amounts, however, payment claims 5, 10, 11 and 12 did not include excluded amounts (at [65]).
22Devco’s argument that the payment claims were invalid on the basis that they were not supported by statutory declarations was also rejected by the Court.[11]
[11] APR Structural Steel at [63].
23The ordinary rule is that costs are awarded on a standard basis and the Court should not make an order for costs on another basis unless the circumstances justify departure from the usual course. For the reasons set out above, there are no special circumstances in the present case.
Low Value SOP claims
24This Court has endorsed the hearing of applications under the SOP Act on a summary basis by summons on originating motion with affidavit evidence.[12] Such claims are properly assessed on the balance of probabilities,[13] with the quality of the evidence weighed having regard to the fact that the legislation seeks to facilitate a swift but temporary remedy.[14] Occasionally, a plaintiff nevertheless applies for relief under s16 of the SOP Act by bringing a proceeding commenced by writ and statement of claim, then issuing a summons seeking summary judgment pursuant to s61 of the Civil Procedure Act 2010 (Vic) (“the CPA”).[15] This can add an additional layer of complexity in determining the test to be applied to any defences raised.[16]
[12] 3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd [2018] VCC 674 at [39]–[54]. See also SJ Higgins v The Bays Healthcare Group Inc [2018] VCC 805 at [26].
[13] Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449, 449–450 (Mason CJ, Brennan, Deane and Gaudron JJ).
[14] 3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd [2018] VCC 674 at [51]–[54].
[15] John Beever v Roads Corporation [2018] VSC 635; see also Best Fab Pty Ltd v Australian High Bay Installations Pty Ltd [2018] VCC 1053.
[16] SJ Higgins v The Bays Healthcare Group Inc [2018] VCC 805 at [31].
25Devco submits that APR should only be entitled to recover any costs on the Magistrates’ Court scale of costs by reason that it was only successful in recovering less than half the jurisdictional limit of that Court.
26In my view, the application of r63A.24 of the Rules is not applicable in the present proceeding as parties should not be deterred from initiating a SOP application in the Building Cases List of the County Court for amounts under $50,000.00. This is because the Magistrates Court:
(a) does not allow for issuing proceedings by originating motion so the parties are unable to take advantage of the summary procedure adopted in this Court with a truncated process for determining SOP applications and a less complex test required to enter judgment;
(b) requires the issuing of a complaint which would necessitate a default judgment application if the defendant fails to file a notice of appearance or defence – otherwise the plaintiff must file a summary judgment application by summons which then imposes the higher standard under s63 of the CPA; and
(c) does not have a specialist building and property list so the matters can be heard and determined faster in this Court and before a Commercial Judge (consistent with the SOP Act objectives).
27This Court is currently in the process of revising its Building Cases List practice notes for the new legal year which will seek to clarify that, generally, there will not be any costs consequences under r63A.24 of the Rules if parties issue security of payment applications in the County Court if they seek to recover less than half the jurisdictional limit of the Magistrates Court for the reasons set out above.
28The proposed practice note will seek to build in ways of limiting or fixing costs for those under $50,000.00 with a truncated process for determining them (eg, on the papers, page limited written submissions, and with provision of very brief pro-forma reasons).
Conclusion
29APR seeks to fix its costs in the sum of $15,000.00 to avoid the further expense of taxation. Justice Riordan in Titcher v Marcelis[17] made observations regarding the desirability of fixing fees to avoid the inconvenience and expense of taxation.
[17] [2015] VSC 578 at [12].
30Given that the amount claimed by APR is modest, in my view, it is in the interests of the administration of justice and the just, efficient, timely and cost effective resolution of the issues in dispute to have costs fixed than subject to taxation. The Court will fix APR’s costs in the sum of $15,000.00 under r63A.07 of the Rules, representing 60% of the actual costs incurred by APR, to avoid the inconvenience and expense of having costs formally taxed.
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Certificate
I certify that these 9 pages are a true copy of the amended ruling of her Honour Judge Burchell delivered on 21 October 2021.
Dated: 21 October 2021
Andrea Ko
Associate to Her Honour Judge Burchell
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