Babicka v ASD Corporation Australia Pty Ltd (No 2)
[2024] VSC 751
•5 December 2024
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
TECHNOLOGY, ENGINEERING AND CONSTRUCTION LIST
S ECI 2023 06161
| ALOID BABICKA AS TRUSTEE FOR ALOIS BABICKA FIRST TESTAMENTARY TRUST | Plaintiff |
| v | |
| ASD CORPORATION AUSTRALIA PTY LTD (ACN 167 889 992) | First Defendant |
| and | |
| WILLIAM TIMOTHY SULLIVAN | Second Defendant |
S ECI 2023 06162
| NADIA ANNE MARIE BABICKA | Plaintiff |
| v | |
| ASD CORPORATION AUSTRALIA PTY LTD (ACN 167 889 992) | First Defendant |
| and | |
| WILLIAM TIMOTHY SULLIVAN | Second Defendant |
S ECI 2024 00299
| MAZS INVESTMENT GROUP PTY LTD ATF M & A FAMILY TRUST (ABN 843 476 589 34) | Plaintiff |
| v | |
| ASD CORPORATION AUSTRALIA PTY LTD (ACN 167 889 992) | First Defendant |
| and | |
| WILLIAM TIMOTHY SULLIVAN | Second Defendant |
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JUDGE: | GARDE J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
DATE OF JUDGMENT: | 5 December 2024 |
CASE MAY BE CITED AS: | Babicka v ASD Corporation Australia Pty Ltd & Anor (No 2) |
MEDIUM NEUTRAL CITATION: | [2024] VSC 751 |
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BUILDING CONTRACTS – Adjudication – Judicial review – Setting aside judgments and orders of the County Court – Award of costs – Indemnity certificate – Building and Construction Industry Security of Payment Act 2002 (Vic) s 28R(5); Appeal Costs Act 1998 (Vic) s 4(1)(a); Norwood Ponds Operations v Merrion (4) Pty Ltd [2020] VSC 77 (Digby J) and Radman v Open Plan [2020] VSC 318 (Digby J) followed.
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HIS HONOUR:
Introduction
On 23 September 2024, I handed down reasons for decision in these proceedings.[1] I held that orders in the nature of certiorari should be made under O 56 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘Rules’) setting aside and quashing the determinations of the second defendant (‘the adjudicator’) under building contracts relating to land at 105 Newlands Road, Coburg North.
[1]Babicka v ASD Corporation Aust Pty Ltd & Anor [2024] VSC 587 (‘reasons’).
On the same day, I ordered that the adjudication determinations be set aside and quashed.
On 28 October 2024, the County Court of Victoria was added as a party to each proceeding. On 7 November 2024, Alison Edwards, Manager Law Reform and Policy of the County Court, wrote to the Prothonotary of the Supreme Court advising that the County Court would not take an active role save for any costs order being considered against it and would abide by the decision of the Supreme Court. The submission was consistent with the principles accepted by the High Court of Australia in R v Australian Broadcasting Tribunal; Ex parte Hardiman.[2] The builder and the owners were given additional time to make final submissions. The parties are in dispute about the status of an email sent by the builder’s solicitors dated 1 October 2024 and marked ‘without prejudice, save as to costs’. However nothing turns on this.
[2](1980) 144 CLR 13, 35-36 (Gibbs, Stephen, Mason, Aickin and Wilson JJ).
The County Court judgments
In written submissions and correspondence the first defendant, ASD Corporation Australia Pty Ltd (ACN 167 889 992) (‘the builder’) submits that the County Court judgments made on 13 December 2023 in each proceeding should not be set aside and quashed.
In the reasons, I observed that the County Court should have been named as a defendant in each proceeding as required by r 56.01(2) and (3) of the Rules.[3] I also observed that it was plain that if the adjudicator’s determinations were quashed no legal basis existed for the orders made by the County Court.
[3]Reasons [136].
The builder now contends that there is no utility in setting aside the judgments as they have merged into the sums paid into Court. As a result, the builder says that the Court is functus officio and that there is no reason to set aside the judgments which have been executed. The builder also seeks to rely by analogy on the decision of the High Court of Australia in Wingfoot Australia Partners Pty Ltd v Kocak .[4]
[4](2013) 252 CLR 480, [67] (French CJ, Crennan, Bell, Gageler and Keane JJ) (‘Wingfoot’).
I reject these contentions for the following reasons.
The governing provision is s 28R(5) of the Building and Construction Industry Security of Payment Act 2002 (Vic) (‘Act’) which provides:
If a person commences proceedings to have the judgment set aside, that person
…
(b)is required to pay into the court as security the unpaid portion of the amount payable under section 28M or 28N pending the final determination of those proceedings.
Section 28R(5)(b) requires that persons in the position of the owners in this case pay into court as security the unpaid amount payable by them under the adjudicator’s determination. This was done by the owners in compliance with an undertaking given in each proceeding under an order made by Stynes J on 8 March 2024. Subsequently, on 23 September 2024, I ordered that the monies paid into Court by the owners and accrued interest be paid to the owners’ solicitors subject to the retention of an amount sufficient to cover any taxation liability.
In Norwood Ponds Operations v Merrion (4) Pty Ltd, Digby J described the nature of the power in s 28R(5)(b) in these terms:
It is common place in this jurisdiction, in New South Wales and elsewhere in Australia in relation to their respective security for payment legislation, that a plaintiff which disputes an Adjudication Determination by instigating a challenge to that Adjudication Determination by way of judicial review, is ordered to pay the adjudicated sum in dispute into Court pending the outcome of that review.
Usually such security by way of payment into Court is effected by initial orders in proceedings such as these. Such orders are commonly in the nature of consent orders sought by the active parties in the judicial review.
In that regard the provision of such security is analogous to the statutory requirement of s 28(5)(b) of the SoP Act which mandates payment into Court of the unpaid portion of any amount of a judgment entered in respect of an Adjudication Certificate as security pending the outcome of a challenge to such judgment in relation to an unpaid Adjudication Determination. [5]
[5][2020] VSC 77, [16]-[18].
I agree with Digby J. The purpose of s 28R(5)(b) is to require a person who commences proceedings to set aside a judgment entered under s 28R(3) of the Act to put up as security the unpaid portion of the amount determined by the adjudicator to be payable. Section 28R(5)(b) imposes this requirement as a condition of the right to challenge the adjudication in the Court. Section 28R(5)(b) does not purport to discharge a judgment previously entered by a court and contains no language to that effect. In the event that the challenge to an adjudication determination is successful, the security will most likely be ordered to be returned to the owners or principals (as here) as the successful party in the litigation. The builder will not receive this money.
The statutory procedure in s 28R(5) is not intended to, and does not have the effect of quashing the judgment or discharging the judgment debt. Nor is there any other provision of the Act which suggests that the mere payment by the owner or principal of security into court will have the effect of discharging the judgment debt.
The position is different if the challenge to the adjudication determination fails and the security is paid to the builder. Payment of the moneys in court to the builder will operate as a payment or part-payment of the judgment debt or interest accruing on the judgment debt.
The position in Wingfoot is very different. In Wingfoot, the High Court held that the opinion of a medical panel under s 68(4) of the Accident Compensation Act 1985 (Vic) was spent when the statutory compensation application to which it related was concluded. It did not create an issue estoppel for the purposes of a serious injury application and had no continuing consequences. One reason why certiorari was unavailable was because the opinion of the medical panel had no continuing legal effect.
The present case is clearly distinguishable from Wingfoot. Here, there is a subsisting judgment debt in each proceeding.[6] The judgments and orders obtained from the County Court are final and conclusive and bear penalty interest.[7] Warrants of execution can be issued in the County Court to enforce judgments and property can be seized by the bailiff.[8]
[6]County Court Act 1958 (Vic) s 73(1) (‘CC Act’).
[7]CC Act s 73(4).
[8]CC Act s 84.
It is plain that the judgments in the County Court against the owners must be quashed if full and proper relief is to be given to the owners. The County Court judgments remain unexecuted and will continue to be operative until they are quashed. The Court is not functus officio. It is appropriate that orders be made to set aside and quash the judgments. This gives finality and certainty to the parties and the County Court.
Costs submissions
The owners and the builders filed written submissions as to costs. No party sought any order for costs against the adjudicator or the County Court.
The owners submitted in their costs submission filed 8 October 2024 that the Court should make an order that the builder pay the costs of each proceeding on the standard basis for the following main reasons:
(a) a successful party should obtain all the costs of the proceeding even if it failed to establish some of the alternative heads of claim;
(b) while the owners achieved mixed success, the issues were intertwined and relevant to the single ground of review before the Court;
(c) the owners did not seek distinct remedies for each issue. The remedy sought by the owner was granted;
(d) the owners achieved success on the critical legal and factual issues before the Court; and
(e) the order sought by the owners is simple and would avoid the messy and costly exercise of isolating and assessing costs ascribed with each issue.
In response, the builder submitted:
(a) at the trial, the owner pressed arguments on four issues. None of the issues were raised during the adjudications;
(b) the owners were successful on two of the issues – one of these was first introduced by the owners on 1 July 2024, whilst the other was first introduced on 22 May 2024; and
(c) only two to three hours of a one and a half day trial were dedicated to these issues.
The builder submitted that the Court should make costs orders to the effect that:
(a) the owners pay the builder’s costs up to 1 July 2024;
(b) the builder pay the owners’ costs from 1 July 2024 until the first day of trial; and
(c) there be no order as to the costs of the trial.
Alternatively, the builder submitted that there be no order as to costs or that any costs order in favour of the owners be limited to the owners’ costs on and from 1 July 2024 when the first issue on which they were successful was raised up to the first day of trial and for 50% of their costs on and from the first day of trial on a standard basis.
In costs submissions in reply, the owners submitted that:
(a) there was no substantial failure of the owners’ factual and legal claims – the plaintiffs were successful on two issues and failed on two issues;
(b) while the owners introduced one issue by way of an amended outline of completion of the ‘Structure Stage’ and ‘Lock Up Stage’ the issue had been addressed as a matter of fact by the parties’ experts in their respective reports;
(c) the second issue on which the owners were successful was first agitated by the builder in its written submissions filed 17 June 2024 causing the owners to respond in reply submissions dated 1 July 2024; and
(d) the issues are so intertwined that it would be a messy and costly exercise to seek to isolate them for the purposes of the assessment of costs.
Costs decision
The relevant principles as to costs are well known. The court has a broad discretionary power to make orders as to costs.[9] The court’s discretion is unfettered but is exercised judicially upon facts connected with the litigation and not by reference to irrelevant or extraneous considerations.[10] Although costs are in the discretion of the court the ordinary rule is that, in the absence of sound reasons to the contrary, a successful litigant should receive his or her costs.[11] The purpose of an order for costs is to compensate the successful party and not to punish the unsuccessful party.[12]
[9]Supreme Court Act 1986 (Vic) s 24(1); Civil Procedure Act 2010 (Vic) s 65C; Supreme Court (General Civil Procedure) Rules 2015 (Vic) O 63.
[10]Latoudis v Casey (1990) 170 CLR 534, 557 [26] (Dawson J) (‘Latoudis’); Oshlack v Richmond River Council (1998) 193 CLR 72, 86 [34] (Gaudron and Gummow JJ).
[11]Milne v Attorney-General for the State of Tasmania (1956) 95 CLR 460, 477 (Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ).
[12]Latoudis, 562-563 (Toohey J), 567 (McHugh J).
It is well established that a successful party may be deprived of costs on issues on which they failed and may even be ordered to pay the costs of the other party on such issues.[13] The exercise of the court’s discretion as to costs has been described as ‘often more a matter of art than science’[14] and that ‘mathematical precision is illusory’[15]
[13]McFadzean v Construction Forestry Mining and Energy Union (2007) 20 VR 250 [154], [157] (Warren CJ, Nettle and Redlich JJA).
[14]Mickelberg v State of Western Australia [2007] WASC 140, [46] (Newnes J)
[15]Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) & Anor v Lane Industries Pty Ltd & Ors (1993) 26 IPR 261, 272 (Gummow, French, Hill JJ).
There were four issues in the proceeding. They were:
(a) Issue 1: Whether light gauge steel framing forming the office space and the mezzanine formed part of the Structure Stage;
(b) Issue 2: Whether internal walls forming the office space and roof hatches formed part of the Lock Up Stage;
(c) Issue 3: Whether the building surveyor approved the structural steel frame and concrete panel works; and
(d) Issue 4: Whether Structure Stage was required to be completed for Lock Up Stage to be reached.
The builder was successful on the first two issues and the owners on the last two issues. The owners were the successful parties overall. However, in my view there is good reason why some deduction should be made from the costs awarded to the owners:
(a) First, the issues and arguments on which the owners were successful were not put to the adjudicator. They were raised only in the present proceedings;
(b) Secondly, the issues and arguments on which the owners were successful were not initially raised in the present proceedings. They were introduced through amendments to the owners’ submissions prior to the trial;
(c) Thirdly, the issues on which the owners were unsuccessful included most of the matters on which evidence was given and occupied a substantial amount of hearing time; and
(d) Fourthly, the issues are not so intertwined as to preclude a deduction for these matters.
Doing the best that I can, and endeavouring to keep the taxation of costs as simple as possible, it is appropriate to award the owners 70% of their costs of each proceeding. This is fair and just in my view. Costs will be awarded at the standard rate. No party suggested otherwise.
Indemnity certificate
The builder applied for the grant of an indemnity certificate under s 4(1)(a) of the Appeal Costs Act 1998 (Vic) (‘AC Act’). The issue of whether an indemnity certificate is available for a proceeding of this character was comprehensively considered by Digby J in Radman v Open Plan.[16]
[16][2020] VSC 318 (‘Radman’).
I accept his Honour’s conclusions that:
(a) an application for judicial review is on ‘appeal, or a proceeding in the nature of an appeal;[17]
(b) the adjudicator to whom the authorised nominating authority refers an adjudication application is a ‘court’ within the meaning of s 3 of the AC act; and
(c) there is jurisdiction to grant an indemnity certificate under s 4(1)(a) of the AC Act.[18]
[17]Radman [40].
[18]See also Punton’s Shoes v Citi-Con [2020] VSC 514, [146] (Digby J); Golets – see Radman [13], [37] (Vickery J); Walton Construction (Qld) v Plumber by Trade (No 2) [2012] QSC 280, [30] (Margaret Wilson J).
I also accept the builder’s submission that there are no relevant discretionary factors in the present circumstances against granting an indemnity certificate, and will grant an indemnity certificate.
Conclusion
I make orders in each proceeding to the effect that:
(a) the order of the County Court relating to each proceeding be set aside and quashed;
(b) the owners’ costs of each proceeding are to be taxed by the Costs Court at the standard rate and when taxed paid as to 70% by the builder; and
(c) an indemnity certificate under s 4(1)(a) of the AC Act is granted in relation to each proceeding.
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