Caruso v Built It Pty Ltd (in Liq) (No 3) - [2019] SASC 147

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
CARUSO v BUILT IT PTY LTD (IN LIQ) (No 3)
[2019] SASC 147
Reasons for Decision of The Honourable Justice Parker
19 August 2019
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COURT SUPERVISION - AMENDMENT
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - PLEADINGS - STRIKING OUT - OTHERWISE ABUSE OF PROCESS
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - JUDGMENTS AND ORDERS - AMENDING, VARYING AND SETTING ASIDE JUDGMENTS AND ORDERS - ACTIONS TO REVIEW OR SET ASIDE JUDGMENT OR ORDER - WHERE FRAUD, MISREPRESENTATION OR SUPPRESSION OF MATERIAL FACTS
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - REMUNERATION - RECOVERY ON QUANTUM MERUIT
Two interlocutory applications concerning an amended notice of appeal filed on 29 July 2019 came before this Court. The appellant applied for leave to appeal in the terms of the amended notice of appeal, while the respondent applied for the amended notice of appeal to be struck out as an abuse of process.
The amended notice of appeal was filed following an earlier judgment of 22 July 2019 where, save for one exception in respect of the award of costs, the appellant was refused leave to appeal under s 471B of the Corporations Act 2001 (Cth) and permission under r 288(1)(b) of the Supreme Court Civil Rules 2006 (SA). The majority of the amended grounds of appeal extend beyond the limited scope of leave and permission granted to the appellant. To a large degree those grounds effectively repeat contentions advanced by the appellant at earlier stages in this proceeding.
The appellant seeks to justify this approach by referring to adverse findings recently made against the director of the respondent by the District Court in Commissioner for Consumer Affairs v Built It Pty Ltd [2019] SADC 66.
Held, per Parker J, dismissing the appellant’s application and upholding the respondent’s application:
1. From the time that the appeal was adjourned for argument, under r 294(2) of the Supreme Court Civil Rules, the appellant required the permission of the Court to amend the notice of appeal (at [18]).
2. Amended grounds 1 to 3 and 5 to 7 extend beyond the scope of leave and permission granted to the appellant. The appellant cannot pursue those grounds unless the Court grants leave under s 471B and permission under r 288(1)(b) and r 294(2) (at [19]).
3. Although the appellant has pursued this interlocutory application on the ostensible basis that he is seeking to revise the grounds of appeal, the practical effect of the application is to seek to re-open matters already decided against him and which are the subject of adverse orders made by the Court (at [13], [20]).
4. Section 6(2) of the Building Work Contractors Act 1995 (SA) does not preclude an unlicensed builder from recovering on a quantum meruit basis in a case where the building owner has accepted the benefit of the work performed (at [38]-[43]).
5. There is no proper basis for the appellant’s contention that the award of costs in favour of the respondent amounts to rewarding it for fraud (at [27]-[46]).
Supreme Court Civil Rules 2006 (SA) rr 117, 288, 294; Magistrates Court (Civil) Rules 2013 (SA) r 104; Corporations Act 2001 (Cth) s 471B; Building Work Contractors Act 1995 (SA) s 6; Builders Licensing Act 1986 (SA) s 39, referred to.
Nunkuwarrin Yunti v AL Seeley Constructions Pty Ltd (1998) 72 SASR 21; DG Australia Pty Ltd v Alexander [2003] SASC 176; Stankovic v Aufderheide [2003] SASC 378, applied.
Caruso v Built It Pty Ltd (in liq) [2018] SASC 71; Caruso v Built It Pty Ltd (in liq) (No 2) [2019] SASC 125; Commissioner for Consumer Affairs v Built It Pty Ltd [2019] SADC 66; Fox v Percy (2003) 214 CLR 118; Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221, considered.

CARUSO v BUILT IT PTY LTD (IN LIQ) (No 3)
[2019] SASC 147

PARKER J: On 12 August 2019, interlocutory applications filed by the appellant and the respondent (Built It Pty Ltd) and each dated 8 August 2019 came before the Court. Both applications concern an amended notice of appeal filed on 29 July 2019.
Following submissions, I refused to grant the appellant permission to amend the notice of appeal, save in respect of amended ground 4. That order was made for the reasons that follow.
So as to avoid any uncertainty as to the disposition of the two interlocutory applications and the amended notice of appeal, I also now make further orders in the terms set out at paragraph [54].
Background
On 22 July 2019, I delivered judgment in respect of an interlocutory application concerning the listing of this appeal.[1] In that judgment, I summarised the history of these proceedings as follows:[2]
[1] Caruso v Built It Pty Ltd (in liq) (No 2) [2019] SASC 125.
[2] Ibid at [3]-[11] (Parker J).
On 1 October 2014, the respondent commenced proceedings against the appellant in the Magistrates Court for moneys payable for building work that it undertook between about May 2013 and March 2014. On 14 September 2017, a Magistrate awarded judgment against the appellant in the amount of $33,938.50 “plus interest and costs to be agreed or taxed”. The Magistrate did not specify at that time the basis upon which costs were to be determined. In the absence of any contrary indication, it must be understood that costs were awarded on a party/party basis.
On 5 October 2017, the appellant appealed against the order that he was liable to pay $33,938.50 to the respondent. It is this appeal which is the subject of the present interlocutory application.
On 21 November 2017, the respondent applied for the award of costs and interest on either a contractual indemnity basis in the sum of $121,528.63 or an indemnity basis. The costs claimed at that time comprised solicitor fees in the sum of $61,278.80, counsel fees totalling $30,800 and court fees of $292.
On 22 November 2017, the Federal Court of Australia made an order for the winding up of the respondent.
…
On 5 May 2018 the appellant filed a reply to the respondent’s application for costs, advancing the position that costs should be awarded on a party/party basis. The delay of almost six months has not been explained.
On 27 April 2018, the appellant filed an interlocutory application under s 471B of the Corporations Act, seeking leave to bring an application to set aside the Magistrate’s judgment under r 104 of the Magistrates Court (Civil) Rules 2013 (SA). The application was heard by Doyle J, who dismissed the application on 1 June 2019. His Honour found that the proposed application under r 104, which requires proof that judgment was obtained through fraud or an irregularity, did not have a solid foundation in fact or law. The appellant did not at that time seek leave under s 471B to continue with the appeal against the decision of the Magistrate.
The appellant has not sought to appeal the dismissal by Doyle J of his application to set aside the Magistrate’s judgment.
On 30 November 2018, the Magistrate made orders concerning costs, interest and related matters. His Honour awarded the respondent costs on a party/party basis up until the close of the second day of the trial and costs on a solicitor/client basis from the commencement of the third day of the trial onward. The Magistrate also awarded interest at the rate of 2% per month (the rate specified in the building contract) until 1 October 2014, being the date of commencement of the claim and thereafter at the standard Court rate of 10% per annum until the date of judgment. The Magistrate also ordered that the terms of a lien should be amended and that the suspension of a warrant for sale be lifted. The final sealed minutes of order were not issued by the Magistrates Court until 9 January 2019.
(Footnotes omitted)
As originally formulated, the appeal challenged the decision of the Magistrate to award judgment against the appellant on 14 September 2017. The appellant has unequivocally stated that he no longer seeks to challenge that judgment. The appeal as now formulated is restricted to an attack upon the subsequent decision of the Magistrate published on 30 November 2018 concerning the award of costs.
On 30 November 2018, the Magistrate awarded the respondent costs on a party/party basis up until the close of the second day of the trial, and costs on a solicitor/client basis from the commencement of the third day of the trial onward. The Magistrate did not expressly address in his published reasons the award of costs in respect of the argument about costs and interest. In the absence of any contrary order, because the Magistrate’s order for costs on a solicitor/client basis was expressed to operate from the third day of trial, it also covered the costs incurred in respect of the costs and interest argument even though that argument occurred more than one year after the conclusion of the trial. While it cannot be determined from the Magistrate’s published reasons whether that result was intended, the parties both accept that this was the effect of the costs order made by his Honour.
The grounds of appeal advanced by the appellant have gone through several iterations. In my judgment of 22 July 2019, I held that only one aspect of one of the numerous grounds of appeal then advanced by the appellant was reasonably arguable. That was revised ground 12 in a handwritten document described as “revised grounds of appeal” produced to the Court on 1 May 2019.[3] Revised ground 12 was expressed as follows:
The Court
…
12.erred in law and on the facts in awarding the Plaintiff special costs and solicitor/client costs from the conclusion of the 2nd days hearing to the end of the matter where the defendant had been substantially successful on the indemnity costs and rate of interest arguments.
[3] Save for revised ground 12, all of the grounds advanced by the appellant challenged the decision of the Magistrates Court on 14 September 2017 to award judgment against the appellant. Revised ground 12 instead challenged the Magistrates Court’s subsequent decision as to costs on 30 November 2018.
I concluded in my judgment published on 22 July 2019 that the appellant required the leave of the Court under s 471B of the Corporations Act 2001 (Cth) to proceed with the appeal.[4] In the absence of leave, the appeal is automatically stayed by the operation of s 471B. In so far as the appeal concerned the award of costs, the appellant also required permission under r 288(1)(b) of the Supreme Court Civil Rules 2006 (SA).[5]
[4] Caruso v Built It Pty Ltd (in liq) (No 2) [2019] SASC 125 at [58] (Parker J).
[5] Ibid at [104]-[105] (Parker J).
I granted leave under s 471B of the Corporations Act and permission under r 288(1)(b) of the Supreme Court Civil Rules to appeal only on revised ground 12, in so far it refers to the principle to be applied in assessing the costs of the argument in the Magistrates Court about the award of costs and interest. In other words, the appeal was limited to the question of whether the costs of the argument about costs should have been awarded on a solicitor/client or party/party basis. It is important that I did not hold that revised ground 12 was reasonably arguable in so far as it sought to challenge the basis upon which the costs of the trial had been awarded by the Magistrate. I granted the appellant leave to file an amended notice of appeal consistent with my judgment.[6]
[6] Ibid at [102]-[120] (Parker J).
On 29 July 2019, the appellant filed an amended notice of appeal in which he advanced the following seven amended grounds of appeal:
(1)On account of the plaintiff through its director trading unlawfully and being the alter ego of that director as set out in the decision of Commissioner for Consumer Affairs v Built It P/L and Zollo [2019] SADC 66 (24 May 2019) and the deliberate, wilful and contemptuous nature of that conduct and the attempts by its director to excuse that conduct and his refusal to acknowledge his wrong doing there should be no order for costs in its favour.
(2)On account of the plaintiff’s refusal and failure to comply with the terms of the contract as to resolution of disputes by mediation and arbitration it should not be entitled to an order for costs or its entitlement to costs should be reduced below what it would otherwise be entitled to for party party costs as assessed in accordance with the court’s rules.
(3)The defendant had an arguable defence to the plaintiff’s claim and there was no event in the circumstances of the matter that justified the making of any order for special costs in favour of the plaintiff.
(4)The plaintiff has been awarded special costs in respect of the special costs argument being a discrete matter in which the defendant was substantially successful.
(5)The likely quantum of the plaintiff’s costs as formulated or otherwise is disproportional to the amount of its claim.
(6)The likely quantum of the plaintiff’s costs as formulated or otherwise is manifestly excessive in all the circumstances of the matter and having regard to the prescribed objectives of the primary court as set out in its rules.
(7)The effect of the term “costs on a solicitor client basis” is unknown there being no scale against which that term is to apply.
The appellant sought to advance these amended grounds of appeal at the hearing on 12 August 2019.
The interlocutory applications
Prior to the hearing of the appeal, on 8 August 2019 the appellant filed an interlocutory application, seeking “[l]eave to the extent that is necessary to appeal in terms of his amended notice of appeal filed 28 July 2019.”[7]
[7] The amended notice of appeal was in fact filed on 29 July 2019, not 28 July 2019.
While the appellant has pursued this interlocutory application on the ostensible basis that he is seeking permission to revise the grounds of appeal, the practical effect of the application is that he seeks to set aside the interlocutory judgment of 22 July 2019 where, save for one exception, I refused the appellant leave to appeal under s 471B of the Corporations Act. Subject to that same exception, I also refused the appellant permission to appeal under r 288(1)(b) of the Supreme Court Civil Rules.[8]
[8] Caruso v Built It Pty Ltd (in liq) (No 2) [2019] SASC 125 at [35]-[58] (Parker J).
Also on 8 August 2019, the respondent filed an interlocutory application, seeking “[t]hat the Amended Notice of Appeal of the appellant dated 26 July 2019[9] be struck out as an abuse of process of the Court”.
[9] The appellant erroneously recorded 26 July 2019 on the front sheet of the amended notice of appeal as the date of filing. In fact, as noted previously, the amended notice of appeal was not filed until 29 July 2019.
It was these two interlocutory applications which came before the Court on 12 August 2019.
Consideration
Consideration — leave to appeal in the terms of the amended notice of appeal
In my judgment published on 22 July 2019, I examined the merits of a challenge to the overall decision of the Magistrates Court as to costs, and concluded that it was not reasonably arguable that the Magistrate erred in respect of the award of the costs of the trial and interest. My reasoning was as follows:[10]
[10] Caruso v Built It Pty Ltd (in liq) (No 2) [2019] SASC 125 at [106]-[115] (Parker J).
Revised ground 12 contends that the Magistrate erred in law and fact in awarding the respondent costs on a solicitor/client basis from the end of day 2 of the trial although the defendant had been substantially successful on the indemnity costs and rate of interest arguments.
The Magistrate noted that the power of a court to award costs is absolute and unfettered but must be exercised judicially. Ordinarily, costs are awarded on a party/party basis, but that principle may be departed from where there is some special or unusual feature. His Honour noted that it may be appropriate to consider awarding costs on a solicitor/client or indemnity basis where an action has been commenced, or continued, in circumstances where the applicant, properly advised, should have known that he had no chance of success.
Against the background of those principles, the Magistrate considered the conduct of the appellant in the course of the litigation. In particular, his Honour referred to the mounting of the defence that the contract had been amended to refer to a tiled roof, the decision to refer to a multitude of documents and to advance ambiguous submissions which did not clarify any of the issues in dispute and the failure to prove numerous causes of action pleaded as part of the counterclaim.
In this light, the Magistrate determined that it was appropriate to depart from the ordinary costs rule. However, his Honour declined to award costs on a solicitor/client basis for the entirety of the claim. His Honour explained that decision by stating that he was mindful of the significant discrepancy between the judgment sum and the amount of costs claimed and also took into account that the respondent did not participate in the conciliation conference and some other unspecified matters referred to by the appellant. His Honour also rejected the respondent’s claim for indemnity costs pursuant to the contract.
The Magistrate stated that, as the trial progressed, it should have been clear to the appellant and his legal advisers that the likelihood of success was exponentially reducing. His Honour stated that the approach he was adopting expressed “the court’s disapproval of the defendant’s bloody minded approach to an unreasonable case.”
As previously noted, the Magistrate ordered that the respondent was entitled to all costs up until the end of the second day of the trial on a party/party basis and thereafter on a solicitor/client basis. The Magistrate awarded interest at the contractual rate of 2% per month until 1 October 2014, being the date on which the claim commenced, and thereafter at the standard Court rate of 10% per annum until the date of judgment.
The appellant asserts in his written submissions that it was successful on the costs and interest argument. That assertion goes beyond revised ground 12 which only asserts substantial success. It is the case that the costs claimed by the respondent have substantially reduced, primarily because it failed in its claim for contractual indemnity costs and only partly succeeded in its claim for interest at the contractual rate. However, the appellant failed in its claim that costs for the entirety of the proceedings should be on a party/party basis. Thus, both parties had mixed success.
An appeal court will only intervene in relation to a costs order where a clear error has been identified or the exercise of the discretion is unreasonable or unjust. For permission to appeal to be granted against a costs order there usually needs to be an important question of principle that requires resolution as opposed to the application of a settled principle to particular facts.
I do not consider it to be reasonably arguable that there is a clear error in the Magistrate’s decision with respect to costs, nor do I consider it reasonably arguable that the exercise of his Honour’s discretion was unreasonable or unjust. His Honour correctly stated the relevant principles and carefully applied those principles to the facts. Given the findings of fact made by the Magistrate and the concerns he expressed about the approach taken by the appellant to the proceedings, it might well be thought that his Honour was merciful in only deciding to award costs on a solicitor/client basis from the end of the second day of the trial.
I also do not consider it reasonably arguable that the Magistrate erred in respect of the award of interest. His Honour provided a cogent and logical explanation for his decisions in respect of interest and I cannot detect any arguable error. The fact that the appellant may be dissatisfied is not, of itself, a basis to grant permission to appeal.
(Footnotes omitted)

Notwithstanding the specific restriction of the leave granted under s 471B and permission given under r 288(1)(b) to the issue of the award of costs in respect of the argument about costs, amended appeal grounds 1 to 3 and 5 to 7 advanced by the appellant purport to challenge the Magistrate’s award of costs in relation to the trial. The appellant concedes, as he must, that the amended grounds go beyond the limited scope of the leave and permission that I had granted.
Rule 294(2) of the Supreme Court Civil Rules relevantly provides that “[a]fter the appeal has been set down for hearing an appeal notice may be amended only by permission of the Court.” Upon delivering judgment in respect of the appellant’s earlier interlocutory application, I ordered that the appeal be adjourned for argument on 1 August 2019.[11] From the time of that order onward, under r 294(2), the appellant required the permission of the Court to amend the notice of appeal.
[11] The hearing of the appeal was later administratively adjourned to 12 August 2019 due to the availability of counsel.
Although I had granted the appellant leave and permission to file an amended notice of appeal, the amended notice of appeal was required to be consistent in all relevant respects with both my orders and the Supreme Court Civil Rules. It is quite clear that amended grounds 1 to 3 and 5 to 7 extend beyond the scope of the leave and permission granted to the appellant. He cannot pursue those grounds unless the Court grants leave under s 471B and permission under r 288(1)(b) and r 294(2). In recognition of that fact, the appellant sought leave and permission in his interlocutory application dated 8 August 2019.
To a large degree the issues raised in amended grounds 1 to 3 and 5 to 7 effectively repeat contentions advanced by the appellant in support of his earlier interlocutory application. In that respect, the appellant is seeking to re-open matters already decided against him and which are the subject of adverse orders made by the Court. It is important to note that he has not appealed against either the judgment of Doyle J in Caruso v Built It Pty Ltd (in liq)[12] or my judgment published on 22 July 2019.
[12] [2018] SASC 71. Doyle J dismissed an application under s 471B to bring an application in the Magistrates Court to set aside judgment on the basis of fraud.
The appellant seeks to justify the approach that he has adopted in amended grounds 1 to 3 and 5 to 7 by contending that fresh information has recently become available. The fresh information is referred to in an affidavit dated 8 August 2019 affirmed by the appellant’s solicitor, Mr P Scragg.
Mr Scragg’s affidavit refers to the adverse findings against Mr Alessandro (Alex) Zollo, the director of the respondent, contained in the judgment of the District Court in Commissioner for Consumer Affairs v Built It Pty Ltd published on 24 May 2019.[13] Mr Scragg stated in his affidavit that, although the appellant was aware of the existence of the District Court proceedings and the claims made against the respondent, he was not aware of the evidence that would be given nor the findings that would be made by the Court.
[13] [2019] SADC 66. This judgment was delivered after oral and written submissions were made on the interlocutory application which was the subject of my earlier judgment dated 22 July 2019.
One of the issues before the District Court in Commissioner for Consumer Affairs v Built It was whether disciplinary action under the Building Work Contractors Act 1995 (SA) could proceed against Mr Zollo in his capacity as a director of Built It when the complaint against the company had been stayed because it was in liquidation. Judge Chapman held that the action could proceed against Mr Zollo.
Judge Chapman found that Mr Zollo had signed an undertaking to the District Court on 21 March 2000 whereby he undertook that he would not act as the director of a body corporate that was a building work contractor. Upon receipt of that undertaking, the District Court discharged a disqualification order made against Built It by the former Commercial Tribunal in 1994. The Commercial Tribunal had found that Built It was not a fit and proper person to be licensed as a builder.
Judge Chapman rejected the evidence of Mr Zollo that he had not signed the undertaking in 2000. Her Honour also found that Mr Zollo had acted as either a director or a de facto director of Built It in the period from 2 November 2011 until the end of December 2014. The purported appointment of other directors was a sham. Her Honour rejected Mr Zollo’s evidence that he was merely an employee and found that he was running the business of Built It during the period to which I have referred.
Judge Chapman also found that Built It was not entitled to be licensed during the relevant period.[14] Her Honour also found that Mr Zollo had breached the undertaking that he had given to the Court and that he was not a fit and proper person to be a director of Built It.
[14] Ibid at [173] (Judge Chapman).
In light of these findings the appellant contends that, due to the contemptuous and unlawful conduct by Mr Zollo in relation to the management and control of the respondent, no order for costs should have been made in the respondent’s favour in the Magistrates Court proceedings which are the subject of the present appeal. In support of that contention the appellant submits that, whereas previously there were merely suggestions of fraud by Mr Zollo, findings of actual fraud have now been made by the District Court. The appellant submits that a person who has participated in a fraudulent scheme should not receive a reward. The reward in this instance was the costs order made in favour of the respondent, Built It.
I reject the preceding submission for several reasons. First, the Magistrate noted at [12] of the judgment published on 14 September 2017 that “Mr Zollo conceded that he had previously been subjected to scathing remarks and findings by various authorities.” His Honour also noted that the defendant had prosecuted his case with a considerable emphasis on attacking the character of Mr Zollo. Against that background the Magistrate held that “whatever Mr Zollo has said or done in the past, it cannot detract from the clear facts in this case. The contract speaks for itself, as does the plaintiff’s actions leading up to the defendant calling off the plaintiff’s workers.”
Secondly, at [84] of my judgment published on 22 July 2019 I observed that the Magistrate had made the preceding findings after seeing and hearing the witnesses give evidence. I found that his Honour’s findings were not “glaringly improbable or contrary to compelling inferences” in the sense referred to by the High Court in Fox v Percy.[15]
[15] Caruso v Built It Pty Ltd (in liq) (No 2) [2019] SASC 125 at [84] (Parker J) quoting Fox v Percy (2003) 214 CLR 118.
Thirdly, the costs orders made by the Magistrate against the appellant were intended to express disapproval of his “bloody minded approach to an unreasonable case.” The adverse findings made against Mr Zollo and the respondent by the District Court do not negate the conclusion reached by the Magistrate about the manner in which the appellant conducted himself in the litigation.
Fourthly, the findings made by Judge Chapman in Commissioner for Consumer Affairs v Built It concern the same issues referred to by the Magistrate at [12] of his Honour’s judgment. The Magistrate was well aware that Mr Zollo had a poor history of compliance with legislation regulating the building industry.
Fifthly, an argument in virtually the same terms as that now advanced by the appellant was considered and rejected by Doyle J in Caruso v Built It Pty Ltd (in liq).[16] The appellant submitted before Doyle J that the judgment of the Magistrates Court should be set aside under r 104 of the Magistrates Court (Civil) Rules 2013 (SA) on the ground that it was obtained through fraud or an irregularity.
[16] [2018] SASC 71.
The basis for the application to set aside the judgment of the Magistrate was that the involvement of Mr Zollo in the building work on behalf of Built It was contrary to the undertaking given by him to the District Court. While Built It held a builder’s licence during the period that it conducted work for the appellant, the appellant contended that it was not entitled to hold a licence and thus the work it had done was unauthorised.
The appellant further submitted to Doyle J that, due to the operation of s 6(2) of the Building Work Contractors Act, Built It was not entitled to be paid for the work it had done. The appellant also contended before Doyle J that the District Court undertaking (or at least its relevance in terms of the timing of the building work), and thus the unauthorised nature of the work, had been concealed from him and also from the Magistrates Court.
Doyle J held that he was not satisfied that the appellant had established a solid foundation for his contention that the conduct of Mr Zollo involved actual fraud in the nature of an intentional contrivance to keep the appellant and the Court in ignorance of the real facts. Doyle J further held that there were significant factual and legal obstacles to the appellant’s contention that knowledge of the undertaking given by Mr Zollo would have provided him with a defence to the claim by Built It for payment for the building work it had performed for him.
Finally, while s 6(2) of the Building Work Contractors Act apparently precluded the respondent from suing to enforce its claim for payment under the contract, for the reasons that follow, I consider that it was nevertheless entitled to payment on a quantum meruit basis in respect of the work it had done.
Judge Chapman found in Commissioner for Consumer Affairs v Built It that the respondent was not entitled to be registered as a builder during the period it was undertaking work for the appellant.
The appellant contends that because the respondent was not entitled to be registered as a builder, s 6(2) of the Building Work Contractors Act precludes the respondent from recovering any money for the work it performed on his behalf. Section 6(2) provides as follows:
(2) A person required by this Act to be licensed as a building work contractor is not entitled to any fee, other consideration or compensation under or in relation to a contract with another on whose behalf the person performed work as a building work contractor unless—
(a) the person was authorised to perform the work under a licence; or
(b) a court hearing proceedings for recovery of the fee, other consideration or compensation is satisfied that the person's failure to be so authorised resulted from inadvertence only.
In Nunkuwarrin Yunti v AL Seeley Constructions Pty Ltd the Full Court considered the operation of the former s 39 of the Builders Licensing Act 1986 (SA) (the 1986 Act).[17] Section 39 of the 1986 Act provided that an unlicensed person “shall not be entitled to recover any fee or other consideration in respect of the building work”. Doyle CJ held that the words used in s 39 should be read as only denying an unlicensed builder an entitlement to recover monies due under a contract.[18] The words did not preclude a restitutionary claim of the type considered by the High Court in Pavey & Matthews Pty Ltd v Paul.[19] Prior J (with Olsson J agreeing) held that s 39 did not preclude a builder from recovering on a quantum meruit basis in circumstances where the owner accepted the benefit of the work done by a builder.[20]
[17] (1998) 72 SASR 21.
[18] Ibid at 23 (Doyle CJ).
[19] (1987) 162 CLR 221.
[20] (1998) 72 SASR 21 at 25-26 (Prior J).
While the current s 6(2) is couched in similar terms to the former s 39, it extends the prohibition to include “any fee, other consideration or compensation” and also disentitles the builder “under or in relation to a contract”.[21] Because of the extension of the prohibition on recovery to include “compensation”, a question arises as to whether the conclusion of the Full Court in Nunkuwarrin Yunti that recovery on a quantum merit basis is not prohibited extends to s 6(2).
[21] Emphasis added.
This issue was considered by Perry J in DG Australia Pty Ltd v Alexander.[22] His Honour stated in obiter remarks that if it had been the intention of the legislature to prevent recovery on a quantum meruit basis, this could easily have been expressly stated. Perry J also observed that recovery on a quantum meruit basis does not compensate the builder for any loss that they have suffered but obliges the building owner, who has benefited from the work done, to account for the benefit accruing from his or her acceptance of the performance of the unenforceable contract.
[22] [2003] SASC 176.
The same issue later arose before Duggan J in Stankovic v Aufderheide.[23]His Honour observed that s 6(2) prohibits recovery by an unlicensed builder “under or in relation to a contract”. Accordingly, the prohibition cannot be construed as applying to a claim based on a quantum meruit.
[23] [2003] SASC 378.
While I am not bound by the decision of Duggan J in Stankovic, I respectfully consider his Honour’s conclusion to be correct. I also agree with the obiter remarks made by Perry J in DG Australia. I therefore conclude that s 6(2) of the Building Work Contractors Act does not preclude an unlicensed builder from recovering on a quantum meruit basis in a case where the building owner has accepted the benefit of the work performed.
It is clear from the findings of the Magistrate that the appellant accepted the benefit of the building work performed on his behalf by the respondent. Accordingly, the respondent could recover reasonable remuneration for that work from the appellant on a quantum meruit basis.
Because the appellant had accepted the benefit of the expenditure made by the respondent in constructing the building, I also see no reason why the respondent would not be entitled to payment of interest at an appropriate rate in respect of monies unpaid for the work performed. The default rate agreed between the parties was 2% per month. The Magistrate found that this rate did not amount to a penalty. His Honour awarded interest at the rate of 2% per month until 1 October 2014, when the proceedings commenced. While the rate of 2% per month may appear high for a quantum meruit, on balance, I consider it be reasonable compensation for the failure by the appellant to pay moneys when due. In reaching that conclusion I take into account that the failure to pay on time may have required the respondent to borrow money or to draw on an overdraft facility so as to keep its business running and also may have caused disruption to that business. Moreover, the fact that the parties had agreed upon 2% per month suggests that they regarded it as an appropriate rate.
Most importantly, I cannot see any basis to hold that the respondent is not entitled to an order for costs in its favour in respect of the professional legal services provided to it to assist in the enforcement of its entitlement to payment for the work it had done on behalf of the appellant, whether under the contract or as a quantum meruit claim. I do not consider that there is any proper basis for the appellant’s contention that the award of costs in favour of the respondent amounts to rewarding it for a fraud.
The effect of amended ground 7 is a submission that the Magistrates Court cannot award costs on a solicitor/client basis due to the absence of a prescribed scale in the Magistrates Court (Civil) Rules. This matter has not previously been agitated by the appellant. At the hearing on 12 August 2019, I suggested that ground 7 could be better understood as a submission in support of amended ground 4, as opposed to a ground of appeal in its own right. The appellant was prepared to proceed on that basis. While I refused permission to amend the notice of appeal to incorporate amended ground 7, I will consider in my judgment on the appeal the appellant’s contention about the lack of an appropriate scale of costs.[24]
[24] I also reserved judgment in respect of the appeal (on amended ground 4) on 12 August 2019.
For the preceding reasons, I refused the appellant permission to amend the notice of appeal in respect of amended grounds 1 to 3 and 5 to 7.
Amended appeal ground 4 challenges the award of costs in respect of the argument as to costs that occurred in 2018. This ground is within the scope of the leave and permission I granted to the appellant on 22 July 2019. The respondent did not contend otherwise.
Consideration — striking out the amended notice of appeal
The respondent applied for the Court to strike out the amended notice of appeal as an abuse of process under r 117 of the Supreme Court Civil Rules.
Rule 117(1) provides that “[t]he Court may make any order it considers necessary for the proper conduct of a proceeding or otherwise in the interests of justice.” Rule 117(2)(e) expressly indicate that the Court may, under that power, “strike out a document or proceeding if the Court considers it frivolous, vexatious or an abuse of the process of the Court”.
Because grounds 1 to 3 and 5 to 7 of the amended notice of appeal dated 29 July 2019 are clearly outside the scope of the permission to appeal that I granted on 22 July 2019, and as I have not been persuaded to reopen that decision on the ground of fraud, I strike out amended grounds 1 to 3 and 5 to 7 under r 117. However, consistently with my decision on 22 July 2019, the appeal may proceed on amended ground 4.[25]
[25] The Court heard argument and reserved judgment in respect of the appeal on amended ground 4 on 12 August 2019.
Conclusion
For the preceding reasons, on 12 August 2019 I refused to grant the appellant permission to amend his notice of appeal, save in respect of ground 4 of the amended notice of appeal dated 29 July 2019.
So as to remove any possible uncertainty, I now order that:
1The appellant’s interlocutory application dated 8 August 2019 is dismissed.
2The respondent’s interlocutory application dated 8 August 2019 is upheld in respect of grounds 1 to 3 and 5 to 7 of the amended notice of appeal dated 29 July 2019.
3Grounds 1 to 3 and 5 to 7 of the amended notice of appeal dated 29 July 2019 are struck out under r 117 of the Supreme Court Civil Rules.
4Leave under s 471B of the Corporations Act is granted for the appellant to appeal on ground 4 of the amended notice of appeal dated 29 July 2019.
5Permission under r 288(1)(b) of the Supreme Court Civil Rules is granted for the appellant to appeal on ground 4 of the amended notice of appeal dated 29 July 2019.
I will hear the parties as to the costs of the two interlocutory applications dated 8 August 2019.