Chateau Constructions (Aust) Ltd v Zepinic & Anor [No 3]

[2009] NSWSC 1373

CITATION:	Chateau Constructions (Aust) Ltd v Zepinic & Anor [No 3] [2009] NSWSC 1373
HEARING DATE(S):	3 December 2009
JURISDICTION:	Equity
JUDGMENT OF:	Slattery J at 1
EX TEMPORE JUDGMENT DATE:	3 December 2009
DECISION:	See paragraph [76] of judgment.
CATCHWORDS:	EQUITY - equitable remedies - declaration of equitable charge over property - extension of caveat - PROCEDURE - non appearance of defendants - sufficient notice of proceedings given to defendants - costs - general rule costs follow the event - costs of whole action - Calderbank letter served before hearing - letter satisfies Calderbank requirements - indemnity costs awarded - consequential relief to be sought
LEGISLATION CITED:	Civil Procedure Act 2005 (NSW) ss 56, 101 Home Building Act 1989 (NSW) s 7D Real Property Act 1900 (NSW) ss 74J, 74K
CATEGORY:	Principal judgment
CASES CITED:	Associated Confectionary (Aust) Ltd v Mineral and Chemical Traders Pty Limited (1991) 25 NSWLR 349 Chateau Constructions (Aust) Ltd v Zepinic [2009] NSWSC 1339 Chateau Constructions (Aust) Ltd v Zepinic [No 2] [2009] NSWSC 1338 Huntsman Chemical Co Australia Ltd v International Pools Australia Pty Limited (1995) 36 NSWLR 242 Multicon Engineering Pty Limited Federal Airports Corporation (1996) 138 ACR 425 Singleton v Macquarie Broadcasting Holdings Ltd (1991) 24 NSWLR 103
PARTIES:	Plaintiff: Chateau Constructions (Aust) Limited First Defendant: Milla Zepinic Second Defendant: Vito Zepinic
FILE NUMBER(S):	SC 4643/09
COUNSEL:	Plaintiff: Mr B Ilkovski Defendants: No Appearance
SOLICITORS:	Plaintiff: Toomey Pegg Drevikovsky Lawyers Defendants: No Appearance

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
DUTY LIST

SLATTERY J

THURSDAY 3 DECEMBER 2009

4643/09 CHATEAU CONSTRUCTIONS (AUST) LIMITED ACN 001 376 218 v MILLA ZEPINIC & VITOMIR ZEPINIC [NO 3]

JUDGMENT [Ex Tempore]

1 HIS HONOUR: In February 2006 Chateau Constructions Pty Limited contracted with Vito and Milla Zepinic to perform building work at a home in Turramurra. By December 2006 disputes existed between Chateau and the Zepinics about the quality and completeness of Chateau’s building work and the non-payment of its progress claims. By January 2007 builder and owner were involved in proceedings in The Consumer Trader and Tenancy Tribunal (CTTT).

2 Chateau was successful before the CTTT. Chateau now seeks to enforce a charging provision in the building contract to secure the sum that the CTTT found was due to it. Chateau lodged a caveat over the Turramurra property on 2 February 2009. The Zepinics gave notice to Chateau of the proposed lapsing of the caveat. Chateau then sought as plaintiff through these proceedings to extend the caveat under s 74K Real Property Act 1900 (NSW).

3 The court has a policy of reducing the risk of identity theft through its published judgments. In furtherance of that policy this judgment does not publish the address of the Turramurra property. Instead it will be referred to as "the property".

4 This matter has been in the Equity Duty List on two prior occasions, first on Monday 28 September 2009 and then on Thursday 8 October 2009. The Court gave judgment on each of those days: Chateau Constructions (Aust) Ltd v Zepinic [2009] NSWSC 1339 and Chateau Constructions (Aust) Ltd v Zepinic [No 2] [2009] NSWSC 1338. On 28 September 2009 the Court extended the caveat. On 8 October 2009 the Court merely dealt with procedural issues. Chateau now seeks a declaration that the property is charged with the debt that the CTTT found was owed to Chateau. The Court has not made that declaration. The issue before the Court today is whether or not the Court should now make that declaration. The Zepinics are not represented today, which raises the first issue I will consider.

5 On 28 September 2009 the Court made orders extending the caveat. I was satisfied on that occasion that the building contract contained a charging provision sufficient to give Chateau a caveatable interest in the property. I was also satisfied that the CTTT had ordered the Zepinics to pay Chateau the sum of $370,847.35. Finally, I was satisfied that the CTTT's order was "An order that the owner pays the money to the builder" within the charging provision in the building contract. The evidence adduced on 28 September 2009 was sufficient to extend the caveat for the reasons analysed in paragraphs 4, 5, 6, 7, and 8 of my judgment that day.

The Questions for Decision

6 The questions I must decide today are the following.

a Is there sufficient evidence of notice to Dr and Mrs Zepinic to justify the Court proceeding with this hearing in their absence?
b Should the Court make the declaration sought in the short minutes of order that Dr and Mrs Zepinic have charged the land in the property with due payment to Chateau of the amount of $370,847.35 plus interest?
c Whether the indemnity costs order that Chateau seeks should be made against the Zepinics?
d If the declaration is made, should Chateau be granted any consequential relief?

7 I will deal with the questions in this order.

Notice to the defendants

8 The Zepinics are not present today in person nor are they legally represented. For the reasons explained in this section I find that they have been given adequate notice of this hearing. The Court will proceed in their absence.

9 Today is not the first occasion on which Dr and Mrs Zepinic have failed to appear before the Court. In the duty list on Monday 28 September 2009, one of the issues that occupied the Court's time was attempting to overcome the consequences of their non-appearance that day. The matter was called outside the Court about 11am that day. The Zepinics did not appear.

10 Mr Andrew Loel the solicitor for Chateau and a partner of Messrs Toomey Pegg and Drevikovsky gave oral evidence on that occasion. He said that he had served the summons, affidavits and orders in the matter in accordance with the Court’s orders of 22 September 2009. Messrs Hancock Aldis & Roskov were then acting for Dr and Mrs Zepinic in respect of the building dispute between the parties. Mr Loel detailed a telephone conversation that he had with Mr Roskov, a partner of the firm, about whether the Zepinics would be represented on 28 September 2009.

11 Mr Roskov had been corresponding for some time on behalf of Dr and Mrs Zepinic with Mr Loel. The import of those conversations is set out at [9] of my judgment on 28 September 2009 which is reproduced here.

“9 To follow up that service, he telephoned Mr Roskov, the solicitor at the firm Hancock Alldis & Roskov, which firm acts for Dr and Mrs Zepinic in the building dispute between the parties. Mr Roskov has corresponded with Mr Loel on behalf of Dr and Mrs Zepinic. The telephone communications between Mr Loel and Mr Roskov confirm two important matters. The first is that Mr Roskov is still retained on behalf of Dr and Mrs Zepinic and there is no present indication that his instructions will be withdrawn. Secondly, Mr Roskov indicated to Mr Loel that he had instructions from his clients not to attend Court today and that he was aware of these proceedings being before the Court today.”

12 No evidence adduced since 28 September 2009 gives any indication that the conclusions I drew on that occasion should be amended. The evidence available to me shows that Mr Roskov was instructed not to attend Court that day despite the fact he, and therefore his clients, were aware that these proceedings were to be heard that day.

13 On 28 September 2009 the evidence of notice of the hearing to Dr and Mrs Zepinic was sufficient that it was possible to proceed to make the declaration then sought. But the Court decided to give the Zepinics a further opportunity to appear in case there had been confusion in relation to the proceedings being heard that day.

14 The matter was stood down to see if the Zepinics could be reached. Later that day the communications conveyed back to the Court were sufficient to infer that Dr and Mrs Zepinic would not be appearing. In the result the Court stood the matter over to 8 October 2009. The Court reserved costs on 28 September 2009 but extended the caveat until further order. Through Mr Roskov, Dr and Mrs Zepinic were aware that the proceedings were listed for hearing that day. Mr Loel also sent a letter to them at their home address informing them of the adjournment to 8 October 2009.

15 The fact that Chateau had been determined for some time to proceed against them should equally have been brought home to Dr and Mrs Zepinic by the course of events before the CTTT. I will describe this history later.

16 On 8 October 2009 Mr Southwick appeared for the Zepinics. His appearance confirmed their knowledge of the listing of the proceedings that day. Mr Southwick sought an adjournment. He indicated to the Court that the Zepinics had an appeal pending against the CTTT order before the District Court of New South Wales. The existence of the CTTT order is essential to Chateau’s claim for an enforceable charge over the property. Mr Southwick indicated that the appeal would be determined on 5 November 2009. Mr Southwick sought the adjournment until the resolution of the District Court proceedings.

17 On 8 October 2009 Mr Ilkovski for Chateau, pressed upon the Court that a declaration should be made and that Chateau had a caveatable interest in the property. I declined to make the declaration requested that day. A declaration would have served little utility. It could not have led to enforcement of the charge before determination of the District Court appeal. Any attempt to enforce it would be liable to be stayed pending the determination of the District Court appeal. The Court adjourned the matter on the basis that it would be heard today, if the District Court had determined the appeal from the CTTT by 26 November 2009.

18 There is no reason to believe that Mr Southwick did not convey notice of today's hearing to his clients. I infer that Dr and Mrs Zepinic had knowledge of today's hearing date from as long ago as 8 October 2009.

19 The Zepinics were also aware of today’s hearing date from other events just before today’s hearing. These recent events provide a basis to infer that their lack of representation here today is deliberate. It is first necessary to exercise the course of the District Court proceedings.

20 On 5 November 2009 His Honour Judge Colefax heard the appeal from the CTTT in the District Court. His Honour gave a thorough and comprehensive judgment on the appeal on 20 November 2009. His Honour’s expeditious delivery of judgment facility this Court’s ability to hear this matter. His Honour upheld the relief sought by Chateau and dismissed the Zepinic’s amended summons appealing against the CTTT's decision. The learned judge ordered Dr and Mrs Zepinic to pay Chateau's costs of those proceedings.

21 Colefax DCJ found that the Zepinic’s appeal had been lodged three and-a-half months out of time. His Honour dismissed the Zepinic’s oral application to extend time to appeal. The learned judge did so on the basis that the hearing of that application could not be determined before February 2010. His Honour found that such a result would be inconsistent with both the CTTT’s obligation to conduct efficient fair and expeditious proceedings and his Honour’s obligation to ensure the just quick and cheap resolution of the proceedings before him: s 56 Civil Procedure Act 2005 (NSW).

22 Upon Colefax DCJ giving judgment on 20 November 2009, Mr Loel wrote to Mr Roskov on 24 November 2009 pointing out that there appeared to be no apparent basis for Dr and Mrs Zepinic to continue to oppose the final declaratory relief that Chateau has an equitable charge over the property.

23 Mr Loel suggested in this correspondence that if Dr and Mrs Zepinic continued to oppose the final relief being sought, that the Zepinics’ evidence and submissions in support of that position should be served on Messrs Toomey Pegg & Drevikovsky by Friday 27 November 2009. Mr Loel explained that this timing would permit Chateau a reasonable opportunity to consider its position prior to today’s hearing.

24 Mr Loel’s letter was expressed in measured and reasonable terms, designed to encourage a response. There is no evidence before the Court that Mr Roskov's instructions were withdrawn before he received this letter from Mr Loel. I infer that its contents came to the attention of Dr and Mrs Zepinic.

25 Mr Loel’s letter of 24 November was followed shortly afterwards by a telephone conversation between Mr Roskov and Mr Loel in which Mr Loel repeated the substance of the letter to Mr Roskov. In response Mr Roskov indicated in this conversation that depending on instructions from Dr and Mrs Zepinic he thought that he, Mr Roskov, would be able to get his client's affidavits, evidence and submissions back to Mr Loel by close of business on 27 November 2009.

26 This co-operative picture changed startlingly on 1 December 2009. Mr Loel had received nothing from Mr Roskov by that date. He telephoned Mr Roskov. Mr Roskov declared that the Zepinics had terminated his retainer in an email sent on Sunday 29 November 2009. Mr Roskov confirmed that he did not then act for either Dr or Mrs Zepinic.

27 Another conversation took place between Mr Roskov and Mr Loel the following day. Mr Roskov told Mr Loel that day that Mr Roskov had sent a copy of Mr Loel's letter of 24 November 2009 to Dr and Mrs Zepinic by email.

28 Mr Roskov then indicated to Mr Loel that, "The easiest way of getting things through to [Dr and Mrs Zepinic], and I know that they received my email, was to use the following email address…” He then gave an email address to Mr Loel. The precise email address will not be published in this judgment. Mr Roskov stated that the same email address had been used to terminate his retainer.

29 Later on 2 December 2009 Mr Roskov recontacted Mr Loel. Mr Roskov indicated that he was in error in saying that the letter of 24 November 2009 had gone to Dr and Mrs Zepinic. He confirmed to Mr Loel though that a letter of 25 November 2009 that set out the substance of Mr Loel’s letter of 24 November 2009 had definitely gone to the Zepinics. In that conversation Mr Roskov said to Mr Loel, of his conversation with his client.

"We specifically referred to the hearing on 3 December 2009. We said the matter was fixed for hearing on 3 December 2009 and told them that the matter should be ready to proceed on 3 December 2009. We requested that they provide their instructions to us if they wished to oppose the final relief sought by Chateau or if they opposed the orders sought. That’s what they responded to when they terminated our instructions on the weekend. We also told them that any submissions on the relief sought and costs will need to be served on Chateau".

30 In a subsequent part of the same conversation in response to Mr Loel’s enquiry, Mr Roskov confirmed that, "…the bottom line is… that Milla and Vito Zepinic are definitely on notice of the hearing tomorrow."

31 Following this conversation Mr Roskov sent Mr Loel a letter on 2 December 2009 confirming the termination of his retainer on all matters with the Zepinics. Mr Roskov stated in this letter that he would not be attending the Supreme Court proceedings today, as his instructions had been withdrawn.

32 The next relevant event took place at about 8.15 this morning. Mr Roskov telephoned my Chambers. I gave an account of the substance of this telephone call in Court earlier this morning. Neither my Associate nor my tipstaff was present in Chambers at 8.15 this morning. I answered the telephone. Mr Roskov conveyed to me what is in his letter of 2 December 2009. He said that his instructions had been terminated, that he would not be appearing in Court, and that he was telephoning as a matter of courtesy.

33 As the call had come through to me directly I requested Mr Roskov to record the call formally both to my Associate and to the solicitors for Chateau. A short while later Mr Roskov emailed my Associate and copied that email to the solicitors for Chateau advising:

“We refer to the above matter and wish to advise that our retainer to act on behalf of Mr and Mrs Zepinic was terminated on Sunday 29 November, 2009 by way of email.

We further advise that the applicant’s solicitor has been notified and we understand that they have been corresponding direct with Mr and Mrs Zepinic who are currently in London.

We also understand that Mr Zepinic has forwarded to Mr Andrew Loel of Messrs Toomey Pegg Drevikovsky, Solicitors, advising him that they will not be able to attend as they are overseas.

As our retainer has been terminated, we do not propose to attend the hearing set down for this morning.”

34 There had indeed been some correspondence between Mr Loel and Dr Zepinic. In an email sent on Wednesday 2 December 2009 at 8.31pm to Mr Loel. The Zepenics said as follows:

"Dear Mr Loel,

Thank you for your another [sic] threatening letter what is nothing new considering your character and personality. Please be advised that the both of us I and my wife Milla are currently overseas and will stay for while here. So, we are unable to attend hearing regarding the Caveat. Please be also advised that it is your responsibility, as well as my solicitor, to inform His Honour Justice Slattery about that and we xpect [sic] that you will be kind to do that.
Kind regards,
Dr V and M Zepinic"

35 The email was a reference to Mr Loel's letter of 24 November 2009, which I have found was measured and reasonable. Mr Loel had sent that letter directly to the Zepinics at the email address Mr Roskov provided. A reply was sent back by Mr Loel to Dr Zepinic saying "thank you, Dr Zepinic. I will do so" and signed, “kind regards, Andrew”.

36 An emailed response from Dr Zepinic came at 9.05 this morning:

"Dear Mr Loel,
Thank you for your help and understanding which seems better than from my lawyers that I am paying or may be someone paying them more.
Regards
Dr Zepinic"

37 The implied slight to Mr Roskov that may perhaps be discerned in this last email from Dr Zepinic, has no basis in any evidence that I have seen in these proceedings.

38 I infer from this course of correspondence that Dr and Mrs Zepinic are well aware these proceedings are listed for hearing today. They appear to have made a deliberate choice to stay away from today's hearing and not to have legal representatives appear for them. On the evidence it is difficult to see there is any other explanation for their failure to attend in person or by a lawyer.

39 The Court will deal with the issues before it today in the absence of either Dr and Mrs Zepinic or their legal representatives.

Grounds for Chateau’s Declaration

40 The second question is whether or not I should make the declaration Chateau seeks. Chateau must establish two matters for the declaration to be made: first, that there is a charge over the Turramurra property; and second, the amount of that charge. I am satisfied that both these matters are established.

41 I have sufficiently described evidence that supports both these matters in my judgment of 28 September 2009 at [4] to [7]. It is unnecessary to re-traverse that evidence. On that occasion I examined the evidence and concluded there was a reasonable basis to infer that Chateau has a charge over the property in the amount of $370,847.35 which sum the CTTT determined on 2 February 2009 to be due to Chateau.

42 No evidence has been filed to contradict the inference I drew on 28 September 2009. The same evidence now justifies granting the declaration as final relief now the District Court appeal has been dismissed.

43 Mr Ilkovski has drawn to my attention a statutory provision relevant to my power to make this declaration. Sub-section 7D (1) of the Home Building Act 1989 (NSW) avoids provisions in a building contract that purport to create an estate or interest in land in favour of persons who would include Chateau. Sub-section 7D (3) provides that sub-section 7D (1) does not apply to a provision in a building contract that creates a charge over land unless the charge satisfies four conditions. Chateau’s caveat over the property satisfies all the conditions in sub-section 7D (3) of the Home Building Act, which Act does not constrain the Court from making the declaration.

Chateau applies for Costs

44 The third question is Chateau’s claim for indemnity costs against Dr and Mrs Zepinic. The basis for this application is twofold. Chateau first submits that the Zepinics have failed to respond to a Calderbank letter sent to Mr Roskov, their legal representative, on 11 September 2009.

45 Chateau’s second basis for seeking indemnity costs is that no material has been advanced to the Court to support any defence to Chateau's contention that it had a caveatable interest in the property. I will deal with both those submissions in turn.

The Calderbank Letter

46 First, Mr Loel sent Chateau’s Calderbank letter of 11 September 2009 to Dr and Mrs Zepinic at their address long before they were said to be in London and long before the termination of Mr Roskov's retainer. In the following terms the Calderbank letter of 11 September 2009 set out the history of the matter, referred to the contractual charging provision and the CTTT judgment for $370,847.35 and left an offer open for acceptance until 15 September 2009.

“3. In the circumstances, Chateau clearly has a caveatable interest as the chargee in respect of the moneys payable by you and your husband to it.

4. We note that you have not asserted that Chateau does not have a caveatable interest, that the caveat is invalid, vexatious or otherwise unsupportable nor that the caveat was improperly or irregularly registered.

5. On that basis, if our client applies to the Supreme Court of New South Wales for an order extending the operation of the Caveat, it is likely that the Court will make such an order.

6. We estimate that Chateau’s costs of making such an application to the Court will be in excess of $5,000.00. If Chateau makes such an application to the Court and the Court makes an order extending the operation of the Caveat, Chateau will also seek an order that you pay its costs of, and incidental to, the application on an indemnity basis.

7. Chateau would prefer to resolve the issue without either party incurring further unnecessary costs. To that end, Chateau offers to resolve the issue on the following basis:

(a) you endorse the enclosed further caveat, with Chateau as the caveator, in respect of the Land with your consent (the “Further Caveat”) and return the Further Caveat to us by 5:00pm on 15 September 2009;

(b) you undertake to do all things deemed necessary by Chateau to enable Chateau to lodge the Further Caveat by 3:00pm on 18 September 2009; and

(c) you undertake not to lodge with the Registrar-General any evidence whatsoever of the service of the Lapsing Notice.”

47 Chateau’s Calderbank letter claimed that in light of the short time available for making an application to the Court for extending the caveat that a reasonable period had been given to the Zepinics for accepting the offer. The letter further said that if the offer were not accepted Chateau would apply to the Court without further notice for an order extending the caveat.

48 A letter satisfying Calderbank requirements will ground an award of indemnity costs against parties who decline to accept such an offer and who do not achieve greater success than the other party is offering: Singleton v Macquarie Broadcasting Holdings Ltd (1991) 24 NSWLR 103 at 108. It is necessary to examine whether all the requirements of a Calderbank letter were satisfied here.

A Reasonable Time for Acceptance

49 The first issue is the reasonableness of the period of notice given in the Calderbank letter. Mr Loel received the lapsing notice for the caveat in his incoming mail on 9 September 2009. By his reckoning the 21-day period under section 74J(1) of the Real Property Act would expire on 30 September 2009. He wrote expeditiously to the other side only two days after receiving the lapsing notice. He allowed another four days for them to consider their position and obtain advice. He added some flexibility to the period when he specified, "However if you require additional time to consider the offer, please contact us immediately to discuss an extension of the time within which the offer is accepted”. Indeed Mr Loel sent a second Calderbank letter in the same terms to Mr Roskov on 16 September 2009. This second letter was apparently sent in response to the Zepinics’ request for more time. For convenience this judgment will only refer to the first of these letters but the second letter is noted.

50 Several factors are in play on the issue of the reasonableness of the time for acceptance provided for in this offer. Mr Loel and Chateau needed to know whether there was to be a contest about the caveat well before the expiry of the lapsing notice on 30 September 2009. He needed to prepare Court process for a possible hearing. He provided a reasonably short period for acceptance. He needed to allow time for exactly what did happen in these proceedings. The not uncomplicated summons and affidavits took some days to prepare. They were filed in Court when these proceedings commenced on 22 September 2009. What followed is a common feature of caveat extension proceedings. A further return date on 28 September 2009 was set only two days before the expiry of the 21 day lapsing period. Mr Loel could reasonably have anticipated a substantive or tactical contest from Dr and Mrs Zepinic on this date. There was not much flexibility for Mr Loel to set a longer acceptance period.

51 If a party issuing a Calderbank letter will soon lose its rights if it does not commence proceedings then, in assessing the reasonableness of the time that the issuing party gives for acceptance, the Court can take into account that the issuing party will have to leave itself sufficient time to act if the offer is not accepted.

52 The Calderbank letter notice period was reasonable. Any argument that it was unreasonable is neutralised here by Mr Loel’s clear indication that if additional time was required for the Zepinics to consider the offer then Mr Loel was open to discussion about its extension. Indeed they took up this invitation and Mr Loel gave an extension.

The Offer was exclusive of Costs

53 The Calderbank offer was made exclusive of costs. In this respect also the offer complies with Calderbank principles: Associated Confectionary (Aust) Ltd v Mineral and Chemical Traders Pty Limited (1991) 25 NSWLR 349. Chateau crafted paragraph 7 of the 11 September 2009 letter to avoid the Zepinics incurring unnecessary costs. The form of Chateau’s offer should not have deterred a reasonable party in the Zepinics position from agreeing to settle the dispute on the terms offered.

Chateau bettered its Calderbank offer

54 The position Chateau offered in the 11 September 2009 letter provides the foundation for indemnity costs order. In substance it is the result that Chateau achieved in the proceedings. The mechanism of a further caveat was a convenient way to avoid expending resources in filing unnecessary Court process for extension of the current caveat. Had Dr and Mrs Zepinic accepted the offer the result would have been an extension of the caveat, notwithstanding the lapsing notice.

55 The caveat enclosed with the letter, I understand, was in substantially identical terms to the caveat the subject of these proceedings. Chateau substantially foreshadowed in the 11 September 2009 Calderbank letter the result it has achieved through the making of the declaration and the extension of the caveat until further order. On established principles this success qualifies Chateau for an indemnity costs order: Singleton v Macquarie Broadcasting Holdings Ltd (1991) 24 NSWLR 103 at 108.

Unreasonable Rejection of the Calderbank Offer

56 The next element is whether there has been an unreasonable rejection of the Calderbank letter. Nothing has been put before the Court by Dr and Mrs Zepinic suggesting there was any serious contest about the fundamental issue whether or not Chateau had a caveatable interest in the property. I find that the Zepinic’s failure to accept the Calderbank letter was unreasonable.

57 I will make an indemnity costs order against Dr and Mrs Zepinic. The indemnity costs order will cover all the costs of these proceedings including the appearances on 28 September 2009 and 8 October 2009.

The Reserved Costs of 8 October 2009

58 I reserved argument about the costs of the day on 8 October 2009. Mr Southwick requested an adjournment of costs issues that day. He argued that he had not had a chance to get sufficient instructions to meet such an argument that day. I deferred that costs issue to today. I gave a preliminary indication on 8 October 2009 that in the absence of further argument on the issue I was inclined to order costs of the day against the Zepinics: at [4] of the judgment of 8 October 2009. Because of Mr Southwick's lack of instructions, I did not make any costs order that day.

59 The indemnity costs order now made overcomes the need to consider the costs of the hearing of 8 October 2009. If it were to become of relevance, in the absence of further argument, I would have made an order for costs against the Zepinics for the costs of 8 October 2009 as was my preliminary view.

Indemnity Costs on an Alternative Basis

60 Mr Ilkovski also founds Chateau’s application for indemnity costs on the alternative basis that the Zepinics had no defence to this claim and should always have known that. Indemnity costs can be ordered in circumstances where a party has maintained proceedings that the party should have known had no real prospects of success. But the matter can be controversial and in other situations where there is only a belated acceptance of the unlikelihood of success, indemnity costs may not be awarded: Huntsman Chemical Co Australia Ltd v International Pools Australia Pty Limited (1995) 36 NSWLR 242 at 247.

61 The absence of any evidence from Dr and Mrs Zepinic grounds a suspicion that they believed that they had no real prospects of success. I do not know enough about their actual state of knowledge to make a finding to that effect though. I prefer to base my decision upon failure to accept Chateau’s Calderbank letter. The fact is Dr and Mrs Zepinic have not obtained a result better than the prior settlement offered by Chateau which will normally on its own justify a special order for costs: Multicon Engineering Pty Limited Federal Airports Corporation (1996) 138 ACR 425.

Consequential Relief

62 The last question is what happens from here. The disputes between these parties had a long history before coming into the Equity duty list on 28 September 2009. These disputes call for finality. The Court should attempt to resolve this matter justly quickly and cheaply in conformity with the overriding purpose of the Civil Procedure Act 2005 (NSW): s 56 Civil Procedure Act. A short account of the facts shows why finality is required in the near term.

63 The Zepinics contracted with Chateau on 23 February 2006, almost 4 years ago. Chateau commenced work the following day. Initially that work proceeded and the Zepinics paid progress claims 1 to 7. On 28 November 2008 Chateau issued the Zepinics with progress claim 8 and then on 20 December 2009 progress claim 9. Both those progress claims remain unpaid.

64 On 18 January 2007 Chateau commenced a claim in the CTTT for payment of progress claims 8 and 9, damages, holding costs and interest consequent on non-payment.

65 In February 2007 Chateau suspended the building work. On 24 June 2007 the Zepinics filed a cross application at the CTTT for work they alleged was defective or incomplete under the contract.

66 The matter first came on for hearing in the CTTT on 26 and 27 May 2008. Both parties were legally represented. At the conclusion of the allocated time for the proceedings they were adjourned part heard. The hearing resumed on 22 September 2008. On resumption the Zepinics made an application to the CTTT for a further adjournment on the basis that they no longer had legal representation. This was an event that appears to have been recently repeated. Only on Sunday 29 November 2009 did Dr and Mrs Zepinic deny themselves legal representation before this Court by terminating their then solicitor’s retainer.

67 There was a contested adjournment application before the CTTT on 22 September 2008. Senior Member C Paull declined to grant the adjournment requested. She then dealt with the application and the cross application. The CTTT found Chateau had a present entitlement to payment of progress payments 8 and 9. She dismissed the Zepinics’ allegations that the work the subject of the progress claims 8 and 9 was not complete or was defective.

68 Senior Member Paull gave the CTTT’s reasons for final decision on 18 December 2008. The CTTT made consequential orders for the payment of money on 2 February 2009.

69 It is now 3 years since the progress claims were first issued and one year since the CTTT made its decision. This dispute has gone on for too long.

70 Mr Ilkovski asks for leave for Chateau to file an amended summons for relief consequent upon the making of the declaration. I will grant that leave. The Court can consider relief that will finalise the dispute between the parties by enforcing the charge the subject of the declaration.

Directions and Discussion of Draft Short Minutes

71 I have been provided with short minutes of order that contemplate the filing of an amended summons and service of that amended summons on the defendants by 14 December 2009. It is proposed that the defendants be served by email at the email address Mr Roskov recently identified to Mr Loel. That is the appropriate place to serve any amended summons and affidavits. I will also require them to be served at the property and the Zepinics residential address, as it is unclear where Dr and Mrs Zepinic will be in the next 2 weeks. There should be added to the orders a requirement that the orders and a copy of this judgment be served at both those addresses by no later than Friday 11 December 2009, and in any event, within 24 hours of them becoming available to the solicitors for the plaintiff.

72 The directions should propose that the matter be adjourned to Monday 21 December 2009. I will be sitting again as the Equity duty judge that week. I would expect on that occasion there to be evidence available as to the steps that have been taken to serve the defendants in accordance with these orders.

73 I will also direct that if Chateau proposes to make any submissions on 21 December 2009 for relief in the nature of the principal remedies of a chargee, such as orders for judicial sale of the property or the appointment of a receiver, that a legal submission claiming such remedies should be filed at my Chambers by close of business on Thursday 17 December 2009 as well as being served at both of the Zepinics’ addresses for service referred to earlier in this judgment.

74 I direct Chateau to bring in short minutes of order conforming with these reasons.

Later in the Day - Final Orders

75 Counsel for Chateau has now provided the Court with short minutes of order for the declaratory relief described in my reasons. The short minutes also express the directions I propose to give for the future conduct of these proceedings. Those orders and directions reflect what I had in mind. I make the orders and directions below.

76 The Court declares that:

1 The Defendants have charged the land situated at 34 Turramurra Avenue, Turramurra in the State of New South Wales (folio identifier A/348843) with due payment to the Plaintiff of $370,847.35 plus interest (at a rate equal to the rate for the time being prescribed for the purposes of section 101 of the Civil Procedure Act 2005) as ordered by the Consumer, Trader and Tenancy Tribunal on 2 February 2009.

The Court orders that:

2 The Defendants are to pay the Plaintiff's costs of and incidental to the proceedings from 9 September 2009 on an indemnity basis.

3 Leave is given to the Plaintiff to file an Amended Summons for relief consequent upon the making of the declaration set out in paragraph 1 above, by 11 December 2009.

4 The Plaintiff is to serve on the Defendants:


a. these orders and a copy of his Honour Justice Slattery’s reasons for decision given on 3 December 2009, by 11 December 2009 (or in any event within 24 hours of the orders and reasons for judgment becoming available to the Plaintiff’s solicitors); and

b. the Amended Summons and any affidavit in support by 14 December 2009.

5 The Plaintiff to effect service on the Defendants by sending the documents referred to in Order 4 by:


a. email to the following email address: [address not published]; and

b. express post to the following addresses: [address not published] and [address not published].

The Court directs:

6 The Plaintiff to:


a. send to the Associate to his Honour Justice Slattery any submissions to be made for the relief sought in the Amended Summons; and

b. serve the submissions on the Defendant by email and at the addresses referred to in Order 5 above.


7 Liberty to apply is granted on 2 days notice.

8 Adjourn these proceedings for further hearing before me in the Equity Duty List on 21 December 2009 at 10am.

9 These orders may be entered forthwith.

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