| JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL STREAM : COMMERCIAL & CIVIL ACT : CONSTRUCTION CONTRACTS ACT 2004 (WA) CITATION : CLASSIC STONE (QLD) PTY LTD and JULIE MAURETTA PITCHER [2012] WASAT 80 (S) MEMBER : MR C RAYMOND (SENIOR MEMBER) HEARD : DETERMINED ON THE DOCUMENTS DELIVERED : 23 AUGUST 2012 FILE NO/S : CC 1958 of 2011 BETWEEN : CLASSIC STONE (QLD) PTY LTD Applicant
AND
JULIE MAURETTA PITCHER
Respondent
Catchwords: Construction Contracts Act 2004 (WA) - Adjudication - Application for costs Legislation: Construction Contracts Act 2004 (WA), s 31(2)(a), s 46(1), s 46(2)
Legal Profession Act 2008 (WA)
State Administrative Tribunal Act 2004 (WA), s 39(1)(a), s 39(e), s 87(2) Result: Application for costs dismissed
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Category: B
Representation: Counsel:
Applicant : Mr C Williams
Respondent : Ms A Dowley
Solicitors:
Applicant : Solomon Brothers
Respondent : Contract Intelligence Pty Ltd
Case(s) referred to in decision(s):
Classic Stone (Qld) Pty Ltd and Julie Mauretta Pitcher [2012] WASAT 80
J & P Metals Pty Ltd and Shire of Dardanup [2006] WASAT 282 (S)
Koupatsiaris and Pepper Home Loans [2010] WASAT 146
Marvelle Investments Pty Ltd and Argyle Holdings Pty Ltd [2010] WASAT 125 (S)
Re Malley SM; ex parte Gardner [2001] WASC 83
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REASONS FOR DECISION OF THE TRIBUNAL:
Summary of Tribunal's decision 1 The respondent had successfully opposed an application for the review of an adjudication decision under s 46(1) of the Construction Contracts Act 2004 (WA) and then applied for an indemnity costs order in respect of part of the proceedings and for a costs order on a party and party basis in relation to the balance of the proceedings. 2 The Tribunal observed that indemnity costs should be awarded only in exceptional circumstances: see Re Malley SM; ex parte Gardner [2001] WASC 83 and the discussion in Civil Procedure Western Australia, Vol 1 by Kendall and Curthoys, LexisNexis Butterworths, Australia 1990 at para 66.1.16.1. The costs in relation to which indemnity was sought was based on: the applicant having filed submissions alleging fraud; the role played by the applicant's former representative; and the substitution of the written submissions first relied upon by the applicant. The total indemnity costs claimed amounted to the sum of $4,950. The costs claimed for the conduct of the balance of the proceedings was $6,255. 3 In analysing the cost details provided, the Tribunal observed that the significant bulk of indemnity costs related to an investigation of the person who had appeared at the first directions hearing as an agent on behalf of the applicant. The result of the investigation suggested, but did not establish, that the person concerned was admitted to practice in Queensland under another name. The Tribunal considered that it was unreasonable to incur these costs. 4 Further, the Tribunal considered that the applicant had acted sufficiently promptly in engaging legal representation once objection was taken to the submissions, and had then immediately abandoned the original basis of the application and the submissions to which objection had been taken. Leave was granted for substituted submissions to be filed, and the matter proceeded to hearing on that basis. 5 The Tribunal referred to a practice within the Tribunal rarely to award costs against a party not represented by a legal representative who, upon becoming aware of a fundamental flaw in its application, seeks leave to withdraw or amend the proceedings without any undue delay, as underlying the basis for the decision in Koupatsiaris and Pepper Home Loans [2010] WASAT 146. As the fraud allegations were abandoned promptly by the applicant, the Tribunal concluded there was no basis (Page 4)
on which to make an indemnity costs order. It also rejected the respondent's contentions that indemnity costs should be ordered because of the substitution of the submissions. Any costs arising therefrom fell to be dealt with under the general costs application. 6 In relation to the general costs claim, the Tribunal rejected the respondent's contentions that the proceedings were obviously unmeritorious. The Tribunal also rejected that costs should be awarded in these proceedings because, having been unsuccessful before the original adjudicator, primarily on the basis that no contractual relationship existed with the respondent, it had commenced fresh adjudication proceedings against the party identified by the respondent as having contracted with the applicant. The Tribunal noted that there is no mechanism under the Construction Contracts Act 2004 which enabled claims to be made against parties in the alternative. 7 Consequently, both the application for indemnity costs and for costs on a party and party basis were dismissed.
The application for costs and relevant history 8 The applicant applied under s 46(1) of the Construction Contracts Act 2004 (WA) (CC Act) to review an adjudication decision. On 27 April 2012, the Tribunal published its reasons for decision dismissing the review application: Classic Stone (Qld) Pty Ltd and Julie Mauretta Pitcher [2012] WASAT 80. 9 At the same time, the Tribunal issued directions for the filing by the respondent of a costs schedule set out in sufficient detail to enable the Tribunal to fix costs, if any costs be awarded, and for the parties to file submissions relating thereto. 10 The respondent seeks orders that the applicant pay the respondent's costs: (Page 5)
11 Immediately prior to the directions hearing, the respondent's solicitors wrote by letter dated 13 December 2011 to the applicant setting out a contention that the application was fundamentally flawed, firstly, because an order was sought that the matter be remitted to a new adjudicator and, secondly, because the grounds raised, being based on natural justice issues, were not within the jurisdiction of the Tribunal. The applicant advised that unless the proceeding was withdrawn, the letter would be brought to the attention of the Tribunal. The applicant has not endeavoured, however, to support a costs order relying on this letter. Given that the original basis of the application was abandoned at a relatively early stage, for the reasons referred to below, this letter would not have justified an award of costs. 12 At the initial directions hearing held in the matter, Mr John Sinclair, who described himself as a contract administrator, appeared as agent for the respondent. Mr Sinclair indicated that it was intended that he act as a representative for the applicant in the proceedings. There was some uncertainty about the capacity in which Mr Sinclair might do so, and the Tribunal indicated that it would not consent to him doing so under s 39(e) of the State Administrative Tribunal Act 2004 (WA) (SAT Act) if he were to be remunerated for doing so. Although the Tribunal made no specific order at the time, it indicated that this issue should be addressed at the commencement of the hearing of the review application if Mr Sinclair was to represent the applicant. 13 On 11 January 2012, the applicant filed and served on the respondent a statement to the effect that Mr Sinclair had been employed by the applicant, together with submissions that Mr Sinclair therefore had a right to appear under s 39(1)(a) of the SAT Act. On the following day, the applicant filed and served on the respondent an outline of submissions dealing with the merits of the review application. 14 On 18 January 2012, the Tribunal received a facsimile letter of that date from the respondent's legal representatives stating, relevantly: (Page 6)
15 The attached affidavit of Elisha Lee Rose deposed to what had occurred at the first directions hearing and outlined steps which had been taken initially by the respondent and later by Ms Rose on the respondent's behalf concerning an investigation of Mr Sinclair. Ms Rose further deposed to a person answering a telephone call to a telephone number recorded by the Bar Association of Queensland website as being that of an admitted legal practitioner, who identified himself as John Sinclair and confirmed that he was now employed by the applicant. The name of the admitted legal practitioner reflected in the website was not John Sinclair. Further, Ms Rose deposed that the Queensland Law Society had advised that no-one by the name of John Sinclair was admitted to practice (in that State). 16 It appears from the respondent's written submissions filed in support of the current costs application that contact was made by Ms Rose on 17 January 2012 with unidentified solicitors said to be representing the applicant (although they conveyed they were no longer acting for the applicant), and also with Mr Anderson of the applicant. Ms Rose advised that unless the submissions were replaced, the respondent would seek the costs of obtaining an order to that effect from the Tribunal. The submissions reflect that the solicitors, who were no longer acting, stated that the submissions would not be withdrawn (which it appears they had no authority to state), but there is no indication of how Mr Anderson responded. 17 The Tribunal acceded to the request and convened a directions hearing on 19 January 2012. The applicant's current legal representatives attended the directions hearing and advised that they had been instructed to represent the applicant. 18 Counsel for the respondent raised that serious allegations of fraudulent conduct were made in the applicant's submissions against both the respondent and its legal representatives. It was not necessary for (Page 7)
counsel for the respondent to develop the point at all, because counsel for the applicant indicated that the applicant wished to file substituted submissions and to support the application for review on an entirely different basis. It was therefore also not necessary to develop any argument in relation to whatever problem may or may not have existed in relation to Mr Sinclair representing the applicant. The Tribunal accordingly made directions relating to the filing of the substituted submissions, providing the applicant with a time within which to file and serve its opposing submissions and reserving the question of costs of the respondent's application. It is in respect of that application that the respondent seeks indemnity costs. 19 The applicant subsequently filed its substituted submissions and the matter proceeded to hearing in the ordinary course. 20 The schedule of costs filed by the applicant sets out the relevant attendances, the charges and the rates charged therefor.
The principles to be applied 21 The principles applicable to the award of costs are summarised in Marvelle Investments Pty Ltd and Argyle Holdings Pty Ltd [2010] WASAT 125 (S) (Marvelle) at [15] [32], inclusive. 22 In the light of the costs determinations applicable to the Tribunal, published under the Legal Profession Act 2008 (WA), unless a cost agreement is proved establishing an entitlement to a higher rate as between solicitor and client, it is unlikely, in most cases, that there will be any real difference between the rates allowed in assessing indemnity costs and the maximum party and party costs which might be permitted. Marvelle at [45] outlines that the determinations are a useful guide to what rates might be allowed as a maximum party and party rate. It is to be noted in this case that the rates charged, when comparing the work claimed in respect of the services the subject of the application for indemnity costs, and the services provided otherwise in the proceedings, appear to be the same. In any event, it would generally only be appropriate to make an order for indemnity costs in exceptional circumstances: see Re Malley SM; ex parte Gardner [2001] WASC 83 and the discussion in Civil Procedure Western Australia, Vol 1, by Kendall and Curthoys, LexisNexis Butterworths, Australia 1990 at para 66.1.16.1. The difference is simply that, on an indemnity basis, costs will be allowed unless they are unreasonable in amount, or are unreasonably incurred. (Page 8)
23 Finally, there is a practice in the Tribunal which does not appear to have been referred to in any previous published decision. Costs will rarely be awarded against a party not represented by a legal representative who, upon becoming aware of a fundamental flaw in its application, seeks leave to withdraw or to amend the proceedings without any undue delay. The reason for this principle is that proceedings, particularly in the Commercial and Civil stream, are often commenced by parties without the benefit of legal representation in the genuine belief that there is an entitlement to the orders sought. Given the Tribunal's usual costs regime, that each party should bear its own costs, it has not been thought appropriate to order costs in the circumstances outlined. On the other hand, if a party is made aware of an obvious obstacle to their application succeeding but persists in pursuing a case which, properly advised, should not be pursued, that may be a circumstance which supports an award of costs. It is evident that this is the principle which led to an award of costs in Koupatsiaris and Pepper Home Loans [2010] WASAT 146 from the date of a directions hearing when the applicant was made aware of a jurisdictional difficulty, but not in respect of costs incurred prior thereto.
Should costs be awarded? 24 Consideration will be given firstly to the indemnity costs application. It is convenient to deal with the first two grounds together on which the indemnity costs order is sought, because they are closely related.
Indemnity costs based on fraud allegations in original submissions and the role of the applicant's first representative 25 The letter of 18 January 2012, which was treated as an interim application by the respondent, did not alert the Tribunal to the concern over fraud allegations. There was a general reference to inappropriate submissions and a request for the Tribunal to consider the material in the attached affidavit of Elisha Lee Rose. The affidavit deposed to the investigation conducted in relation to Mr Sinclair. 26 It appears that counsel for the respondent has charged her time at a rate of $300 per hour. The total time spent by counsel in relation to preparation directly related to the fraud allegations is .25 of an hour, on 19 January 2012, for settling submissions on fraud and costs, and .25 of an hour, on 19 January 2012, for preparation for appearance. A charge of $300 was made in respect of counsel's appearance before the Tribunal on that day. Other charges that directly relate to the fraud allegations appear to be $540 incurred by a person, presumably an articled clerk or a law clerk, charged at a rate of $90 per hour on 18 January 2012. (Page 9)
The vast bulk of time charged in relation to the indemnity cost claim appears to relate to the investigation concerning Mr Sinclair. 27 It is not at all clear as to why the respondent launched into this investigation. At that point, it had been asserted that Mr Sinclair was employed by the applicant and that he therefore had an automatic right to represent the applicant. It is not clear that the applicant was necessarily correct in so contending, because it is at least doubtful as to whether Mr Sinclair was an officer of the company as required by s 39(1)(a) of the SAT Act. The investigation, in any event, disclosed circumstances which suggested that Mr Sinclair was admitted to practice under another name in Queensland (although there might be other explanations for why he could be contacted at a telephone number listed for a barrister). If that is the point which the respondent intended to establish, the situation is, as the applicant has submitted, bizarre, because why would a legal practitioner, who could appear on the applicant's behalf in the proceedings in the Tribunal as of right, knowingly seek to pass himself off as a different person who had no right of appearance and who then had to establish some other basis upon which to represent the applicant? When one considers that the total costs incurred on this issue was the bulk of the $4,950 compared to the cost of the actual review proceeding of $6,255, it demonstrates that it was unreasonable to launch the investigation and incur the costs which the respondent did on this issue. 28 Insofar as the fraud allegations are concerned, it is evident that the entire basis upon which the application was founded was abandoned promptly and at an early stage in the proceedings as soon as the applicant had the benefit of advice from its current legal representatives. 29 In these circumstances, an indemnity cost order is not justified on either of the above two grounds. The costs incurred directly related to the fraud allegations would be covered in principle, subject to assessment, if costs were to be awarded generally in the matter. The bulk of the costs claimed of $4,950 related to the investigation of Mr Sinclair, and even if costs were to be awarded generally, the 'investigation' costs would be disallowed as being unreasonably incurred. The objectives of the Tribunal require that costs to the parties be minimised and that proceedings be conducted accordingly: see J & P Metals Pty Ltd and Shire of Dardanup [2006] WASAT 282 (S).
Indemnity costs based on substitution of submissions 30 The respondent's costs schedule does not show that any costs were incurred preparing a response to the original submissions which (Page 10)
were substituted. Indeed, the directions hearing on 19 January 2012 was listed, in part, because it was submitted that it would be inappropriate to respond to those submissions. As there are no wasted costs demonstrated, there can be no costs connected with the second submissions which might be the subject of an indemnity order. Those costs should be dealt with as part of the general costs of opposition and, according to the costs schedule, have been included in those costs claimed of $6,255. 31 It is therefore necessary to address the general claim for costs.
General costs claim 32 Central to the applicant's argument, in order to take the case out of the normal regime under s 87(2) of the SAT Act that each party pay its own costs, is reliance on communications between the respective legal representatives on 2 and 3 February 2012. The correspondence focused on the issue of whether or not a number of invoices issued by the applicant constituted payment claims under the CC Act. 33 As it turned out, this was not a point that it was necessary for the Tribunal to determine. The Tribunal found that the respondent was not a party to the contract with the applicant and, consequently, that the adjudication application had never been properly served, but went on to indicate that if that decision is wrong, in any event, uncertainty as to the contractual terms had the effect that the application would fall to be dismissed on the basis that it was not possible to fairly make a determination because of the complexity of the matter. 34 There is therefore no finding of the Tribunal to support the respondent's submission that costs should be awarded because of the pursuit of the application to hearing in the light of these communications, nor that the second submissions were obviously unmeritorious on this point. To the contrary, the point is arguable either way, but without being able to determine the contractual terms which applied and which might regulate how to make a payment claim, this issue between the parties could not be resolved. 35 The respondent further submits that costs should be awarded because the proceedings had been pursued at the same time as a second adjudication application, commenced by the applicant against a party identified in these proceedings by the respondent as the party with whom the applicant had contracted. It is difficult to understand why the respondent should be critical of this course. The applicant had commenced adjudication against the respondent, thinking that (Page 11)
the respondent was the correct party. An adjudicator had held otherwise and the applicant had sought to review that decision. 36 The respondent's submissions include the adjudication determination which was handed down in favour of the applicant. But the applicant could not have been sure that it would succeed in those proceedings, given the technicality of adjudication proceedings and the obvious difficulties highlighted in these proceedings. However, having succeeded in the later adjudication, if this review had succeeded, it would obviously have been inappropriate to pursue this matter on its referral back to the adjudicator. 37 The adjudication process is not one which would have permitted the applicant to commence adjudication against this respondent and the other respondent in the later adjudication proceedings, in the alternative, as could have been done in court proceedings. While the applicant might have been able to delay the second adjudication until the review proceedings had been finalised, depending on when it had served a payment claim (which is not known), it was not an abuse of these proceedings to have persisted with the review. 38 The original basis of the application appeared flawed. Concerns were raised by the respondent's legal representatives on 13 December 2011 shortly prior to the first directions hearing. Further objection was then taken on 17 January 2012 to the original submissions filed by the applicant. The applicant was not then legally represented in the proceedings. Mr Sinclair's status is, at best, unclear. As soon as the applicant had engaged its current legal representatives, it was clear the applicant abandoned the original basis of the application and the offending submissions. This was within two days of the latter objections. The order sought referring the adjudication back to a new adjudicator was obviously contrary to s 46(2) of the CC Act and was not pursued at the hearing. The claim for this order says more about the applicant's understanding, or the understanding of Mr Sinclair, of the legislation than anything else. It could not have been regarded by the respondent as a significant issue. 39 In the result, while the respondent is the substantially successful party in relation to the review proceedings, there is an insufficient basis upon which to move from the usual costs regime that each party pay its own costs. (Page 12)
Orders 40 For the above reasons, the Tribunal will cause orders to issue as follows: 1. The respondent's applications: |