Ding v First Avenue Homes

[2021] VCC 1066

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

BUILDING CASES LIST

Case No. CI-21-01897

LI DING	Plaintiff
v
FIRST AVENUE HOMES PTY LTD (ACN 167 851 176)	Defendant

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JUDGE:	Her Honour Judge Burchell
WHERE HELD:	Melbourne
DATE OF HEARING:	On the papers
DATE OF RULING:	5 August 2021
CASE MAY BE CITED AS:	Ding v First Avenue Homes
MEDIUM NEUTRAL CITATION:	[2021] VCC 1066

RULING
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Subject:CONTRACTS – BUILDING AND CONSTRUCTION – DOMESTIC BUILDING

Catchwords:              Building and construction – abuse of process – application to stay a proceeding on the basis that it is a “domestic building dispute” under the Domestic Building Contracts Act 1995 (Vic) – definition of “builder” in the Act – work to which the Act relates

Legislation Cited:     Domestic Building Contracts Act 1995 (Vic) ss29(4), 57; Civil Procedure Act 2010 (Vic) ss7, 62; Australian Consumer Law and Fair Trading Act 2012 (Vic) s188(2); Building Amendment (Enforcement and Other Measures) Act 2017 s101; Building Act1993 (Vic); County Court Civil Procedure Rules 2018 Order 22; Building (Building Amendment (Enforcement and Other Measures) Act 2017 Transitional Regulations 2021

Cases Cited:Australians for Sustainable Development Inc v Minister for Planning (No 2) [2011] NSWLEC 70; Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd (No 2) [2009] NSWCA 12; Re the Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622

Ruling

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R Andrew	Colin Biggers & Paisley
For the Defendant	Mr A Morrison	Ward & Co. Legal Consultants

HER HONOUR:

Introduction

1The plaintiff (“Ding”) brought a proceeding in this Court claiming that he was entitled to recover the amount of $903,447.50 paid to the defendant (“First Avenue Homes”) under a major domestic building contract dated 15 October 2018 (“the Contract”) as a debt due pursuant to s 29(4) of the Domestic Building Contracts Act 1995 (Vic) (“the Act”). First Avenue Homes, the builder, was the counterparty to the Contract.

2First Avenue Homes applied by summons dated 15 June 2021 for the proceeding to be struck out as an abuse of process pursuant to s 188(2) of the Australia Consumer Law and Fair Trading Act 2012 (Vic) (“the ACL”), or alternatively, for a stay of the proceeding pursuant to s 57 of the Act. Alternatively, First Avenue Homes sought summary dismissal of the proceeding pursuant to s 62 of the Civil Procedure Act 2010 (Vic) and Order 22 of the County Court Civil Procedure Rules 2018 (“the Rules”).

3On 4 June 2021, Judge Woodward made timetabling orders for First Avenue Homes to provide its submissions by 18 June 2021, Ding to file his submissions by 9 July 2021 and reply submissions to be completed by 16 July 2021. The application was then to be heard on 23 July 2021. 

4In its reply submissions filed on 16 July 2021, First Avenue Homes referred to the passing of the transitional regulations under the Building (Building Amendment (Enforcement and Other Measures) Act 2017 Transitional Regulations 2021 (“Transitional Regulations”) issued on 29 June 2021 which had retrospective effect such that the post 1 July 2018 version of s 29 of the Act would not apply to a Domestic Building Manager (“DB-M”) who entered into a major domestic building contract between 1 July 2018 and 30 June 2021.

5By email dated 19 July 2021, Ding’s solicitors referred to First Avenue Homes’ reply submissions, which relied upon changes made in the previous few weeks, to the relevant statutory regime. In particular, Ding noted that it would appear that regulation 4 of the Transitional Regulations, made on 29 June 2021, and revoked two days later on 1 July 2021, had the result that his proceeding, which relied on section 29 of the Act, as amended by section 101 of the Building Amendment (Enforcement and Other Measures) Act 2017, was no longer viable. Accordingly, Ding no longer pursued his claim in the proceeding, and it followed that the hearing fixed for Friday 23 July 2021 was vacated.

6Ding submitted that, in the circumstances, given that he commenced the proceeding properly, but through no fault of his own, the changes to the statutory regime in recent weeks retroactively extinguished his cause of action and therefore the proceeding ought to be dismissed with no order as to costs.

7By email dated 22 July 2021, First Avenue Homes’ solicitors made an application for its costs of the proceeding. The parties agreed to the exchange of brief written submissions with the costs application to be determined on the papers.

Background

8By statement of claim dated 12 May 2021, Ding claimed recovery of the sum of $903,447.50 paid to First Avenue Homes in the course of construction of two new residential townhouses at 11 Olive Street, Hampton in the State of Victoria, 3188 (“the Property”). On 19 July 2021, while First Avenue Homes’ application to strike out or stay the proceeding was pending, Ding discontinued this proceeding, citing the impact of the Transitional Regulations which came into effect on 29 June 2021.

9First Avenue Homes seeks orders dealing with the costs of this proceeding in cascading order:

(a)   Ding pay First Avenue Homes’ costs of and incidental to the proceeding on the standard basis.

(b)   In the alternative to (a):

(i) Ding pay First Avenue Homes’ costs of and incidental to the proceeding on the standard basis from 29 June 2021; and

(ii) First Avenue Homes’ costs of and incidental to the proceeding be otherwise reserved for determination by VCAT.

(c)   In the alternative to (a) and (b), First Avenue Homes’ costs of and incidental to the proceeding be reserved for determination by VCAT.

10Ding argues that there ought to be no order as to costs. 

Legal Framework

11It is common ground between the parties that where a proceeding is discontinued or withdrawn, liability for costs shall be determined in accordance with Rule 63A.15 of the County Court Civil Procedure Rules 2018 (“Rules”). Rule 63A.15 provides:

Unless the Court otherwise orders, a party who discontinues or withdraws part of a proceeding, counterclaim or claim by third party notice shall pay the costs of the party to whom the discontinuance or withdrawal relates to the time of the discontinuance or withdrawal.

12As such, the usual order in the event of discontinuance is to order costs against the party discontinuing. 

13Both parties also refer to authorities indicating the general principle may be departed from where the proceeding has been rendered futile because of a supervening event. 

14Both parties cited the case of Australians for Sustainable Development Inc v Minister for Planning (No 2) (“Australians for Sustainable Development”)[1] per Biscoe J. In that case, his Honour referred to Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd (No 2)[2] per Allsopp P (Beazley and Campbell JJA agreeing). At [11] his Honour referred to the relevant principles as follows:

…[w]here there has been a supervening event that has so altered the subject matter of the dispute, the proper exercise of the discretion would ordinarily be to make no costs order unless: (a) one of the parties has acted so unreasonably that the other party should obtain the costs of the proceedings; or (b) even if the parties had acted reasonably, one party was almost certain to have succeeded if the subject matter of the dispute had not changed or been rendered inutile so that that party should obtain the costs of the proceedings.

[1] [2011] NSWLEC 70.

[2] [2009] NSWCA 12 at [5].

15First Avenue Homes submits that the Court cannot try a hypothetical action to determine who would have won. But, the Court may conclude that, even if both parties acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried.[3]

[3]Re the Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 (“Lai Qin”) at [624]-[625].

Section 29 of the Act

16At the time Ding commenced the present proceeding, s 29(1) provided, in effect, that a person must not enter into a major domestic building contract to carry out domestic building work for another person unless two requirements were both met. The first requirement was that the person be a registered building practitioner. The second requirement was that that person's registration authorised the person to carry out the work.

17Ding claimed that First Avenue Homes breached s 29(1) as it was not a “registered building practitioner” authorised to carry out the construction of the property at the time of entering into the Contract and hence Ding was entitled to recover the total sum of $903,447.50 paid as a debt due.

18In paragraph 7 of his statement of claim filed on 12 May 2021, Ding alleged that, as at 15 October 2018, First Avenue Homes was registered only in the class and category of “domestic builder (manager)”. During the course of constructing the Property, First Avenue Homes represented itself to be registered as a “domestic builder (unlimited)”, by assuming the registration number "DB-U 394246" despite there not being anyone registered under the Building Act1993 (Vic) with the number “DB-U 394246”; which is the registration number of the sole director of First Avenue Homes, Anthony Karlovic (“DB-M 39424”), with the “M” changed to a “U” and the number “6” added to the end of the number “39424”.

19First Avenue Homes was first registered as a “domestic builder (unlimited)” on 7 May 2020, at which time the Victorian Building Authority assigned it the registration number “CDB-U 66055”. This was after First Avenue Homes had completed construction on the Property on or about 3 April 2020. Ding hence alleged that First Avenue Homes breached s 29(1) on the basis that it held itself out as a “domestic builder (manager)”, which did not fit within the definition of a “registered building practitioner” under the Act.

20On 29 June 2021, the Transitional Regulations were passed. In effect, it changed the definition of “registered building practitioner” under the Act to include both “domestic builder (manager)” and “domestic builder (unlimited)”. Due to this change, Ding’s claim under s 29 was rendered futile and it withdrew its claim in this Court on 19 July 2021.

21Ding submits that he acted reasonably in this proceeding and until 29 June 2021, he was entitled to seek payment of a statutory debt in a court of competent jurisdiction. 

22First Avenue Homes argues that it is entitled to its costs because its third ground, set out in its summons, that the claim ought to be summarily dismissed, was made out following the passing of the transitional regulations on 29 June 2021. 

23The first ground is refused. Ding was entitled up to 29 June 2021 to seek the relief sought, being a unique statutory entitlement for debt under s 29 of the Act. Prima facie, it was also open to him to seek such relief in the jurisdiction of this court.

24Second, First Avenue Homes states that the futility of Ding’s claim ought to have been apparent from the passing of the Transitional Regulations on 29 June 2021. Nevertheless, it notes that on 8 July 2021, Ding filed his outline of submissions. Those submissions failed to pay regard to the impact of the new regulations. 

25First Avenue Homes contends that this put it to the cost of responding to Ding’s submissions, which it did on 16 July 2021. Ding discontinued the proceeding some 3 days later and First Avenue Homes says, alternatively, it should therefore receive its costs from the date the Transitional Regulations commenced.

26Ding rebuts First Avenue Homes’ justification for a costs order on the basis that he filed his submissions on 8 July 2021, and despite failing to pay regard to the new regulations, that fact alone cannot be grounds for ordering costs against a plaintiff in a case where, by retrospective change to relevant legislation, its cause of action has been revoked. 

27Ding notes that First Avenue Homes did not, on or shortly after 29 June 2021, advise him that his cause of action had been revoked. The amendments were referred to for the first time in First Avenue Homes’ reply submissions filed on 16 July 2021 pursuant to the Court’s orders. Ding says the defendant could have written to him before completing, filing and serving its reply submissions thereby avoiding the costs of their drafting.

28In my view, consistent with the obligations under the Civil Procedure Act 2010 (Vic), First Avenue Homes’ costs of the reply submissions could have been avoided had it contacted Ding’s solicitors as soon as the Transitional Provisions came to its attention. It chose not to do so and instead proceeded to incur costs in filing written submissions.

29Ground two is rejected.

30Third, First Avenue Homes submitted that if costs are to be reserved for determination by VCAT they ought to be its costs only.

31The parties acknowledged the differences in the circumstances where a County Court proceeding reaches its conclusion by way of orders made under s 57(2) of the Act; as opposed to those where a plaintiff concedes that, if it were to proceed with the claim in the County Court, it would be futile because its cause of action has been revoked by Parliament.

32First Avenue Homes says that in the present case, Ding’s cause of action has run its course and is not being “picked up” in the VCAT proceeding.  Therefore, costs of this proceeding ought to be dealt with discretely. 

33First Avenue Homes further states that if the Court does reserve the question of costs for determination in the VCAT proceeding, it contends that it should only be the defendant’s costs which are so reserved. First Avenue Homes argues it would be a considerable injustice if Ding, after having wrongly commenced this proceeding against the defendant, were subsequently able to recover his costs of so doing from First Avenue Homes via a costs order in the VCAT proceeding.

34Ding submits that it would not be appropriate to reserve costs to VCAT as there may be issues about its jurisdiction to hear and determine the costs, given the subject matter of the proceeding. Further this Court is best placed to assess how the costs of the proceeding ought to be awarded. 

35This is an unusual case. However, I accept Ding’s submissions that it was open to him to initiate the proceeding in this Court when he did so on 12 May 2021. The cause of action for a statutory debt was well founded until the retrospective nature of the recent Transitional Regulations was introduced. I further accept that as soon as Ding became aware of the effect of the Transitional Regulations, he promptly notified the Court and First Avenue Homes that he no longer pressed his claim. In my view, Ding’s conduct demonstrates a commitment to the overarching purpose of the Civil Procedure Act 2010 (Vic), and he has not acted so unreasonably that First Avenue Homes should obtain its costs of the proceeding.

36Further, given that the Court was deprived of hearing the merits of the defendant’s application, it is necessarily deprived of the factor that usually determines whether or not a costs order ought to be made.[4] Therefore, this Court cannot make a finding that First Avenue Homes was almost certain to succeed if the Transitional Regulations had not rendered the proceeding futile.[5]   

[4]        Lai Qin at [6].

[5]        Australians for Sustainable Development at [11].

37Ground three is rejected.

Conclusion

38Finally, I am satisfied that the present proceeding falls within the class of cases in which the usual cost order in the event of a discontinuance ought to be departed from, namely where the proceeding has been rendered futile because of a supervening event. In such cases, the usual order is that each party bears their own costs. 

39For the reasons above, the matter should be dismissed with no order as to costs. The Court will make orders giving effect to these reasons which will be distributed to the parties.

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Certificate

I certify that these 8 pages are a true copy of the ruling of her Honour Judge Burchell delivered on 5 August 2021.

Dated: 5 August 2021

Andrea Ko

Associate to Her Honour Judge Burchell