European Window Co Pty Ltd v Day

[2021] VCC 1607

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

BUILDING CASES LIST

Case No. CI-20-04820

EUROPEAN WINDOW CO. Pty Ltd (ACN 120 232 519)	Plaintiff
v
MALCOLM WILLIAM STUART DAY	First Defendant
and
HAITHAM ROD EL-HASSAN also known as HAITHAM RIFAI	Second Defendant

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JUDGE:	Her Honour Judge Burchell
WHERE HELD:	Melbourne
DATE OF HEARING:	On the papers
DATE OF RULING:	22 October 2021
CASE MAY BE CITED AS:	European Window Co Pty Ltd v Day & Anor
MEDIUM NEUTRAL CITATION:	[2021] VCC 1607

RULING
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Subject:COSTS

Catchwords:              Failure to attend mediation – lack of preparation for mediation – case transfer application

Legislation Cited:      Civil Procedure Act 2010 (Vic) ss20, 22, 24, 25, 28(1) and 29(1); County Court Act 1958 (Vic) s78A; Court (Case Transfer) Act 1991 (Vic) Pt 3; Jurisdiction of Courts (Cross-Vesting) Act 1987 (Vic) s5(2); County Court Civil Procedure Rules 2018 r63A.02, r63A.03(1), r63A.03(2) and 63.20.1; Courts (Case Transfer) Rules 2011 (Vic) reg 13

Cases Cited:Harris, Sam Edwin Leigh v Cigna Insurance Australia Ltd [1995] FCA 905; Duffy & Anor v Marr & Anor [2017] VSC 384; Setka v Abbott (No.2) [2013] VSCA 376; Dale v Clayton Utz (No 3) [2013] VSC 593; Fiduciary Ltd v Morningstar Research Pty Ltd [2002] NSWSC 432; Elsmore Resources Ltd [2014] NSWSC 1390; Hargood v OHTL Public Co Ltd (No 2) [2015] NSWSC 511

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr L Hogan	Pointon Partners
For the Defendants	--	Madison Marcus Law Firm

HER HONOUR:

Introduction

1The plaintiff (“EW”) brought a proceeding in this Court claiming that it was entitled to recover the amount of $330,001.22 as loss and damage suffered under breach of contract dated 21 February 2020 by the defendants (“Day & Rifai”), who were counterparties to the contract.

2The parties were scheduled to participate in mediation on 26 March 2021 by court order, but the first defendant (“Day”) did not attend. This gave rise to the issue of the costs of the mediation.

3Day & Rifai filed a case transfer application (“Transfer Application”) on 28 May 2021 to have the proceeding referred to the Supreme Court of Victoria under Part 3 of the Courts (Case Transfer) Act 1991 (Vic) (“Case Transfer Act”). Day & Rifai also filed and served a summons on 18 June 2021 seeking, inter alia, a stay of the proceeding pending the determination of the Transfer Application and leave to file and serve an amended defence and counterclaim. The determination of the Transfer Application was that the proceeding should not be transferred to the Supreme Court of Victoria. This gave rise to the issue of costs of the Transfer Application.

4EW seeks costs of the mediation and Transfer Application on the basis that costs should follow the event, to be taxed immediately.

5Day & Rifai submit that there be no order as to costs of the mediation or Transfer Application, or that costs be costs in the proceeding.

6For the reasons below, I will order that Day & Rifai pay EW’s costs of the mediation thrown away and of and incidental to the Transfer Application on a standard basis to be taxed in default of agreement immediately. 

Background

7By statement of claim dated 29 October 2020, EW claimed recovery of the sum of $330,001.22 owing from Day & Rifai in the course of supplying and installing windows at a property situated at 24 Pearson Street, Balmain East, New South Wales.

8On 12 May 2021, the parties attended a case conference where Day & Rifai gave notice of their intent to make an application for a stay of the proceeding and its transfer to the District Court of New South Wales or any other forum of competent jurisdiction. Day & Rifai filed their Transfer Application on 28 May 2021 and applied by summons dated 17 June 2021 for a stay of the proceeding pending the making of an order under Part 3 of the Case Transfer Act. The Transfer Application was determined on 26 August 2021.

9On 14 September 2021, I made timetabling orders for the parties to exchange and file written submissions by 27 September 2021 as to the costs of Day & Rifai’s Transfer Application and non-attendance of the mediation held 26 March 2021, and a document setting out their legal costs and expenses to date, an estimate of the anticipated costs to trial and the likely costs they will be ordered to pay if unsuccessful at trial. I also ordered that Day & Rifai file and serve any further affidavit material in support of their application (filed on 18 June 2021) to amend their defence and counterclaim. Day & Rifai failed to file and serve these documents within the specified time, and without providing any reasons, requested an indulgence that they be permitted to file and serve their submissions by 8 October 2021 at 5.00pm, which was the date of the hearing of the summons. EW objected to this extension of time. By orders dated 7 October 2021, Day & Rifai were to file and serve their submissions and proposed amended defence and counterclaim by 7 October 2021 at 5.00pm, which they failed to do.

10Following the hearing of the summons on 8 October 2021, I made orders that Day & Rifai file and serve their submissions as to costs by 13 October 2021 and proposed amended defence and counterclaim by 22 October 2021. Day & Rifai filed their submissions late on 14 October 2021. EW provided a brief response to Day & Rifai’s submissions by email correspondence dated 20 October 2021 in lieu of formal reply submissions.

Legal Framework

11The Court has general discretion of costs pursuant to s78A of the County Court Act 1958 (Vic) and r63A.02 of the County Court Civil Procedure Rules 2018 (“the Rules”). Section 28(1) of the Civil Procedure Act 2010 (Vic) (“CPA”) provides that “exercising any power in relation to a civil proceeding, a court may take into account any contravention of the overarching obligations”. Section 28(1) of the CPA provides that “without limiting subsection (1), in exercising its discretion as to costs, a court may take into account any contravention of the overarching obligations”.

12Rule 63A.03(1) and (2) of the Rules provides that the Court may in any proceeding exercise its power and discretion to award costs at any stage of the proceeding and the costs unless otherwise ordered shall be paid forthwith.

13Rule 63.20.1 of the Rules provides:

If an order for costs is made on an interlocutory application or hearing, the party in whose favour the order is made shall not tax those costs until the proceeding in which the order is made is completed, unless the Court orders that the costs may be taxed immediately. 

14Section 29(1) of the CPA entitles the Court to issue costs against a party for the benefit of another party where the overarching obligations are breached. The relevant overarching obligations referred to by EW in its submissions included obligations to:

(a) cooperate with the parties to a civil proceeding and the court in connection with the conduct of that proceeding (s20 of the CPA);

(b) use reasonable endeavours to resolve a dispute by agreement between the persons in dispute (s22 of the CPA);

(c) use reasonable endeavours to ensure that legal costs and other costs incurred in connection with the civil proceeding are reasonable and proportionate the complexity or importance of the issues in dispute and the amount in dispute (s24 of the CPA);

(d) use reasonable endeavours in connection with the civil proceeding to act promptly and minimise delay (s25 of the CPA).

15The courts have recognised that a departure from the ordinary rule requires one or more of the following factors:

(a)   Because of the conduct of the unsuccessful party;

(b)   Because of the likely delay before the final completion of the proceeding; and

(c)   Because the interlocutory application involves a separate or discrete issue.[1] 

[1] Dale v Clayton Utz (No 3) [2013] VSC 593 at [65] (“Dale”).

Costs of the mediation

16EW seeks orders dealing with costs of the mediation in this proceeding on the basis that:

(a)   Day did not appear at the mediation; and

(b)   Day & Rifai were not ready to proceed.

17EW submits that Day’s failure to appear at the mediation and Day & Rifai’s failure to be ready for the mediation to proceed breached the overarching obligations under the CPA. The consequence of those breaches led to EW wasting the following costs:

(a)   the costs incurred by EW’s counsel and instructing solicitors in respect of preparing for the mediation;

(b)   the appearance costs of counsel and EW’s instructing solicitors; and

(c)   half of the costs of the mediator’s fee.

18Day & Rifai submit that there should be no order as to costs of the mediation or that costs be costs in the proceeding. They provide the following reasons:

(a)   Day had given authority and responsibility to the second defendant (“Rifai”) to settle the dispute in accordance with paragraph 7 of his Honour Judge Woodward’s orders made on 25 February 2021 (“25 February 2021 Orders”) with clause 3.2(c) of the Mediation Agreement. Rifai was present;

(b)   Day & Rifai attended the mediation in good faith and were ready, willing and able to settle the dispute;

(c)   Day & Rifai are represented by the same solicitor; and

(d)   Day was available by audio-visual means to participate as required.

19The mediation certificate dated 8 April 2021 specified that the mediation was “not held” and “mediation commenced but could not proceed as first defendant did not appear and defendants generally not ready.” Day & Rifai submit that the mediation certificate is somewhat contradictory and does not actually reflect the events which occurred at the mediation. They do not provide substantive reasons to support this submission, but simply note that they are not at liberty to make further submissions regarding the mediation certificate and it would likely contravene the Mediation Agreement and the 25 February 2021 Orders. Day & Rifai argue that the mediator did not have consideration to clause 3.6 of the Mediation Agreement, which provides that “[a] party may withdraw from the mediation at any time”, and that they were not given an opportunity to respond to the mediator’s certificate. Day & Rifai also submit that the parties must have or should have known that in attending a mediation prior to either party filing its evidence may have resulted in the mediation being adjourned to a later stage in the proceedings. Day & Rifai did not submit any notice of non-attendance of the mediation.

20EW responds to Day & Rifai’s submissions, stating that:

(a)   Day could not ‘withdraw’ from a mediation he had never participated in. To do so would be contrary to the Court’s orders.

(b)   No evidence has been provided that Day had provided authority to Rifai to settle the dispute.

(c)   Day & Rifai’s solicitors have been aware of the mediator’s certificate and its contents since 8 April 2021 when it was provided to the Court. No issue has been taken with the issue of the certificate until 13 October 2021, some six months later.

21All parties to a proceeding must attend a court ordered mediation and must participate in the process in a bona fide manner. The Court made orders by consent in this matter for the parties to attend an early mediation of the dispute. Paragraph 8 of the 25 February 2021 Orders refers to the parties’ agreement to “participate in the mediation in good faith and engage in genuine negotiations aimed at settling the proceeding, including by making reasonable offers or proposals for settlement and giving due consideration to any such offers or proposals made by another party or by the mediator.” Further, I do not accept Day & Rifai’s position that an early mediation may result in the risk of an adjournment. Many parties forensically decide to undertake an early alternative dispute resolution to avoid escalating legal fees and to come to a commercial outcome that is faster and more cost-effective than proceeding through a lengthy court process to trial. Thus, parties often agree to go to mediation before incurring the expense of preparing witness statements and expert reports.

22In the present case, there is no evidence that Day had given Rifai authority to settle the dispute at the mediation. The Court expects that the parties discuss such arrangements with their counterparts and the mediator prior to the mediation date and to seek consent in relation to a party proposing to attend remotely. Mediations tend to be more successful if all parties are in attendance personally as they are personally involved in the emotion of the negotiations and options offered.

23In my view, by failing to take these steps, and by Day’s non-attendance at the mediation on 26 March 2021, Day & Rifai’s failure to provide notice of non-attendance and their lack of preparation for the mediation, Day & Rifai have not acted with “competence and diligence”, thereby requiring EW to incur significant costs over and above those which would otherwise have been incurred by reason of the costs thrown away.[2] As such, there has been a breach by Day & Rifai of the overarching obligations under the CPA as submitted by EW.

[2] Harris, Sam Edwin Leigh v Cigna Insurance Australia Ltd [1995] FCA 905.

Costs of the Transfer Application

24EW also seeks the costs of the Transfer Application on the basis that costs should follow the event. Day & Rifai’s Transfer Application failed, and as EW submits, was ultimately bound to fail.

25In their submissions filed on 14 October 2021, Day & Rifai submit that there be no order as to costs of the Transfer Application or that costs be costs in the proceeding.

26On 23 June 2021, Day & Rifai made submissions regarding the Transfer Application. The Transfer Application was made as Day & Rifai intended to seek orders in the Supreme Court of Victoria for the transfer of proceedings to New South Wales pursuant to s5(2) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Vic) (“Cross-Vesting Act”). Day & Rifai submitted that the Supreme Court of Victoria has exclusive jurisdiction over determinations under the Cross-Vesting Act, and that the County Court of Victoria has no jurisdiction to make determinations to transfer proceedings to other states under the Cross-Vesting Act. Day & Rifai submitted that the Supreme Court’s exclusive jurisdiction was itself sufficient to grant the transfer from the County Court to the Supreme Court.

27A notice of determination was made in the Transfer Application on 26 August 2021 that the proceeding should not be transferred to the Supreme Court of Victoria in accordance with reg 13 of the Courts (Case Transfer) Rules 2011 (Vic). Day & Rifai requested written reasons for the Court’s determination, but received notice that no written reasons would be provided as, upon a determination being made under s17(3) of the Case Transfer Act, the designated judicial officer (“DJO”) of the court in which the proceeding is pending shall cause notice of the determination to be given to the parties to the proceeding and a copy of the notice to be filed in the proceeding. This was done.

28Section 16(1) of the Case Transfer Act provides that:

(1)     A proceeding may only be transferred under this Part if in the opinion of the designated judicial officers—

(a)     the transferor court does not have exclusive jurisdiction to hear and determine it; and

     (b)   the transferee court has the appropriate skill, experience and authority to hear and determine it having regard to its gravity, difficulty and importance; and

(c)     it is just and convenient that it be transferred.

29In determining not to transfer the proceeding, the legislative criteria set out in s16(1) of the Case Transfer Act had not been met.

30EW seeks its costs of the application on the basis that costs follow the event. I agree. 

Timing of Taxation

31EW submits that pursuant to s29(1)(b) of the CPA, EW should be awarded its costs immediately. Section 29(1)(b) of the CPA states the Court may make “an order that the legal costs or other costs or expenses of any person be payable immediately and be enforceable immediately”.

32Day & Rifai submit that if costs are awarded in favour of EW with respect to the mediation or Transfer Application, it should be on the “ordinary basis” and be assessable and enforceable after the conclusion of the proceedings.

33Dixon J in Duffy & Anor v Marr & Anor [2017] VSC 384 (“Duffy”), citing Setka v Abbott (No.2) [2013] VSCA 376, set out the following factors which might justify an order for immediate taxation:

(a)   if there is a prospect of considerable delay in completion of the proceedings;

(b)   where the issue the subject of the interlocutory order is discrete from what will finally require determination; and

(c)   where the party against whom the order was made has been guilty of unsatisfactory conduct, that is, conduct that was unreasonable, reprehensible or involving a want of competence and diligence.

Delay

34EW submits that there is a real prospect of considerable and continued delay in the proceeding, noting that the proceeding was commenced on 29 October 2020 and, while the pleadings have closed, Day & Rifai have filed an application to amend their defence and to add a counterclaim out of time. On 8 October 2021, I granted leave to file an amended defence and counterclaim and made further timetabling orders as to pleadings and discovery. 

35EW further submits that to date, Day & Rifai have prolonged the proceeding by missing multiple deadlines, failing to adhere to the orders made by the Court and requiring multiple adjournments. EW states that if this pattern of behaviour is to continue, then it is likely that the proceeding will continue to be delayed by the failure of Day & Rifai to meet court deadlines.

36Day & Rifai submit that there is no real prospect of considerable and continued delay, noting that in early 2021 the matter was listed for a final hearing in around March 2022, and that final procedural orders were made on 8 October 2021 to prepare the matter for the hearing in March 2022.

37In my view, Day & Rifai’s repeated pattern of behaviour of failing to comply with court orders and respond to communication from EW and the Court does demonstrate a real prospect of considerable and continued delay in the proceeding.

38Further, EW has been out of pocket from the costs thrown away by reason of the mediation that did not proceed since 26 March 2021. The current trial date is fixed for 7 March 2022 — almost 12 months after the event. 

39Additionally, I agree that there is a likelihood of there being a considerable lapse of time between the Transfer Application and the final determination of the proceeding, making it unfair to deprive the successful party of the benefit of their costs order for a lengthy period.[3]

[3] Dale at [68].

40I conclude that this case falls within the principles set out above and it is fair and just that EW’s costs be taxed immediately on this ground.

Discrete Issue

41EW submits that the mediation and the Transfer Application were discrete from the remaining issues for determination in this proceeding. In EW’s submission, this matter has been largely “on hold” since May 2021 when the Transfer Application was filed and the costs associated with the Transfer Application and mediation are similarly discrete and readily identifiable such that any interlocutory taxation will be relatively straightforward.

42Day & Rifai submit that EW has not made submissions to assert that the mediation or the Transfer Application is discrete from what will finally require determination, and that there is no reasonable basis to assert that the mediation is discrete from what will finally require determination.

43I accept EW’s submission that issues associated with the Transfer Application and mediation are discrete from the remaining issues for determination in this proceeding. The costs of the mediation and Transfer Application are readily identifiable such that interlocutory taxation is relatively straightforward.

Unsatisfactory Conduct

44EW submits there was unsatisfactory conduct by Day & Rifai by:

(a)   failing to prepare for and attend the mediation; and

(b)   failing to meet and adhere to and respect court deadlines.

45In EW’s submission, Day & Rifai’s failure to attend the mediation and prepare for the mediation was unreasonable such that it constituted unsatisfactory conduct. EW also submits that Day & Rifai’s failure to make their application on the correct legislation and to the correct court is a departure from the usual position.

46Day & Rifai deny that they have, at any time over the course of these proceedings, been guilty of unsatisfactory conduct — that is, conduct that was unreasonable, reprehensible or involving a want of competence and diligence.

47Day & Rifai make submissions against the making of a forthwith cost order, reasoning that:

(a) The underlying purpose of the Rules is to avoid multiple taxations and to leave taxation of costs until all issues of costs between the parties have been resolved.[4]

(b)   The discretion to order the immediate payment of interlocutory costs is wide; “[i]n the end, the demands of justice are the only determinant”.[5]

(c)   Because an order that costs be paid forthwith is an exception, it should only be made in a case that is out of the ordinary, as such an order “has the capacity to stultify proceedings particularly brought by persons with limited resources, and also has the risk of operating unfairly where, over the course of the proceedings, there may be orders which are made that one or other party should pay the costs of the other from time to time”.[6]

(d) The underlying purpose of the Rules is to avoid multiple taxations and to leave taxation of costs until all issues of costs between the parties have been resolved.[7]

[4] Dale at [58].

[5] Fiduciary Ltd v Morningstar Research Pty Ltd [2002] NSWSC 432 at [7].

[6] Elsmore Resources Ltd [2014] NSWSC 1390 at [5]; Hargood v OHTL Public Co Ltd (No 2) [2015] NSWSC 511 at [8].

[7] Duffy at [19].

48Day & Rifai rely on the facts in Duffy, which involve a defendant failing on four occasions over a period of four months to serve a properly pleaded defence. In that case, the court held that the defendants’ conduct did not warrant an order for immediate taxation. EW refers to the principles set out in Duffy in relation to the discretion to order immediate taxation. 

49Day & Rifai further submit that a mediation which did not result in a settlement and an unsuccessful interlocutory application does not constitute conduct that warrants an order for immediate taxation. Day & Rifai state that it is not uncommon for matters not to settle at the first attempt of mediation, especially when they are held so early in the proceedings and deny that the outcome of the mediation was the result of unsatisfactory conduct.

50As set out above, it is the failure of Day & Rifai to communicate its position in relation to the mediation in advance that is central to the criticism of Day & Rifai’s conduct. 

51Further, Day & Rifai do not provide any submissions as to their failure to meet and adhere to and respect court deadlines. For the reasons set out above, the conduct of Day & Rifai at the mediation is a relevant factor that warrants an order for immediate taxation. 

Conclusion

52In my view, the principles set out in Dale v Clayton Utz (No 3)[8] have been satisfied in the present case. EW should be awarded the costs of the mediation and the Transfer Application on a standard basis to be taxed in default of agreement immediately.

[8] [2013] VSC 593.

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Certificate

I certify that these 13 pages are a true copy of the ruling of her Honour Judge Burchell delivered on 22 October 2021.

Dated: 22 October 2021

Andrea Ko

Associate to Her Honour Judge Burchell