F and J Investment Assets Pty Ltd v Paul Etcell t/as Ikonic Homes (No 2)

[2021] VCC 2070

IN THE COUNTY COURT OF VICTORIA
AT MELBOURNE
COMMERCIAL DIVISION Revised
Not Restricted
Suitable for Publication

BUILDING CASES LIST

Case No. CI-19-00242

F & J INVESTMENT ASSETS PTY LTD	Plaintiff
v
PAUL ETCELL t/as IKONIC HOMES	Defendant

---

JUDGE:	HIS HONOUR JUDGE COSGRAVE
WHERE HELD:	Melbourne
DATE OF HEARING:	23,24,25 and 29 November,1 and 2 December
DATE OF RULING:	17 December 2021
CASE MAY BE CITED AS:	F & J Investment Assets Pty Ltd v Paul Etcell t/as Ikonic Homes (No 2)
MEDIUM NEUTRAL CITATION:	[2021] VCC 2070

RULING
---

Subject:COSTS  

Catchwords:              Indemnity costs

Legislation Cited:      County Court Civil Procedure Rules2018 (Vic)

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	R A Harris	MGA Lawyers
For the Defendant	J R Gurr	Ward & Co

HIS HONOUR:

Introduction

1On 8 December 2021 I handed down my reasons for judgment allowing Etcell to file a further amended defence and counterclaim (“the principal reasons”). I directed that the parties confer in an attempt to agree upon orders giving effect to those reasons. The parties agreed to orders save for the issue of costs. In this ruling, I use the same definitions as appeared in the principal reasons.

Plaintiff’s submissions

2F & J Investment seeks an order that Etcell pay its costs occasioned by the amendment and the adjournment of the trial. It says that the costs should be paid on an indemnity basis and include both the sitting and non-sitting days from 23 November to 8 December as well as one day of the weekend of 27-28 November together with the costs of the amendment application.

3F & J Investment argued that because of the defendant’s opening, it sought leave to amend its claim to join Jetmir and Florije Mustafa in their capacity as trustees of the MP Trust. When the application was heard, F & J Investment effectively agreed to concede that the building contract in relation to the property was made on 4 October and not 26 October 2017 as previously alleged. However, when the court sought clarification from Etcell, he maintained that his case was that the building contract was made on 26 October and not earlier. Given this, F & J Investment withdrew the application and told the court that it was content to proceed with the pleadings as then filed.

4F & J Investment submitted that this was as clear-cut a case as one would find where the costs occasioned by the amendment, which included wasted costs due to the adjournment of the trial, were caused solely by the conduct of the defendant.

5F & J Investment contended that the costs should be awarded on an indemnity basis for the costs of the amendment to the defence and counterclaim and the costs thrown away by reason of the adjournment.  It contended that Etcell had ample time to make the change earlier. The proceeding had been subject to significant judicial supervision since July 2021 with orders made on four occasions by a Judge or Judicial Registrar between that time and November 2021.

6Further, F & J Investment submitted that the time allotted for the hearing had been wasted due to the grant of leave to amend. It said that because Etcell obtained leave and could alter the pleading to a form more like the pleading filed in December 2020, the plaintiff now sought to amend and the case could not go forward as previously constituted.

Defendant’s submissions

7Etcell for his part seeks the following orders:

(a)Pursuant to Rule 63A.17 of the County Court Civil Procedure Rules 2018 (“the Rules”), the plaintiff shall pay the defendant’s costs of the application for leave to amend the further amended defence and counterclaim.

(b)The parties’ costs of and occasioned by the amendment to the further amended defence and counterclaim are otherwise costs in the proceeding.

(c)The plaintiff shall pay the defendant’s costs of and incidental to the plaintiff’s abandoned applications for leave to amend its second further amended statement of claim dated 9 July 2021.

(d)The defendant’s costs of the first and second days of the hearing are reserved.

8Etcell said that F & J Investment should pay the costs of his application to amend. The amendment arose from existing facts and the clarification which the defendant made was said to be open on the material. Etcell said that there were no extraordinary circumstances weighing against the grant of leave and the plaintiff had established no relevant prejudice. Etcell argued that F & J Investment should have consented to the amendment without the need for a hearing. He said that because the court ultimately gave leave, costs should follow the event. Etcell denied that the proposed joinder of Jetmir and Florije was influenced by his amendment.

9Etcell also submitted that F & J Investment should pay his costs of the application to amend its statement of claim. Initially, F & J Investment delivered a proposed claim and then a newer proposal which, inter alia, accepted the point made (so it thought) by Etcell that the building agreement was entered on 4 October 2017. Because the application to amend was abandoned, Etcell sought the costs of days 3 and 4 of the hearing, being 25 November and 29 November, plus the costs of his written submissions delivered on 26 November.

10Finally, Etcell contended that his costs of the first two days of the hearing should be reserved. He argued that the plaintiff’s case on termination, as pleaded and opened, could not have succeeded. He said that if Jetmir and Florije were now joined to the proceeding, then the costs of the openings will not have been wholly wasted.

Consideration

11This trial commenced  on 23 November 2021. After openings, the plaintiff applied to amend its statement of claim. Ultimately, it abandoned its modified application when Etcell stated that his case was premised on the building contract being made on 26 October 2017 and not 4 October 2017.

12Subsequently, Etcell sought to amend his defence and counterclaim and I allowed time for the framing of the amendment and a response by F & J Investment. As noted above, I granted this application.

13In relation to the costs of Etcell’s amendment application, in my view, they must be borne by Etcell. The fact that the amendment application was granted and the plaintiff’s opposition was unsuccessful does not automatically mean that F & J Investment should pay the costs of the application. First, Etcell sought and obtained a significant indulgence. When a party obtains the benefit of an order granted in the discretion of the court, it is common that the successful party bears the costs of the indulgence. Secondly, it is wrong to say that F & J Investment should have consented to the application. The plaintiff was justified in opposing the application. There were reasonable grounds to support its position and its opposition was not irresponsible. The consequences of allowing the amendment have been notable because of the extra delay in the trial and the potential additional parties.

14The defendant’s application to amend was made during the hearing on material which was not as detailed as it might have been and the trial did not continue. Given the context, I consider that the court should “otherwise order” for the purposes of rule 63A.17 of the Rules. In the circumstances, the plaintiff should have the costs of the defendant’s application to amend and the costs of and occasioned by the amendment to the defendant’s pleading. The extent of those costs would include:

·part of 29 November 2021 when the court adjourned around 1:30pm for the defendant to finalise its amendment together with supporting submissions;

·30 November 2021 when, upon receipt of the defendant’s materials, F & J Investment prepared submissions in opposition;

·1 December 2021 when the defendant made its application in court; and

·possibly part of 2 December 2021 when the court reconvened briefly to consider a matter which the plaintiff said it overlooked in argument the previous day.

15As to the time between the conclusion of the argument and the delivery of judgment on 8 December 2021, for which the plaintiff claims, I consider that the plaintiff should not recover costs for the intervening work days. While it is unfortunate that the days were lost, such events are part of the everyday risk of litigation. It is not appropriate for the defendant alone to bear the cost of the time taken to prepare the judgment.

16The next issue is the scale of costs recovery. The amendment application was not one, in my view, where the defendant acted vexatiously or deliberately sought to disrupt the proceeding by making its application at the time and in the circumstances he did. Nonetheless, the defendant has seriously disrupted the proceeding and the trial will now be heard around September 2022. The precise date depends upon a number of factors. As a result of the grant of the application, the time and money spent in preparing for trial in November 2021 will be largely wasted. The legal representatives, particularly counsel, will need to refocus their attention on the detail of the case in about nine months to present it again at court.

17The plaintiff is an innocent victim in this scenario. The court’s discretion was exercised in the defendant’s favour and it has resulted in considerable cost to the plaintiff. In this context where the defendant has obtained the benefit of the order it sought, I do not consider that the plaintiff should be significantly out of pocket. It has been placed in an invidious position through no fault of its own. The defendant made his application late in the history of this proceeding. Indeed, he made the application a number of days into the trial. The defendant had plenty of prior opportunity to amend. Accordingly, in my opinion, the plaintiff should recover the costs of and incidental to, or caused by, the amendment application on an indemnity basis, at least insofar as it concerns the costs of the hearing and the cost of the resultant delay. These costs should include an allowance for having to prepare the case for trial again next year. When the estimated duration of the hearing is 10 days and the court book material exceeds 7000 pages, I regard six days as a reasonable allowance for refreshing counsel’s mind about the case. In reality, I would not be surprised if the preparation time were rather greater. The Costs Court should also make some allowance for the solicitor too. While costs will not always be sufficient compensation for the prejudice caused by delay, they should go some way to addressing the plaintiff’s situation.

18The defendant should pay the plaintiff’s costs of, and occasioned by, the amendment of its pleading on a  standard basis. These costs are limited to the pleading consequences of the defendant’s application.

19I am satisfied that the plaintiff’s amendment application was brought about by the opening of the defendant in which reference was made to the essential elements of the building contract being agreed on 4 October 2017. At the time, counsel for the defendant said the essential terms of the building contract were agreed at a meeting on 4 October at the defendant’s offices in Prahran. Counsel stated that, because the parties were agreed on the essential terms and it was just a case of “dotting the Is and crossing the Ts”[1] on the peripheral aspects of the contract, we were in Masters v Cameron type territory. He noted that, in the days immediately after the meeting, “works commenced under the contract, payment claims were made and payment claims were paid and those payment claims were made and paid in accordance with the terms of the contract that was ultimately signed on 26 October 2017”.[2] A hoarding was also erected around the property and the stage one building permit was sought on about 9 October 2017. The building permit application was completed and issued by Grimbos Building Surveyors and stamped as issued on 12 October 2017. This, said counsel, was “consistent with the parties having reached an agreement on the key terms as at 4 October 2017”.[3]

[1] T90.

[2] Ibid.

[3] T92.

20The plaintiff (and indeed I) thought, based on the opening, that the defendant was seeking to make some substantial point about the contract date by referring to the events of 4 October 2017. That the plaintiff launched its application to amend and then abandoned it when the defendant insisted that there was no intent to vary the contract date of 26 October 2017 indicated the misunderstanding which attended the situation. In these confusing circumstances I consider that the costs associated with the plaintiff’s abandoned amendment proposal should lie where they fall and there should be no order against or in favour of either party.

21With respect to the parties’ costs of the openings, they should be reserved. Given that I heard no evidence and subsequent argument regarding the totality of the case, I am not prepared to find that the plaintiff’s case as presented must inevitably have failed. If only Jetmir and Florije are joined, then the openings might not have been entirely wasted but I would expect that supplementary openings would be warranted. If former professional advisors are joined as well, I consider there is a strong argument that the proceeding will have changed sufficiently that it would be appropriate to commence the trial afresh. Indeed, even if the only change is the addition of Jetmir and Florije , it would probably be preferable to begin afresh.

22This case is one which should be subject to close monitoring by the court to ensure as far as possible, that all preparatory steps are taken in a timely fashion and the matter is ready to proceed on its next allotted date.

Conclusion

23For the reasons set out above, I order that:

1.    the trial on the question of liability is adjourned to a date to be fixed on or after 5 September 2022 on an estimate 10 days.

2.    The defendant has leave to file and serve by 4.00 pm on 22 December 2021 an amended defence and counterclaim substantially in the form of the proposed second amended defence and counterclaim dated 30 November 2021.

3. The plaintiff has leave pursuant to Rule 9.06 of the County Court Civil Procedure Rules 2018 to join:

(a)as plaintiffs, Jetmir Mustafa and Florije Mustafa; and

(b)as defendants, such of its advisors (including MJ Business Solutions and Boutique Legal) as it may wish,

and to amend the Writ filed herein and make such amendments to its second further amended statement of claim dated 9 July 2021 as are necessary by reason of such joinder and the filing of the defendant’s second amended defence and counterclaim.

4.    The plaintiff shall file and serve by 4.00 pm on 18 February 2022 any further amended pleading in accordance with order 3.

5.    The matter is listed for further directions on the first available date after 4 March 2022 before a Judicial Registrar of the Commercial Division.

6.    Reserve liberty to the parties to apply by email to the Commercial Registry [email protected] for further directions upon giving reasonable notice to all other parties.

7.    The defendant pay the plaintiff’s costs of and incidental to the defendant’s application to amend its defence and counterclaim dated 20 July 2021, such costs to be taxed on an indemnity basis in default of agreement.

8.    The defendant pay the plaintiff’s costs of and occasioned by the defendant amending its defence and counterclaim dated 20 July 2021, such costs to be taxed on a standard basis in default of agreement.

9.     The parties’ costs of their openings at the trial be reserved.