Falaras v Gouletsas
[2017] VSC 495
•31 August 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
JUDICIAL REVIEW AND APPEALS LIST
S CI 2016 03938
| SPIROS FALARAS | Applicant |
| v | |
| ILIAS GOULETSAS | Respondent |
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JUDGE: | KEOGH J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 26 June 2017 |
DATE OF JUDGMENT: | 31 August 2017 |
CASE MAY BE CITED AS: | Falaras v Gouletsas |
MEDIUM NEUTRAL CITATION: | [2017] VSC 495 |
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ADMINISTRATIVE LAW – Administrative decisions – Victorian Civil and Administrative Tribunal (‘VCAT’) – Jurisdiction of the VCAT under the Domestic Building Contracts Act 1995 – Leave to appeal – Extension of time – Delay – Unrepresented litigant in VCAT hearing – Failure to pay amounts in consent order – Misunderstanding whether sole director and registered building practitioner personally liable – Domestic Building Contracts Act 1995 s 55(1)(a) – Victorian Civil and Administrative Tribunal Act 1998 ss 93, 148(1) – application dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr W Thomas | Aitken Partners Pty Ltd |
| For the Respondent | Mr D Bongiorno | LFS Legal |
HIS HONOUR:
In June 2014 Mr Gouletsas and his wife Persefoni Gouletsas contracted with a builder for construction of a new dwelling on a property in suburban Melbourne. The contract named Elegant Homes and Developments, trading as Hotondo Homes Craigieburn, as builder and Mr Falaras as registered building practitioner. Late in 2014 it became apparent the builder was unable to complete the contract. An agreement was reached to terminate the contract on the basis that Mr and Mrs Gouletsas be paid an amount of just over $18,000. That amount remained unpaid.
In January 2015 Mr Gouletsas lodged an application pursuant to the Domestic Building Contracts Act 1995 with the VCAT claiming the outstanding amount owed pursuant to the agreement to terminate the contract. Mr Falaras was named as respondent to the VCAT application. That application came on for hearing before Member Eggleston at the VCAT on 18 March 2015. At the hearing the parties reached agreement that by 20 April 2015 Mr Falaras was to pay Mr Gouletsas an amount slightly in excess of $22,000. An order was made by Member Eggleston on 18 March in accordance with that agreement. Mr Falaras did not pay any part of the amount by the due date.
Mr Gouletsas then took various steps to recover the amount from Mr Falaras. First Mr Gouletsas registered the VCAT order in the Magistrates’ Court. Later he arranged to have warrants issued by the Magistrates’ Court and by this Court. On 15 May 2015 Mr Falaras paid an instalment of $500 against the amount owed. Otherwise the amount of the VCAT order, plus interest and costs, remains outstanding.
In September 2016 Mr Falaras issued this proceeding, by which he applies for an extension of time to seek leave to appeal, and for leave to appeal the VCAT order, and if those applications are granted that the appeal be allowed. The substance of both applications is Mr Falaras’ submission that the contracting party as builder in the domestic building contract with Mr Gouletsas was not Mr Falaras but his company Elegant Homes and Developments Pty Ltd (Elegant Homes). At issue on the application for extension of time is whether Mr Falaras was operating under the mistaken belief that the VCAT consent agreement obliged Elegant Homes to pay the amount outstanding to Mr Gouletsas, and whether this mistaken belief and surrounding circumstances justify an extension of the time for Mr Falaras to commence this proceeding. At issue on the application for leave and the appeal is whether the VCAT lacked jurisdiction to make the consent order, or erred in doing so, because the contracting builder to the domestic building contract with Mr Gouletsas was Elegant Homes and not Mr Falaras.
In the VCAT proceeding neither Mr Falaras nor Mr Gouletsas was legally represented. However, both are represented in this proceeding, and will have incurred legal costs. It seems extraordinary that the parties have been prepared to incur what must be significant legal costs in respect of a dispute over a relatively modest amount of money.
Background
The domestic building contract is dated 10 June 2014. The parties agree that it is a contract to which the Domestic Building Contracts Act 1995 applies.
The contract names as owners Mr and Mrs Gouletsas. The builder is described in the contract as follows:
NAMEElegant Homes & Developments T/As Hotondo Homes Craigieburn
ADDRESSSuite 4/41-53 Miller Street
SUBURBEPPING STATE VIC POSTCODE 3076
ABN96 882 232 638 ACN 123 738 228
WORK03 9408 0722 HOME
FAXMOBILE 0431 333 134
BUILDER’S LICENCE NUMBER DB-U 23755
REGISTERED BUILDING PRACTITIONER SR FALARAS
HIA MEMBER NUMBER 872753 HIA MEMBERSHIP EXPIRY 31/03/2015
The contract was to build a new dwelling and garage. The contract was signed by Mr and Mrs Gouletsas as owners and by Mr Falaras as builder. Beneath Mr Falaras’ signature appears the following:
Signed for and on behalf of Elegant Homes and Developments T/As Hotondo Homes Craigieburn.
A note at the foot of that page reads:
Where a company is signing: ‘by A Smith, director’ or ‘signed for and on behalf of XYZ Pty Ltd’.
In November 2014 an agreement was reached to terminate the contract on the basis of payment to Mr and Mrs Gouletsas of just over $18,000. Some detail of that agreement is contained in an email exchange between Mr Gouletsas and Kathy Falaras on 21 November. Those emails refer to a ‘variation order’ of the same date. Exhibited to an affidavit of Mr Falaras is a document headed ‘Variation Order No. 1’, which names Elegant Homes as the builder. That document is undated and unsigned.
The application by Mr Gouletsas to the VCAT is dated 2 January 2015. It is headed ‘Application to Building and Property List (Building)’. Mr Gouletsas completed the application naming himself as applicant and owner of the relevant property, and Mr Falaras as respondent and builder. To the option in the application form ‘Is the respondent an individual or a company?’, Mr Gouletsas nominated ‘individual’. Beneath the option in the form ‘If the individual/s trades under a business name, please specify’, Mr Gouletsas included the ABN which appeared on the building contract, and the business name ‘Elegant Homes and Developments’.
Mr Gouletsas’ application came on for hearing before the VCAT on 18 March before Member Eggleston. Neither Mr Gouletsas nor Mr Falaras was represented at the hearing. Transcript of the VCAT hearing demonstrates that at the commencement both Mr Gouletsas and Mr Falaras were sworn. Member Eggleston then made some general comments about the process of hearing, risk associated with a contested hearing, and the benefits of a negotiated outcome. There followed discussion about the amount owing and the terms for payment. Member Eggleston stood the matter down briefly. When he returned the following discussion occurred:
Mr Gouletsas: We’ve agreed on a compromise, sir.
Member: All right. Please take a seat. Tell me what that is.
Mr Gouletsas: Ros [Mr Falaras] agreed to pay $22,265.18.
Member: Okay.
Mr Gouletsas: Which is a discounted amount of the twenty-four, whatever it was.
Member:Yes. All right. That’s …
Mr Gouletsas: That’s it.
Member:Including everything?
Mr Gouletsas: That includes everything.
Member:Right.
Mr Gouletsas: And in 30 days.
Member:Just one small issue. The 30 days falls on a Saturday. Do you want to make payable by the Monday?
Mr Gouletsas: Done.
Member:Right. So then by 20 April 2015 the respondent must pay to the applicant $22,265.18. So, gentlemen, that’s the order that the VCAT Registry will process. That’s the order they will send to you. Mr Gouletsas, if that money’s not paid within that timeframe, all you have to do is write or fax the – or email the Tribunal asking them to provide you with a certified copy of this order, and it then becomes an order which you can lodge in the Magistrates’ Court closest to you free of charge, and then ultimately the Magistrates’ Court – presumably Heidelberg would be closest to you.
An order was made by Member Eggleston on 18 March 2015. That order names Mr Gouletsas as applicant and Mr Falaras T/As [trading as] Elegant Homes and Developments as respondent. The order reads:
By 20 April 2015 the respondent must pay to the applicant $22,265.18.
In late April 2015 Mr Gouletsas lodged that order with the Magistrates’ Court at Heidelberg, and a warrant to seize property was issued against Mr Falaras as defendant pursuant to s 111 of the Magistrates’ Court Act.
On 12 May 2015 Mr Falaras filed with the Magistrates’ Court an application for payment of the judgment debt by monthly instalments of $500, commencing 19 June 2015. On 15 May Mr Falaras paid an amount of $500 into Mr Gouletsas’ bank account. On the same day an order was made by the Magistrates’ Court refusing Mr Falaras’ application for an instalment order. On 18 May Mr Falaras filed with the Magistrates’ Court a notice of objection to the refusal to make the instalment order. The application for instalment order was completed by Mr Falaras with details of his personal financial position. The notice of objection includes the following detail from Mr Falaras:
I have some equity in my home, but it will take some time for me to get approval from the banks to access the equity as I am self-employed. I am just asking for some time to get access to the equity to pay the debt in full. We are not refusing to pay, we just don’t have the money to pay all upfront now.
On 26 June an order was made in the Magistrates’ Court striking out the notice of objection.
On 4 November 2015 the Magistrates’ Court warrant was returned to the Court endorsed ‘UNSATISFIED’.
On 9 November 2015 a certificate of the judgment owed by Mr Falaras was issued for the Supreme Court by the Heidelberg Magistrates’ Court. On 2 December a warrant of seizure and sale naming Mr Gouletsas as plaintiff and Mr Falaras as defendant was issued by this Court. On 22 December that warrant was returned to the Supreme Court by the Sheriff unsatisfied. The warrant was then registered on title against Mr Falaras’ property at 488 Ringwood–Warrandyte Road, Warrandyte.
On 20 January 2016 Elegant Homes was placed into liquidation and liquidators were appointed.
Commencing 11 March 2016 there was correspondence between solicitors for the parties relating to the debt resulting from the VCAT order. Despite negotiations, the issue of the VCAT order and the debt remained unresolved. A bankruptcy notice issued on 2 June 2016 was served on Mr Falaras on 9 June 2016. Subsequently a creditor’s petition was filed with the Federal Circuit Court by Mr Gouletsas’ solicitors on his behalf on 18 August. That creditor’s petition was served on Mr Falaras’ solicitors the following day.
This proceeding was commenced by Mr Falaras filing an originating motion on 26 September 2016.
By October 2016 the mortgagee of Mr Falaras’ Warrandyte property had taken possession of that property, and had arranged to schedule an auction to sell the property on 19 November 2016. Solicitors for the mortgagee wrote to Mr Gouletsas’ solicitors on 20 October 2016 serving notice pursuant to s 76 of the Transfer of Land Act 1958 requiring removal from the title to the Warrandyte property of the warrant of seizure and sale to enable sale of the property to proceed.
Grounds of appeal
The grounds of appeal relied on by Mr Falaras in an amended notice of appeal dated 10 May 2017 are:
1.The tribunal had no jurisdictional power to order that the applicant pay any amount to the respondent, by reason that the tribunal’s jurisdiction was not properly invoked under:
(a)the Australian Consumer Law and Fair Trading Act 2012 (Vic);
(b)the Domestic Building Contracts Act 1995 (Vic); or
(c)any other enabling enactment as required by s 43 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) (the VCAT Act).
2.The tribunal failed to act fairly and according to the substantial merits of the case as required by s 97 of the VCAT Act, by:
(a)failing to provide positive assistance to the parties, who were unrepresented litigants-in-person, to ensure that the order reflected the true legal position as between the parties; and
(b)failing to consider the merits of the order sought to be made by consent in circumstances where the parties were unrepresented litigants-in-person.
3.The tribunal erred in making an order that was based on an agreement entered into by mistake, namely that the applicant believed that he had agreed on behalf of Elegant Homes and Developments Pty Ltd to pay the sum of $22,265.18 to the respondent, and not on his own behalf.
Should Mr Falaras be given an extension of time in which to bring his application?
Mr Falaras has applied for leave to appeal the VCAT order pursuant to s 148(2) of the VCAT Act. That provision requires that an application for leave to appeal must be made no later than 28 days after the day of the order of the Tribunal. This Court may extend the time for making an application for leave to appeal pursuant to s 148(5), which provides:
The Court of Appeal or the Trial Division, as the case requires, may at any time extend or abridge any time limit fixed by or under this section.
In submissions Mr Falaras relied on a statement of factors relevant to the exercise of discretion to extend time by Derham AsJ in Edwards v Transport Accident Commission,[1] cited with approval by J Forrest J in Boogs v Missen[2] as follows:
The power to extend time is an unfettered discretion to be exercised judiciously. In Edwards v Transport Accident Commission, Derham AsJ identified some of the factors to be considered:
Other relevant matters have been held to include the length of the delay, the reasons for the delay, the chances of leave being granted if an extension of time is granted, and the degree of prejudice to the defendant if time is extended. Clearly, the party seeking the extension bears the onus of proving that it should be granted. An extension will not be granted if the case is hopeless, unarguable or bound to fail, because it would be futile to grant the extension in those circumstances.
Although the court does not decide an application to extend or enlarge time for doing an act according to some formula, the factors identified above provide a useful guide.
[1][2013] VSC 557 [37]–[38].
[2][2017] VSC 50 [25].
The originating motion was issued by Mr Falaras more than 16 months out of time. In an affidavit sworn in support of his application to extend time, Mr Falaras deposed:
On or about 3 March 2016, my solicitors, Aitken Partners, advised me that a Warrant had been registered on the property situated at 488 Warrandyte–Ringwood Road, Warrandyte (the property) which I own jointly with my wife, Kathy Falaras. Until that time, I did not realise that the Respondent had any claim against me personally (or had obtained the VCAT order against me). I do not recall being served with the Warrant or the Magistrates’ Court order at any time.
Mr Falaras then proffered as the reason for the further delay in issuing the originating motion that there were continuing negotiations from March 2016 in an attempt to resolve the dispute without the need to issue the proceeding.
In cross-examination, Mr Falaras agreed that:
(a) he had received and read the VCAT application prior to the hearing at the VCAT and that he was named as respondent to that application;
(b) he had received and read the VCAT order in which he was named as respondent;
(c) he was the respondent to the VCAT proceeding and he was present when the Tribunal member said the respondent must pay to the applicant the amount of money specified in the order;
(d) he understood the VCAT order had been registered with the Magistrates’ Court;
(e) on 12 May 2015 he completed in handwriting the Magistrates’ Court application for payment by instalments and an associated ‘statement of affairs by an individual’ in which he named as judgment creditor Mr Gouletsas and as judgment debtor himself;
(f) on 28 May 2015 he completed in his handwriting a Magistrates’ Court notice of objection again naming himself as judgment debtor, and including the detail to which I have referred in [12] above. Mr Falaras confirmed the property to which he was referring was 488 Warrandyte–Ringwood Road, Warrandyte South, which he jointly owned with his wife.
(g) he was personally served on 9 June 2016 with a bankruptcy notice based on the Magistrates’ Court debt;
In re-examination, Mr Falaras said:
Well I’m the sole – sole director of the company, I was the sole director of the company. So anything that comes out of the company name, I’m personally liable for as the director, hence the reason why everything is in my name when I went to the Magistrates’ Court and put everything down in my name.
For the following reasons I conclude that Mr Falaras’ application to extend time to commence this proceeding should be refused. First, I do not accept the reason for delay proffered by Mr Falaras that he ‘only became aware that Mr Gouletsas had obtained an order against him personally when he was given legal advice to that effect in March 2016’. Mr Falaras was aware the VCAT application was listed naming him as respondent. The VCAT order was made following a negotiated agreement between Mr Gouletsas and Mr Falaras. Enforcement action was clearly directed personally to Mr Falaras. By the application for an instalment order and the notice of objection Mr Falaras responded personally to the enforcement steps taken by Mr Gouletsas. Mr Falaras personally paid an instalment of $500 to Mr Gouletsas on 15 May 2015. I do not accept that it was Mr Falaras’ understanding at the time that the basis for him being personally named in the VCAT proceeding and in the Magistrates’ Court proceeding was that he was sole director of Elegant Homes, that he was named in that capacity, and that the VCAT proceeding and the Magistrates’ Court recovery process was against the company Elegant Homes and not him personally. Mr Falaras completed a number of Magistrates’ Court documents naming himself as judgment debtor, and recorded in those documents personal details, including his income, expenses and assets. Mr Falaras has not persuaded me that in March 2015, when he reached agreement with Mr Gouletsas resulting in the VCAT order, in May 2015 when he made application for an instalment order and filed a notice of objection to the refusal of the Magistrates’ Court to accept that application, and later in 2015 when the Supreme Court warrant was issued and registered against his property in Warrandyte, he was unaware that Mr Gouletsas was taking steps to enforce a debt owed personally by him. Even if Mr Falaras was initially confused about whether Mr Gouletsas was pursuing him or his company for the debt, that explanation for such a lengthy delay does not excuse it.[3] Secondly, there was a further delay of over six months from the time Mr Falaras says he was advised by his solicitors that a claim for recovery of the debt was being made against him personally to the date this proceeding was issued on 26 September 2016. I do not accept as a reasonable explanation for the whole of that delay ongoing negotiations between the parties’ solicitors in an attempt to resolve the issue in dispute. I note that Mr Falaras was served with a bankruptcy notice on 9 June 2016, yet delayed a further three and a half months before issuing this proceeding.
[3]Cooma Clothing Pty Ltd v Create Invest Develop Pty Ltd [2013] VSCA 106 [15] (Nettle and Neave JJA); Brandwill Holdings Pty Ltd v Johnson & Ors [2014] VSC 356 [15] (Emerton J).
Thirdly, the length of delay in applying for leave to appeal a VCAT order is very considerable and weighs against Mr Falaras. Fourthly, if the application is granted and the appeal allowed, Mr Gouletsas would suffer very real prejudice. In January 2016, some 10 months after the VCAT order was made, Elegant Homes was placed into liquidation, leaving Mr Gouletsas with no prospect of recovering a debt owed to him by that company. It is not possible on this application to assess the value of any chance to recover from Elegant Homes which has been lost by Mr Gouletsas. In addition to that lost chance, Mr Gouletsas has suffered the trouble and expense associated with the recovery action which he pursued against Mr Falaras. Whilst it is not possible to measure accurately the degree of prejudice suffered by Mr Gouletsas, I am satisfied that in combination these matters have resulted in real prejudice which cannot be fully cured by the extension of time being made conditional upon Mr Falaras first paying the cost of recovery action taken by Mr Gouletsas. The existence of real prejudice weighs heavily against granting Mr Falaras’ application to extend time to commence this appeal.
Finally, the prospects of Mr Falaras succeeding on the application for leave to appeal and the appeal are not so strong as to weigh heavily in his favour on the application for extension of time. In relation to the merits of the appeal, Mr Falaras’ primary argument is that the VCAT lacked jurisdiction because the building contract, which was the subject of the VCAT application, was a contract between Mr and Mrs Gouletsas as owners and Elegant Homes as builder. Mr Falaras points to the following objective features of the contract as establishing that the contracting builder was Elegant Homes:
(a) First, the contract names the builder as Elegant Homes and Developments trading as Hotondo Homes Craigieburn, and records the Australian company number of Elegant Homes.
(b) Second, Mr Falaras signed the document ‘for and on behalf of Elegant Homes and Developments trading as Hotondo Homes, Craigieburn’, which is consistent with the contract note as to the manner of signing for a company.
(c) Third, the variation order, which was the basis of the agreement for payment of the amount which was the subject of the VCAT application, names Elegant Homes as the builder.
(d) Fourth, the email exchange in relation to the variation agreement refers to Mrs Falaras as general manager, Elegant Homes and Developments, which would be unusual if the contracting builder was actually Mr Falaras as a sole trader.
(e) Finally, the business address in the email from Mrs Falaras is the registered address of the company.
Further, Mr Falaras submitted that, while he was the building practitioner for the purposes of the building contract, and s 54(1)(a) of the Domestic Building Contracts Act defines a ‘domestic building dispute’ as including a claim between a building owner and a building practitioner ‘in relation to a domestic building contract’, there was in fact no dispute between Mr Gouletsas as owner and Mr Falaras as building practitioner which could be or was the basis of Mr Gouletsas’ application to the VCAT. It was submitted in the circumstances the VCAT lacked jurisdiction to determine Mr Gouletsas’ application to it. Although the order was made by the Tribunal member pursuant to s 93 of the VCAT Act to give effect to an agreement between the parties to the application, if there is a lack of jurisdiction that deficiency is not cured by s 93.[4]
[4]DC Consolidated Investments Pty Ltd & Ors v Maroondah City Council [2012] VCAT 999.
Mr Gouletsas on the other hand submitted that the building contract was between he and his wife as owners and Mr Falaras as builder, relying on the following:
(a) the building contract was not executed by Elegant Homes in the manner prescribed by the Corporations Act 2001 (Cth);[5]
[5]Corporations Act 2001 (Cth) ss 129(3), 129(5), 127(1), 153(1).
(b) the contract named as builder ‘Elegant Homes and Developments’, with ABN 96 882 232 638, which are the personal trading name and Australian business number of Mr Falaras;
(c) the ACN on the contract was not the ACN of Elegant Homes, because two numbers were transposed;
(d) when he signed the contract, Mr Falaras did not specify he was executing the document as director of Elegant Homes.
Mr Gouletsas submitted that even if it were concluded Elegant Homes was the contracted builder, the text of s 54(1)(a) of the Domestic Building Contracts Act1995 was sufficiently broad to provide the VCAT with jurisdiction to deal with the application he made to it, because Mr Falaras was named in the contract as registered building practitioner and the application was in respect of a dispute ‘in relation to a domestic building contract’.[6]
[6]Vero Insurance Ltd v Witherow [2004] VSC 272 [25]–[26] (Hollingworth J).
Mr Gouletsas submitted that s 93 of the VCAT Act confers discretion on the Tribunal to make orders giving effect to an agreement or settlement between the parties, and that is what occurred in this case.
While the contractual and jurisdictional arguments raised by Mr Falaras are not without merit, the countervailing arguments of Mr Gouletsas are strong. Mr Gouletsas issued the VCAT application naming as respondent Mr Falaras. There was a basis for him doing so, because there was a good argument Mr Falaras was the builder pursuant to the building contract, and a fall-back argument that in any event the application was properly issued against Mr Falaras as building practitioner. The Tribunal was not called upon to resolve either of those issues. The parties to the VCAT application reached an agreement, which the VCAT member determined to confirm in an order. In my view Mr Gouletsas had the better of the argument that the VCAT had jurisdiction to make that order. It is not necessary for me to finally determine that issue. I conclude that the merits of Mr Falaras’ proposed appeal are not sufficient, when weighed against the length of delay, the inadequate excuse for delay, and the prejudice to Mr Gouletsas caused by the delay, to justify granting Mr Falaras’ application to extend the time to commence the proceeding.
Mr Falaras raised as a secondary argument that because he was self-represented at the VCAT hearing, the Tribunal member was obliged to take special care to ensure that the order was ‘reflective of the legal position as between the parties’. Mr Falaras accepted that this secondary submission relied on a conclusion that the building contract was not between him and Mr Gouletsas. In my view, this secondary argument does not advance Mr Falaras’ position in relation to the application for extension of time to any significant degree.
Conclusion
Mr Falaras has not discharged the onus of establishing that the extension of time to make application for leave to appeal the VCAT order should be granted. That application is refused. Because I have concluded Mr Falaras’ application for extension of time should be dismissed, it is unnecessary for me to consider the application for leave to appeal.
I will order that Mr Falaras pay Mr Gouletsas’ costs of the proceeding. Mr Gouletsas submitted that if I rejected Mr Falaras’ evidence that until March 2016 he was operating under the mistaken belief that the VCAT consent order and subsequent recovery proceedings related to a debt owed by Elegant Homes and not by him personally, then it would be appropriate to order costs on a higher basis than standard costs. While I have not accepted Mr Falaras’ explanation for delay in commencing this proceeding, I do not regard his conduct of the proceeding as warranting an order for costs other than on a standard basis.
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