Gevah Constructions Pty Ltd v GRN Australia Pty Ltd
[2006] VSC 266
•31 July 2006
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
No. 9132 of 2005
| GEVAH CONSTRUCTIONS PTY LTD (ACN 005 974 596) | Appellant |
| V | |
| GRN AUSTRALIA PTY LTD (ACN 108 435 927) | Respondent |
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JUDGE: | HARGRAVE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 25 July 2006 | |
DATE OF JUDGMENT: | 31 July 2006 | |
CASE MAY BE CITED AS: | Gevah Constructions Pty Ltd v GRN Australia Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2006] VSC 266 | |
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Appeal – discretionary decision of Victorian Civil and Administrative Tribunal under s. 78 of Victorian Civil and Administrative Tribunal Act 1998 (Vic) – whether pre-conditions for exercise of discretion existed – whether exercise of discretion involved an error of law justiciable on appeal under s. 148(1) of Victorian Civil and Administrative Tribunal Act 1998 (Vic).
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APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr V Ruta | Jack Bock Lawyers |
| For the Respondent | Mr J Brett | Deacons |
HIS HONOUR:
Factual Background to Appeal
The appellant (“Gevah”) is a property developer. The respondent (“GRN”) is a distributor of polystyrene products. In November 2004, GRN agreed to supply, install and render polystyrene sheets on the exterior of 15 home units being constructed by Gevah (“the contract”).
The contract price was calculated by reference to calculations of the total area to be covered by the polystyrene sheets and rendered, including an allowance for wastage. The calculations upon which the contract price was based were made by Gevah. In these circumstances, the contract contained a provision to protect GRN in the event that more polystyrene sheets were required than those specified in the contract. In this respect, the contract provides:
“Variations:
As per Gevah Constructions calculations, the area calculated for the works involved (allowing for waste) is 1150 sqm. Since each 40 mm “M” Grade Polystyrene sheet is 3 m this area is equivalent to 384 sheets.
GRN Wallboards and Gevah Constructions P/L agree that, should extra polystyrene be needed to complete the project, Gevah Constructions to pay $215.70 for each extra sheet (Excluding GST) for the supply and render. This is equivalent to $71.90 per square metre. (Excluding GST).
Additional cartage will be charged at $120.00 per delivery (Excluding GST).”
The 15 units were to be constructed in three stages of five units each. After completion by GRN of its part of stage 2 of the works, it became apparent to GRN that extra polystyrene sheets would be required to complete stage 3. By letter dated 10 March 2005, GRN informed Gevah that it had already used 343 polystyrene sheets in the completion of stages 1 and 2. Accordingly, the 384 polystyrene sheets referred to in the contract would be insufficient to complete stage 3. Gevah was put on notice that extra charges would be made for additional sheets in order to complete stage 3. Specific reference was made in this letter to the term of the contract to which I have referred above.
It appears that there was no response to this letter from GRN to Gevah. GRN proceeded to complete the works required under the contract and, in doing so, contends that it supplied and installed extra polystyrene sheets.
On 14 April 2005, GRN invoiced Gevah for the extra polystyrene sheets supplied and installed by it and for associated delivery charges (“the extra charges”). The extra charges amounted to $32,084.91 above the contract price.
GRN made a number of requests in writing for payment of the extra charges. In a letter dated 21 April 2005 from Mr Sperway of GRN to Mr Plotnik of Gevah, Sperway complained that Plotnik would not return his telephone calls concerning the extra charges and noted the obvious fact that delay in payment was causing disadvantage to GRN. In this regard, Sperway stated in his letter:
“Like you I have a commitment to keep with my suppliers and tradespeople, and I need to honour my part accordingly.”
Eventually, GRN commenced proceedings in the Victorian Civil and Administrative Tribunal (“the Tribunal”) in July 2005. The proceeding was commended in the Civil Claims List, claiming the full amount of the extra charges.
The initiation of the proceedings in the Tribunal generated, in the ordinary course, the making of orders in chambers by a member of the Tribunal on 15 July 2005 (“the orders”). The orders were in the following terms:
“1.The Principal Registrar to serve a copy of these orders on all parties and the claim on the Respondent.
2.On or before 29 July 2005 shall specify the material facts relied upon by way of defence. Any set-off which is claimed shall be fully particularised as to the date(s) and the amount(s) and as to the basis for claiming the same.
3.On or before 29 July 2005 any counterclaim of the Respondent shall be filed by way of filing a separate claim form in this Tribunal and paying the appropriate fee.
4.The parties are directed to note section 78 of the Victorian Civil and Administrative Tribunal Act 1998 and that failing to comply with the orders of the Tribunal may result in orders being made in accordance with that section including striking out the applicant’s claim or entering judgement and making final orders against the Respondents as the case may be and orders for costs.
5.The Tribunal shall determine the further conduct of this matter after 29 July 2005.”
At the time of the service of these orders on Gevah, its sole director Mr Plotnik was in Israel undergoing some annual medical treatment for psoriasis. An application was made to the Tribunal for an extension of time for compliance with the orders and this was granted by an order made on 2 August 2005. The time for Gevah to specify its defence and any set-off, and to file any counterclaim, was extended from 29 July 2005 to 15 September 2005.
Notwithstanding the granting of an extension of time, Gevah failed to file a defence, set-off or counterclaim by 15 September 2005. Accordingly, on 22 September 2005 the Tribunal issued a notice of hearing to the parties. Relevantly, the notice of hearing states:
“Please Take Notice
The Respondent having failed to comply with the orders made 15 July 2005 this application shall be listed before the Victorian Civil & Administrative Tribunal, Civil Claims List on 4 October 2005 at 9.30 am at 55 King Street, Melbourne for the purposes of hearing submissions as to why pursuant to section 78 of the Victorian Civil and Administrative Tribunal Act 1998 judgement should not be entered against the Respondent for the claim, interest and any costs.” (Emphasis added.)
In response to the receipt of the notice of hearing, the solicitors for Gevah did two things on 26 September 2005. First, by letter to the Registrar of the Tribunal, Gevah’s solicitors sought a further extension of time to comply with the orders, from 15 September to 15 October 2005. This application was supported by a statutory declaration sworn by Mr Plotnik in which Mr Plotnik declared that:
“Upon my return to Australia, I erroneously noted the time for compliance as being the 15th October, 2005 instead of the 15th September, 2005 as was ordered.”
Further, Mr Plotnik declared that he did not believe GRN would be prejudiced by the delay if the further extension was granted.
Secondly, by separate letter to the Registrar of the Tribunal, Gevah’s lawyers sought to adjourn the date of the hearing as the nominated date was a Jewish holy day.
On 27 September 2005, a member of the Tribunal granted the application by Gevah for an adjournment of the hearing and adjourned it to a date to be fixed.
The Tribunal refused the application by Gevah for a further extension of time for compliance with the orders. On 5 October 2005, a Deputy President made the following findings and orders in chambers:
“FINDINGS
1.The Respondent has failed to comply with the orders made 15 July 2005 as varied on 2 August 2005.
2.The Solicitor for the Respondent has requested a further extension of time for compliance with orders of the Tribunal.
3.The Respondent in its Statutory Declaration dated 21 September 2005 has provided no reasonable excuse for having failed to comply with the orders made (as varied).
4.The Applicant has raised the issue of the Respondent being represented by a solicitor at any hearing.
ORDERS
1.There shall be no further time for compliance granted on the papers.
2.The hearing pursuant to section 78 of the Victorian Civil and Administrative Tribunal Act 1998 adjourned on 27 September 2005 shall take place at 2.00 pm on 10 October 2005 at 55 King Street Melbourne.
3.The parties are referred to sections 62 and 109 of the Victorian Civil and Administrative Tribunal Act 1998 in relation to representation and costs.
4.Direct Registrar to serve notice of hearing and copies of these orders on the parties and the solicitor for the Respondent Jack Bock 60 Park Street South Melbourne 3205 by facsimile where possible and also by express mail.”
Following the orders made on 5 October 2005, a further notice of hearing was issued by the Tribunal and served on the parties. This further notice of hearing was headed “URGENT NOTICE OF SECTION 78 HEARING” and states:
“PLEASE TAKE NOTICE
The Respondent having failed to comply with the orders made 15 July 2005 this application shall be listed before the Victorian Civil & Administrative Tribunal, Civil Claims List on 10 October 2005 at 2:00 PM at VCAT, 5th Floor, 55 King Street, Melbourne.
The purpose of hearing is to consider submissions as to why pursuant to section 78 of the Victorian Civil and Administrative Tribunal Act 1998 judgement should not be entered against the Respondent for the claim, interest and any costs.” (Emphasis added.)
The notice of hearing expressly states that the hearing is to be under s. 78 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) (“the Act”). Section 78 of the Act relevantly provides:
“78. Conduct of proceeding causing disadvantage.
(1)This section applies if the Tribunal believes that a party to a proceeding is conducting the proceeding in a way that unnecessarily disadvantages another party to the proceeding by conduct such as –
(a)failing to comply with an order or direction of the Tribunal without reasonable excuse...
(2)If this section applies, the Tribunal may –
(a)...
(b)if the party causing the disadvantage is not the applicant –
(i)determine the proceeding in favour of the applicant and make any appropriate orders; or
...
(c)make an order for costs under section 109.”
A few days before the hearing, the solicitors for Gevah endeavoured to fax a defence to the solicitors for GRN. This attempt was unsuccessful. The defence was in fact produced at the hearing. It seeks to raise a number of issues, including a denial that completion of the contract works required the additional polystyrene sheets which GRN claims were required and raises issues as to the quality of the workmanship by GRN in relation to installation of the polystyrene sheets and rendering.
The hearing took place before a member of the Tribunal on 10 October 2005. At the conclusion of the hearing, the member determined the proceeding in favour of GRN (“the decision”) and made the following order:
“The Tribunal orders that the Respondent shall pay to the Applicant the sum of $33,879.84 forthwith.”
The order included an amount for interest on the extra charges from the date of filing of the application.[1]
[1]The award of interest appears to have been based on ss. 108(2)(b)(ii) and 108(3) of the Fair Trading Act 1999 (Vic).
At the hearing, the member gave brief oral reasons for the decision (“the oral reasons”). Subsequently, on 30 November 2005 she published written reasons for the decision (“the written reasons”).
Following receipt of the written reasons, Gevah applied to this Court pursuant to s. 148(1) of the Act for leave to appeal against the decision on a question of law. On 16 February 2006, leave to appeal was granted by a Master.
Grounds of Appeal
The notice of appeal raises a number of grounds. In oral argument, only two grounds were relied upon. First, it was submitted on behalf of Gevah that the member did not form a belief under s. 78(1)(a) of the Act that, by failing to comply with the orders within the specified time as extended, Gevah was conducting the proceeding in a way that unnecessarily disadvantaged GRN. Accordingly, it was submitted that s. 78 did not apply and the member had no power to make orders under s. 78(2). Secondly, it was submitted that, if the member did form the requisite belief under s. 78(1)(a) of the Act, she misconceived her function under s. 78(2) of the Act. This was because the member determined the merits of the proceeding by making findings on the balance of probabilities in favour of GRN. It was submitted that this conduct by the member involved either taking irrelevant considerations into account or failing to take into account matters which she was bound to take into account in considering her discretion under s. 78(2) of the Act.
In answer to the first ground of appeal relied upon by Gevah, it was submitted on behalf of GRN that, when read as a whole, the transcript of the hearing and the written reasons demonstrate that the member believed that the delay caused by the failure of Gevah to comply with the orders caused unnecessary disadvantage to GRN.
In answer to the second ground of appeal which was relied upon, it was submitted on behalf of GRN that the member was entitled to proceed and determine the proceeding in its favour under s. 78(2)(b)(i) of the Act and that is what she did. Accordingly, no error has been shown in the manner of exercise of the discretion under s. 78(2) of the Act.
As to the first ground of appeal relied upon, I accept the submission on behalf of GRN that the member was of the belief that the delay caused by the failure of Gevah to comply with the orders was such as to unnecessarily disadvantage GRN. Although there is no specific finding in either the oral reasons or the written reasons to this effect, the transcript of the hearing indicates that the member was of the view that GRN was unfairly disadvantaged by the delay. For example, the member stated in response to statements made on behalf of Gevah to explain the reasons for the delay:
“In this day and age there’s emails, there’s all sorts of ways one can attend to affairs and I don’t believe that one party should be prejudiced [by the delay]...”[2]
[2]Transcript page 6.
Further, unfair disadvantage arising from delay in payment of a debt is an obvious matter. It was expressly referred to in the letter dated 21 April 2005 from Mr Sperway of GRN to Mr Plotnik of Gevah referred to above. This letter was before the member. I infer that the member was of the requisite belief that delay by Gevah in complying with the orders unnecessarily disadvantaged GRN. Accordingly, there being no issue as to a belief by the Tribunal that there was no reasonable excuse for Gevah failing to comply with the orders[3], s. 78 of the Act applied and the discretion under s. 78(2) was enlivened.
[3]This was conceded in argument by counsel for Gevah. See also paragraph 3 of the orders of the Tribunal made on 5 October 2005.
The nature of the discretion under s. 78(2) of the Act was considered by Ashley J, as he then was, in Bell Corp Victoria Pty Ltd v Stephenson.[4] After reviewing many authorities, Ashley J concluded:
“It follows from the authorities to which I have referred that an exercise of discretion under s. 78(2) would involve error of law if the Tribunal failed to take into account a matter which it was bound to take into account; or if it took into account an irrelevant consideration.”[5]
[4][2003] VSC 255.
[5][2003] VSC 255 at [36].
As to the matters which the Tribunal is bound to take into account in exercising its discretion under s. 78(2), Ashley J stated:
“In my opinion, bearing in mind the submissions of counsel directed to the provision here under scrutiny, the subject matter, scope and purpose of the Act show that if the Tribunal forms a belief concerning the matters required by s. 78(1)(a) of the Act the following matters must be considered in the exercise of the discretion under sub-s. (2):
·The subject matter of the belief formed by the Tribunal for the purposes of sub-s. (1).
·The nature of the power conferred by sub-s. (2) in the context of the armoury of power conferred upon the Tribunal by ss. 75-77. By this I mean, particularly, that s. 78(2) operates in circumstances which at least do not require that the proceeding be frivolous, vexatious, misconceived, lacking in substance or otherwise an abuse of process; and which at least do not require that the circumstances demonstrate want of prosecution. Put another way, the sub-section contemplates the making of an order with very serious consequences in circumstances that very probably would not fit the templates set up by ss. 75 and 76. Whilst it can rightly be said that the creation of such a remedy in the situation contemplated by s. 78(1) shows that an intention that orders be made in some cases where the situation exists, it should also be firmly concluded, in statutory context, that the remedy should be of last resort and not first resort.
·The requirement imposed upon the Tribunal by s. 97. That section should be considered to import the concept that, ordinarily, the interests of case management should not be employed so as to shut a party out of litigating its case. The ultimate aim of the Tribunal, as much as of a court, must be the attainment of justice in respect of issues joined.
·The requirement imposed by s. 98(1)(a), to the extent that a party should ordinarily be given an opportunity to be heard upon the merits. That opportunity is not absolute. It may be lost without breach of the rules of natural justice. But the consequence that the making of an order under s. 78(2) will deprive a party of an opportunity to be heard upon the merits is surely relevant to exercise of the discretion whether to so order.
·The power to make costs orders conferred by ss. 109(2)(3) and 78(2)(c). The last-mentioned, it appears, might be exercised even though no order is made under s. 78(2)(a) or (b).
It may be that in a particular case the Tribunal will consider some other matter to be relevant. It does not follow from the fact that only some matters must be considered that other matters are necessarily irrelevant. Other matters will only be irrelevant if they infringe an implied limitation on the factors to which regard may legitimately be held. Any such limitation must be found in the subject matter, scope and purpose of the statute.”[6]
[6][2003] VSC 255 at [51]-[52].
A reading of the transcript of the hearing, the oral reasons and the written reasons demonstrates that the member, in determining the proceeding in favour of GRN and ordering payment of the amount claimed, failed to take into account a number of the necessary discretionary considerations referred to by Ashley J in Bell Corp. In particular, I am of the opinion that the member failed to consider that she was exercising a discretion in a case management context. She was not engaged upon the final hearing of the proceeding. The notices of hearing unambiguously stated that the purpose of the hearing was to consider the application of s. 78 of the Act and was for no other purpose. In these circumstances, the member was obliged to consider whether the delay caused by the failure to comply with the orders, which at that time was in the order of a maximum of 10 weeks only[7], justified Gevah being shut out from defending the proceeding by being given a full opportunity to be heard on the merits after the making of all necessary interlocutory orders and directions in order to prepare for a final hearing. I find that the member failed to address these issues in any way.
[7]Before extension, the orders required the defence, set-off and counterclaim by 29 July 2005. This was 10 weeks before the hearing. However, as noted above, the time for compliance with the orders had been extended until 15 September 2005, less than four weeks before the hearing.
I accept that the member was entitled to give some consideration to the merits of the proposed defence, set-off or counterclaim to be raised by Gevah. Obviously enough, if there was no evidence that Gevah may have an arguable defence, set-off or counterclaim, the interests of justice may well have been served by determining the proceeding in favour of GRN. However, as the transcript shows, there was evidence before the member of circumstances which may give rise to an arguable defence, set-off or counterclaim.[8] In these circumstances, it was not in my view open for the member to proceed and determine the merits of the proceeding under s. 78 of the Act. However, the transcript, oral reasons and written reasons demonstrate that this is what the member did.
[8]For example, the evidence of Mr Hensgen at Transcript, pages 9-12, 15-17.
In the oral reasons, the member concluded:
“Based on all the evidence that I have heard today and what has happened prior to the matter coming to the Tribunal today I am satisfied on the balance of probabilities that the applicant is entitled to the amount that [it] is claiming.”
In the written reasons, the member concluded:
“12.In response to questioning by the Tribunal as to why the Respondent had failed to pay any of the invoices sent by the Applicant, Mr Plotnik denied that the extra sheets had been necessary or had been ordered and further claimed that they were not received by the Respondent and that someone else could have stolen them from the site. This explanation, having regard to the detailed correspondence and oral evidence of the Applicant, and the behaviour of the parties overall, is totally unconvincing. Mr Plotnik had ample time and opportunity to question or refused delivery of extra sheeting and was in fact asked to contact the Applicant on a number of occasions over a period of months, but apparently failed to do so. No written response was ever given to the large number of delivery dockets, invoices, faxes and letters that were sent to his company. No defence or counterclaim has ever been lodged or submitted.
13.In these circumstances, it was clear to the Tribunal that the Respondent has simply sought to avoid payment of the debt that is owed to the Applicant for as long as possible. There was no reason given to the Tribunal to show cause why the proceeding should not be determined in favour of the Applicant.”
In my view, these findings by the member demonstrate that she misconceived the nature of the jurisdiction which she was exercising under s. 78 of the Act.[9] This conclusion is reinforced by a number of comments made by the member during the hearing. For example, when Mr Plotnik of Gevah referred to an intention to subpoena a particular witness as part of Gevah’s defence, he was met with the response by the member that it was “too late” as parties were required to attend a hearing with all of their evidence, including on subpoena.[10] In my view, this misconception by the member of her jurisdiction amounted to an error of law.
[9]Cf. Craig v State of South Australia (1995) 184 CLR 163 at 177-8.
[10]Transcript pages 28-9.
Further, I am of the opinion that the member erred in law by failing to give consideration to the highly relevant fact that Gevah was clearly not prepared for a final hearing. I have already referred to the fact that Gevah indicated a wish to subpoena a material witness. In addition, the evidence indicated a reasonable basis for a request for discovery of, at least, invoices by sub-contractors to GRN.[11]
[11]Transcript, pages 16-17.
Finally, in my view, the member erred in law by failing to consider whether there was any alternative remedy, short of determining the proceeding in favour of GRN, as a first resort. For example, the making of a self-executing order if the defence, set-off or counterclaim was not filed within a specified time.[12] In my view, this was the appropriate course for the member to adopt in all of the circumstances. The form of the self-executing order which was in my view appropriate in the circumstances of the case is set out below.
[12]Cf. Bell Corp [2003] VSC 255 at [51], [68].
For the above reasons, the appeal will be allowed. In the event that GRN is ultimately successful at any final hearing of its claim, I note that the Tribunal has the power to order, in addition to any debt found to be due, damages in the nature of interest.[13] Such an award of interest may be based upon the rates fixed from time to time under s. 2 of the Penalty Interest Rates Act 1983 (Vic).[14] I see no reason why an award of damages in the nature of interest ought not, if the circumstances indicate that it is appropriate, include interest from the date that demand was made for payment.[15]
[13]Section 108(2)(b)(ii) Fair Trading Act 1999 (Vic).
[14]Section 108(3) Fair Trading Act 1999 (Vic).
[15]Cf. s. 58(1) Supreme Court Act 1986 (Vic).
Orders
Subject to any submissions that counsel may make, I propose to make orders in accordance with the following minutes:
(1) The appeal is allowed.
(2) The order made by the Tribunal on 10 October 2005 is set aside.
(3)In lieu of the order made by the Tribunal on 10 October 2005, it is ordered that:
(a)unless by 4.00 pm on 11 August 2006 the Respondent files and serves upon the Applicant a document specifying the material facts relied upon by way of defence to the Applicant’s claim (including any set-off), the Respondent shall forthwith pay to the Applicant the sum of $32,084.91 together with the further sum of $4,602.66[16] by way of damages in the nature of interest;
[16]Interest calculated on the extra charges at the rate fixed by s. 2 of the Penalty Interest Rates Act 1983 (Vic) for the period from 14 April 2005, being the date of the first demand for the extra charges, until 11 August 2006.
(b)by 4.00 pm on 11 August 2006, the Respondent file and serve on the Applicant any counterclaim by way of filing a separate claim form in the Tribunal and paying the appropriate fee;
(c)the Respondent pay the Applicant’s costs (if any) of the s. 78 hearing, to be assessed by the Principal Registrar;
(d)the Tribunal shall determine the further conduct of this matter after 11 August 2006.
(4)In the further hearing of the claim and any counterclaim, the Tribunal shall not be constituted by the member who made the orders the subject of this appeal.
(5)The Respondent pay the Appellant’s costs of the appeal, including any reserved costs.
(6)The Respondent is granted an indemnity certificate under s. 4 of the Appeal Costs Act 1998 (Vic) in respect of its own costs and the costs ordered to be paid by it to the Appellant.
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