Jeffcott v Davesi Construction Group Pty Ltd (No 3)

[2025] ACTSC 1

SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

Case Title:

Jeffcott v Davesi Construction Group Pty Ltd (No 3)

Citation: 

[2025] ACTSC 1

Hearing Date: 

20 January 2025

Decision Date: 

21 January 2025

Before:

Mossop J

Decision: 

(1)     The application in proceeding dated 14 January 2025 is dismissed.

(2)     The defendant is to pay the plaintiff’s costs of the application in proceeding dated 14 January 2025.

Catchwords: 

PRACTICE AND PROCEDURE – APPLICATION – Application by defendant for stay of judgment of primary judge pending appeal by defendant – winding up proceedings initiated by plaintiff based on judgment – where prospects of appeal not obviously strong but arguable – where no financial evidence led by defendant company or those standing behind it – stay not granted

Legislation Cited: 

Evidence Act 2011 (ACT), s 79

Cases Cited: 

Challenge Charter Pty Ltd v Curtain Brothers (Queensland) Pty Ltd [2004] VSCA 66; 9 VR 382

Hoy v Hurst-Meyers (No 3) [2023] ACTSC 6

Hoyt’s Pty Ltd v Spencer (1919) 27 CLR 133

Jeffcott v Davesi Construction Group Pty Ltd [2024] ACTSC 366

Kalifair Pty Ltd v Digi-Tech (Australia) Limited [2002] NSWCA 383; 55 NSWLR 737

Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589

Parties: 

Mark Jeffcott ( Plaintiff)

Davesi Construction Group Pty Ltd ( Defendant)

Representation: 

Counsel

A Greinke ( Plaintiff)

Z Mason ( Defendant)

Solicitors

Chamberlains Law Firm ( Plaintiff)

Adero Law ( Defendant)

File Number:

SC 532 of 2021

MOSSOP J:  

Introduction

1․This is an application for a stay of a judgment given by Baker J pending the hearing of an appeal in the Court of Appeal. The application was brought before me yesterday as duty judge during the term break. Such an application would ordinarily be made to the primary judge or to the Court of Appeal which may, for that purpose, be constituted by a single judge. However, no party took any issue about the application being dealt with by a single judge of the Supreme Court other than the primary judge.

2․The case before the primary judge was a building case. The plaintiff, a part owner of property, sued the defendant, a licensed builder, for damages arising out of a building contract and a project management contract. The judgment of Baker J was given on 15 November 2024. Her Honour found that the plaintiff was entitled to damages from the defendant of $241,131.69: Jeffcott v Davesi Construction Group Pty Ltd [2024] ACTSC 366 (hereafter cited as the ‘PJ’).

3․Shortly after the judgment was handed down, the plaintiff served a statutory demand on the defendant based on the judgment. The defendant made no application to set that statutory demand aside. The plaintiff then applied for the winding up of the defendant and the first return date of that application is 14 February 2025.

4․The application for a stay is put on the basis that if the winding up proceeds, then the appeal will be frustrated in circumstances where it would otherwise have reasonable prospects.

The proceedings at first instance

5․The components of the plaintiff’s claim were:

(a)a claim for repayment of interest paid to the defendant under protest;

(b)a claim for damages for delay in completion of the construction;

(c)a claim for damages arising from the defendant locking the plaintiff out of the property; and

(d)a claim for the cost of rectifying defects in the building constructed on the property.

6․The unusual feature of the claim, which meant that the case was not a completely straightforward building case, was that two different agreements were signed between the relevant parties. One was a standard form project management agreement and the other was a standard form building contract. The first required the defendant to act as project manager. The second required the defendant to act as the builder. The plaintiff pleaded both contracts. The defendant admitted both contracts but then pleaded that both had been terminated on 4 December 2017 and the project management contract “reinstated” on 18 January 2018. Further, before Baker J there was evidence of “unusual financial arrangements between the parties” which involved money being paid by a bank to the builder and then part of that money returned to the other part owner of the property (who was also a party to the two contracts).

7․By the end of the hearing before the primary judge, the assertion that both contracts had been terminated by the parties on 4 December 2017 could not be pursued because the defendant conceded that it had not given a termination notice to the plaintiff or an agent of the plaintiff: PJ[30]. However, the controller of the defendant, Mr Stevanovic, believed that he had terminated that contract: PJ[48].

8․While the existence of two different contracts for the same work and the unusual financial arrangements that existed between the parties were suggestive that both contracts were not intended to operate together, that was not reflected in the pleadings. Baker J noted that an assertion that the building contract was a “sham” made in submissions filed prior to the hearing was not pursued at the hearing: PJ[32]. Rather, the defendant’s case was put on the basis that the building contract never operated and that the project management agreement operated in substitution for the contract: PJ[40]. Precisely what principle of law gave rise to this result does not appear to have been clearly articulated.

9․Further, at least by the hearing before the primary judge, the defendant had recognised that if the building contract remained on foot, then there may be an entitlement to the whole of the $2 million referred to in that contract, as on its case, no claims for payment had been made under that contract. The submissions of the defendant before the primary judge said that amounts due under the building contract may become payable “either by way of a cross-claim or by way of a subsequent claim”. However, no cross-claim was ultimately filed: PJ[33]. The plaintiff made it clear before the primary judge that any such claim would be met by an assertion of an estoppel in accordance with Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589.

10․It was in that context that the primary judge found that it was “difficult to see any basis upon which it could be concluded that the Building Contract was inoperative as a whole”. Her Honour recognised that having two such agreements was “highly unusual” but “[a]s the two agreements can stand together, the Court must proceed on the basis that both are operative.”

Grounds of appeal

11․The first ground of appeal challenges that conclusion, asserting that the two contracts were inconsistent. That is certainly a fundamental issue having regard to the evidence of the dealings between the parties. The submissions of the defendant placed reliance upon the notion that the building contract was a collateral contract and hence subordinate to the project management agreement. By that means, the rule in Hoyt’s Pty Ltd v Spencer (1919) 27 CLR 133 that such a contract may not be inconsistent with the main contract, was invoked. However, no evidence was pointed to indicating that the building contract was entered into in consideration of entry into the project management agreement. No evidence was pointed to that would explain the circumstances which warranted characterisation of the building contract as subordinate.

12․The second ground of appeal asserts that the court made an error of law in placing a burden upon the defendant to prove that it had obtained insurance. That issue arose because the property had been damaged by hail during the course of construction. The expert evidence of the plaintiff’s building expert was that “other defects in the roof and wall cladding could not be dissected from the hail damage”. The defendant asserted that the existence of insurance taken out by it was relevant to whether or not the plaintiff could claim damages arising from the hail damage. Both the building contract and the project management agreement required the defendant to take out insurance. Her Honour’s reasons indicated that there was no “unequivocal evidence” that such insurance was taken out notwithstanding that there was some evidence of an insurer being prepared to pay a sum of money. The primary judge said:

164. If there had been adequate evidence that the defendant had taken out insurance under which the plaintiff could fully recover for the damage occasioned by the hail storm, there may have been a question about whether it was appropriate for the plaintiff to instead make a claim for that damage under one or more of the contracts.

165․ The evidence in the proceedings does not demonstrate that the defendant had taken out insurance in accordance with cl 21 of the Building Contract and cl 14 of the Project Management Agreement. It would have been a simple matter for the defendant to provide unequivocal evidence of the insurance arrangements which it asserts were in place. A request, or subpoena, to Vero could have avoided the need to assess the piecemeal evidence which was scattered throughout the oral evidence and the Court Book.

13․Who bore the onus to establish the terms of the insurance policy will need to be analysed upon appeal having regard to the pleadings and the change in position of the defendant in light of its acceptance of facts which meant that the agreements were not terminated on 4 December 2017. For present purposes, it can be said that the ground of appeal is not obviously strong.

14․The third ground of appeal asserts the primary judge erred in fact and law in finding that the building contract did not exclude the plaintiff’s right to seek common law damages for breach of contract. This ground relates to a liquidated damages clause. The amount of liquidated damages payable for late completion was struck through. The question was whether or not the striking through of a liquidated damages clause precluded a claim for unliquidated damages for delays in completion. The primary judge found at [116] that it was not excluded as a result of the exclusion of liquidated damages. Once again, this ground is not obviously strong.

15․Ground 4 asserts that there was no net loss because, if the building contract remained on foot, then no money had been paid pursuant to that contract, instead being paid pursuant to the project management agreement and that money was outstanding under that agreement. There was evidence that, subsequent to the primary judge’s decision, a demand was made for $2 million pursuant to the building contract. This was the issue which the defendant submitted would be addressed either by way of a cross-claim or subsequently, although no cross-claim was made. Inevitably, a claim like this would be met with an assertion of an Anshun estoppel. That had been flagged by the plaintiff in written submissions prior to the commencement of the hearing before the primary judge.

Appeal prospects

16․It is only appropriate to assess the prospect of an appeal at a very high level of generality. The grounds of appeal as I have explained them are not obviously strong. However, the circumstances of the case involving, as it does, two parallel contracts for a single development are unusual, as are the circumstances surrounding the payments, and there were undoubtedly difficulties for the primary judge arising out of the discontinuity between the pleaded defence and aspects of the defence that the defendant wished to run. Those features lead me to determine that I should not conclude, as the plaintiff invited me to, that for the purposes of the application the defendant does not have an arguable case on appeal. I proceed on the basis that the appeal is an arguable one.

Other matters

17․There is no evidence indicating that there is a risk that, if the judgment sum and interest is paid to the plaintiff, it will be unrecoverable if the appeal is successful. On the contrary, the evidence establishes that the plaintiff has, at the very least, substantial equity in the property on which the subject building was constructed.

18․There is no evidence of the financial affairs of the defendant company apart from the fact that it has not paid any part of the amount owing pursuant to the judgment. Some evidence was sought to be led in the form of a letter from an accountant indicating that the company was solvent except as a result of the judgment debt. This evidence was not admitted because the bare ipse dixit of the accountant was insufficient to demonstrate that the conclusion was based upon specialised knowledge based upon the accountant’s training, study or experience for the purposes of s 79 of the Evidence Act 2011 (ACT). Further, there was no evidence as to the assets or resources of those who stood behind the company, most obviously Dalibor Stevanovic, the current sole director, and Vesna Stevanovic, a former director and the current shareholder. There was no evidence of the company’s activities, income, assets, employees or anything else.

19․The submissions of the parties devoted considerable effort to debating the weight to be given to the potential for prejudice arising from the threat of liquidation. It is unnecessary to canvass the differences between the decision of the New South Wales Court of Appeal in Kalifair Pty Ltd v Digi-Tech (Australia) Limited [2002] NSWCA 383; 55 NSWLR 737 (followed in Hoy v Hurst-Meyers (No 3) [2023] ACTSC 6) and judgments following the approach in Challenge Charter Pty Ltd v Curtain Brothers (Queensland) Pty Ltd [2004] VSCA 66; 9 VR 382, which place less significance on the potential prejudice from a winding up.

20․So far as other discretionary factors are concerned, I do not consider that the delay in applying for the stay is of significance in this case. Nor do I consider it significant that the defendant failed to make an application to set aside the statutory demand.

21․Finally, the possibility that the defendant may subsequently make a successful claim for the plaintiff’s one-half liability of $1 million under the building contract is, at the very least, temporally remote and not a basis to stay a judgment enforceable since 15 November last year.

Decision

22․Decisions of trial judges are not simply a step along the way to the “real” determination of a dispute by the Court of Appeal. The starting point must be that the plaintiff is entitled to the fruits of the judgment. If the enforcement of a judgment subject to a pending appeal will lead to the winding up of the company, then that might provide the basis for the granting of a stay. However, in order for that to be a just outcome, there must be evidence before the court indicating why it is that the existence of the judgment would lead to liquidation. That will involve disclosing information about the capacity of the company to pay the judgment and the capacity of those standing behind the company to provide resources to allow the judgment to be paid. There is a substantial difference between “I don’t want to pay”, “I can pay but it will be difficult” and “I cannot pay”. In the present case, there is no evidence indicating anything about the financial affairs of the company, and specifically, no evidence of an incapacity to pay on the part of the company itself. Nor is there any evidence on the part of any person, most obviously Dalibor or Vesna Stevanovic, the director and shareholder of the company respectively. In those circumstances, it is not appropriate to grant a stay of the proceedings because it is not clear whether what is involved is a stubborn refusal to pay a judgment, a financial necessity caused by poverty, or something in between.

23․I note that it would be of little utility to grant a stay subject to the payment of the judgment sum when the same outcome can be achieved without the grant of a stay by the payment of the judgment sum.

24․Further, on an application such as this, one possible outcome is the granting of a stay subject to a requirement that a proportion of the amount in dispute be paid. In the present case, having regard to the absence of any evidence as to the financial circumstances either of the company or those standing behind the company, there was no basis upon which a figure less than the amount owing could properly be fixed upon as providing a basis for the grant of a stay.

25․Finally, it was submitted on behalf of the defendant that if an unconditional stay was not granted, then I should adjourn the proceedings to allow further negotiations about the terms upon which a conditional stay might be granted. I do not consider such a course to be appropriate. It is not appropriate in circumstances where a forensic choice has been made to put forward almost no evidence about the financial circumstances of the company and no evidence about those behind the proceedings. To adjourn the proceedings for further negotiations would only encourage parties to split their applications in a manner inconsistent with the prompt and efficient disposal of the business of the court.

Conclusion

26․The application will be dismissed and the parties heard as to costs.

[The parties were heard on costs]

27․In relation to costs, counsel for the plaintiff has sought an order for indemnity costs. Counsel for the defendant has submitted that costs in the cause would be appropriate, or alternatively that an order for indemnity costs was not warranted.

28․So far as costs in the cause is concerned, an order that costs be costs in the cause might have been a disposition that was warranted had the application been successful. But in circumstances where the defendant was seeking an indulgence and has been unsuccessful, it is not an appropriate disposition. So far as the application for indemnity costs is concerned, I accept that there was substantial contentious correspondence between the parties in which difficulties with the state of the evidence put forward by the defendant was pointed out. However, I do not consider that overall, in the circumstances of an urgent application brought on during the term break, the manner in which the application was made and conducted warrants a better than usual order. I reach that conclusion with a recognition that, given the amount of correspondence and written submissions that went into the proceedings, a very substantial proportion of the overall costs will be recoverable pursuant to a party and party costs order.

Orders

29․The orders of the Court are:

(1)The application in proceeding dated 14 January 2025 is dismissed.

(2)The defendant is to pay the plaintiff’s costs of the application in proceeding dated 14 January 2025.

I certify that the preceding twenty-nine [29] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Mossop.

Associate:

Date: 23 January 2025