Koncept Developments Pty Ltd v Kumar
[2017] VCC 671
•30 May 2017
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-17-00446
| KONCEPT DEVELOPMENTS PTY LTD | Plaintiff |
| v | |
| ANJAN KUMAR & ORS | Defendants |
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JUDGE: | HIS HONOUR JUDGE COSGRAVE | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 15, 26 May 2017 (and further written material filed on 17 and 24 May 2017) | |
DATE OF JUDGMENT: | 30 May 2017 | |
CASE MAY BE CITED AS: | Koncept Developments Pty Ltd v Kumar & Ors | |
MEDIUM NEUTRAL CITATION: | [2017] VCC 671 | |
REASONS FOR JUDGMENT
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Subject: DEFAULT JUDGMENT; SUMMARY JUDGMENT; COSTS
Legislation Cited: Civil Procedure Act 2010 (Vic); County Court Civil Procedure Rules 2008 (Vic); Domestic Building Contracts Act1995 (Vic)
Cases Cited: Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (2013) 42 VR 27;
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms G Douglas | Minter Ellison |
| For the Defendant | Mr K Mihaly | Vernon Da Gama & Associates |
HIS HONOUR:
1 This matter concerns an application by the plaintiff by summons filed 5 April 2017. The plaintiff seeks:
(a)an order under Rule 21.02 of the County Court Civil Procedure Rules2008 (Vic) (“the Rules”) for default judgment against the defendants for their failure to file and serve a defence by the date ordered, namely 21 March 2017;
(b)summary judgment pursuant to section 61 of the Civil Procedure Act 2010 (Vic) (“the CPA”) and Rule 22.03 on the grounds that the defence and counterclaim have no real prospects of success.
Rule 21.02 application
2 The plaintiff commenced the proceeding by writ on 7 February 2017.
3 On 20 February 2017, the defendants filed a notice of appearance.
4 On 6 March 2017 a directions hearing was conducted at which the defendants were ordered to file a defence by 21 March. A further order was made at the directions hearing requiring any application by the plaintiff for summary judgment to be filed by 31 March 2017.
5 On 21 March 2017, the defendants sought an extension of time from the plaintiff to file their defence. The defendants sought agreement to file their defence by 24 March.
6 On 22 March 2017, the defendants again sought an extension from the plaintiff whereby they could file their defence by 24 March 2017.
7 At approximately 5.30pm on 22 March 2017, the plaintiff rejected the defendants’ request for an extension of time to file the defence.
8 On 24 March 2017, the defendants filed their defence.
9 On 5 April 2017, the plaintiff filed its application for summary judgment.
10 The major aspects of this chronology are as follows: the defendants failed to comply with the court order and file and serve the defence by 21 March; the defendants have given no explanation about why they failed to comply with the court order; the plaintiff did not obtain a copy of the defence until 27 March, six days after the due date.
11 In these circumstances, where the defendants have given no explanation, I infer that there was no substantive excuse for their non-compliance with the court order. It ill behoves the defendants to complain that the plaintiff did not file its summary judgment application within the time limited by the order of Judicial Registrar Tran. Indeed, the defendants have exhibited an unusual degree of effrontery in making such a submission given it was their non-compliance with the court’s orders which brought about the delay.
12 The plaintiff quite properly acknowledged that the court retains a discretion to withhold the giving of judgment even where a party fails to comply with a court order and files a pleading out of time.
13 In the present circumstances, I would not be inclined to give judgment to the plaintiff. It seems to me that this would constitute too extreme a penalty to impose even though the evidence revealed no proper basis or explanation for the defendants’ conduct. However, the plaintiff was well within its right to complain. Indeed, I would hope that one day, a superior court would take strong action against a party which defaults on such an order in order to emphasise that court orders are to be treated seriously and not merely as suggestions or tentative proposals. On one view, courts are too often lenient in their treatment of parties who fail to comply with their obligations.
Order 22 application
14 On 25 May 2016, the plaintiff and each of the defendants, as well as some other related parties, executed a deed of settlement and release (“the Deed”) to resolve a number of disputes which had arisen between them since approximately February 2014.
15 Pursuant to clause 3.1(a) of the Deed, the parties filed notices of discontinuance in four proceedings which were on foot between them.
16 At the same time, a dispute also existed between some of the parties with respect to a home building contract at Unit 5, Seaton Court, Mount Waverley (“the Seaton property”). The Seaton property was being constructed pursuant to a “new homes contract” (“the Seaton contract”) governed by the Domestic Building Contracts Act1995 (“DBCA”). This contract concerned the construction of ten dwellings on the property at Mount Waverly.
17 On 16 April 2016, the plaintiff issued a notice of suspending works in relation to the Seaton property. Under the Deed, the parties resolved to settle the dispute in relation to the Seaton property and to provide for the completion of the work at the Seaton property.
18 For present purposes, clause 3.3 of the Deed was an important clause. This clause required the first defendant, Anjan Kumar (“Anjan”) and the third to sixth defendants (“the Kumar entities”) to pay the plaintiff the sum of $155,000 (“the settlement sum”):
(a)within five business days of receiving funds following obtaining refinance of their current loan facilities; or
(b)if refinance were not obtained, no later than 31 August 2016.
19 Clause 3.3(d) of the Deed required the first and second defendants, Anjan and Deepa Kumar (“Deepa”) to pay the plaintiff the sum of $42,000 (“the Seaton sum”):
(a)within five business days of receiving funds following obtaining refinance of their current loan facilities; or
(b)if refinance were not obtained, no later than 31 August 2016.
20 In addition, clause 3.4(b) of the Deed provided that notwithstanding anything else in the Deed, the parties retained their respective rights under the Seaton contract in respect of the Seaton property. Accordingly, the Seaton contract remained in force and governed the construction of the Seaton property and any disputes in respect of that construction work.
21 From the plaintiff’s perspective, on 31 August 2016 both the settlement sum and the Seaton sum were due and owing and neither of those sums was paid to it.
22 On 4 October 2016, the defendants paid to the plaintiff $55,000 of the $155,000 due under the Seaton sum. It was not made clear by the defendants precisely which of them paid the money.
23 On 18 January 2017, the plaintiff’s solicitor sent a demand for payment of the outstanding balance of the settlement sum and also made demand for the Seaton sum. The demand was in writing and was made to Anjan and the Kumar entities through their lawyers, Vernon Da Gama & Associates.
24 As at the date the plaintiff filed its summons in this matter, none of the defendants had made either of the payments demanded.
Legal principles regarding summary judgment applications
25 Section 61 of the CPA provides that a plaintiff in a civil proceeding may apply to the court for summary judgment in the proceeding on the ground that a defendant’s defence or part of that defence has no real prospect of success.
26 Rule 22.03 of the Rules provides that an application by a plaintiff under section 61 of the CPA for summary judgment shall be made in accordance with Part 2 of Order 22 of the Rules.
27 The Victorian Court of Appeal has given some guidance in respect of summary judgment applications. In Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (2013) 42 VR 27, Warren CJ and Nettle JA said (at [35]):
“Upon the present state of authority:
(a) the test for summary judgment under s 63 of the Civil Procedure Act 2010 is whether the respondent to the application for summary judgment has a “real” as opposed to a “fanciful” chance of success;
(b) the test is to be applied by reference to its own language and without paraphrase or comparison with the “hopeless” or “bound to fail” test essayed in General Steel;
(c) it should be understood, however, that the test is to some degree a more liberal test than the “hopeless” or “bound to fail” test essayed in General Steel and, therefore, permits of the possibility that there might be cases, yet to be identified, in which it appears that, although the respondent’s case is not hopeless or bound to fail, it does not have a real prospect of success;
(d) at the same time, it must be borne in mind that the power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried; and that is so regardless of whether the application for summary judgment is made on the basis that the pleadings fail to disclose a reasonable cause of action (and the defect cannot be cured by amendment) or on the basis that the action is frivolous or vexatious or an abuse of process or where the application is supported by evidence.”
28 The plaintiff identified what it said were three important aspects of the defence filed by the defendants. First, the Deed contained an implied term that, because the payment of the Seaton sum was required after the Seaton deadline and not before, the plaintiff would not be entitled to demand the Seaton sum until the plaintiff had completed the construction of the Seaton property. Second, the defendants contended that there were defects and outstanding works at the Seaton property such that the Seaton implied term had been breached. Finally, the defendants contended that they were not liable to pay the settlement sum because, as a result of the alleged defects in the work at the Seaton property, the plaintiff had breached the Seaton implied term.
29 The plaintiff contended that the final inspection of the property was held on 11 July 2016 and that handover took place on 16 July 2016. At the time of handover, a document acknowledging the same was signed by Anjan (but not Deepa). The plaintiff contended that the giving over to the defendants of the permits and handover of the Seaton property on 16 July constituted completion.
30 Clause 3.4 of the Deed provided that no later than five business days after the execution date, the plaintiff would commence works to complete the construction of the Seaton property in accordance with the Seaton contract. Such works were to be completed in accordance with the Seaton contract and plans within six weeks of the execution date and would include the completion of the outstanding works identified in Annexure C to the Deed. Upon completion of the works, the plaintiff would provide to Anjan and Deepa a certificate of occupation in respect of the Seaton property.
31 Clause 3.4(b) of the Deed provided that, notwithstanding anything else in the Deed, the parties retained their respective rights under the Seaton contract in respect of the Seaton property.
32 The plaintiff contended that the items in an Annexure C of the Deed were repaired properly as agreed in the Deed. The defendants disputed this.
33 Clause 17 of the Seaton contract dealt with defects. There seemed to be no dispute amongst the parties that, at the time of final inspection and handover, the defendants gave no written details of complaint or defects to the plaintiff. For this reason, the plaintiff argued that the various triggers for payment in the Seaton contract and Deed operated and that the Seaton sum therefore was liable to be paid.
34 Clause 19 of the Seaton contract provided for a defect liability period. Within the 91 day period set out, the defendants did provide a list of alleged defects to the plaintiff to attend to and the plaintiff claimed that appropriate remedial measures were taken to fix the defects.
35 In this application, the defendants rely upon two reports by Rock Brown Projects Pty Ltd. The author of the reports purports to identify various defects in the work at the Seaton property and offers an opinion on whether, or to what extent, the various defects were fixed. As a result of the reports, the defendants have a different view of the matter from the plaintiff and contend that there are outstanding defects in the property.
36 The plaintiff contends that the Rock Brown Projects Pty Ltd reports are not proper expert reports and are not admissible under Order 44 of the Rules. I accept that, if this were a trial, the reports would not be admissible as they do not satisfy the requirements of the Rules. However, in this application, which is interlocutory in nature, the reports can be relied upon.
37 The plaintiff contends, in effect, that whether or not there are outstanding defects is irrelevant because the obligation in the Deed to pay the Seaton sum and the settlement sum existed outside any obligations in the Seaton contract. For that reason, any alleged defects under the Seaton contract would have no impact on the obligation to make payments under the Deed.
38 The defendants take issue with the plaintiff’s view of the matter and contend that clause 3.4 of the Deed obliges the plaintiff to complete the construction of the Seaton property in accordance with the Seaton contract and plans within six weeks and also to complete the outstanding works listed in Annexure C. For this reason, the defendants contend that the Deed imposes obligations upon the plaintiff and, to the extent that the Seaton contract is not completed properly, it constitutes not only a breach of that contract but also of the Deed. Thus, the defendants contend that the rectification cost can be set off against the defendants’ contractual liability under the Deed. Either the set-off is a defence, perhaps as contemplated in Rule 13.14, or it goes to the court’s discretion to take account of the balance of moneys owing in deciding whether it is appropriate to allow judgment against the defendants.
39 Part of the defendants’ argument was that, assuming there is a breach of the Seaton contract and/or the Deed, the Seaton sum is dependent in a way upon the plaintiff complying with the terms in relation to the Seaton contract and is not payable while there are defects. Hence, there is said to be some interdependence between the making of the payment and the proper completion of the work (“the dependency argument”).
40 The plaintiff advanced argument about why the defendants’ construction of the matter should not be accepted. Ultimately, the plaintiff might be proved correct but, given the facts (and arguable law) in this case, it is difficult to peremptorily rule against the defendants on a summary basis and deprive them of the opportunity to advance an argument at trial.
41 The plaintiff contends that the defendants’ dependency argument of a connection between any alleged defects and payment of the settlement sum is weak. The plaintiff notes that the settlement sum is payable by all defendants except Deepa. By comparison, only Anjan and Deepa are obliged to pay the Seaton sum. Thus, there is not a complete identity of parties with respect to the differing contractual obligations to pay the two sums.
42 The plaintiff says that it would be odd to suggest that the Kumar entities were not required to pay the settlement sum according to the Deed due to alleged defective works under the separate Seaton contract to which they were not a party. The plaintiff says that such a proposition is untenable and is one of the reasons why the obligations to pay the settlement sum and Seaton sum were separated. However, it seems to me that, at least on one view, the Deed seeks to tie together obligations under the Deed and obligations under the Seaton contract by imposing obligations on the plaintiff in relation to the Seaton contract and the proper performance of work under that contract.
43 Another area of dispute related to the alleged defects and the jurisdiction of VCAT. The plaintiff says that if the defendants had a concern about the proper performance of the works under the Seaton contract, they should have brought action at VCAT. The plaintiff says that VCAT has jurisdiction to deal with the matter under the DBCA and that a court may stay a court action taken in relation to such a dispute.
44 At this point, there is no such application before me. It is no more than a possibility. Nonetheless, the plaintiff says that I need to take this possibility into account in dealing with the present application. The defendants dispute this.
45 In my view, the matter is not as clear as the plaintiff contends. I have to deal with the existing situation. This allows for disputes in relation to building matters to be dealt with in a court if none of the parties objects. Thusfar, no application for a stay has been made and there has been no objection taken. Accordingly, I decline to give any, or any significant, weight to this factor because at the present time, it is simply not relevant.
46 I note that at the conclusion of the hearing, I raised with the parties the discrepancy between the figures in the Rock Brown Projects Pty Ltd report. There, the author concluded that an amount of $44,000 (excluding GST) was required to complete the works at the Seaton property. However, the various line items in the report totalled approximately $65,756 (excluding GST).
47 I granted the defendants the opportunity to file some additional affidavit material clarifying what the correct amount was and the basis of the discrepancy. I allowed this notwithstanding the plaintiff’s objection.
48 The defendants subsequently filed an affidavit by Yogen Lakshman in which he explained how he made an error by mistakenly failing to change the figure in the template used in his report from $44,000 to $65,756.
49 The plaintiff filed some further written submissions objecting to the self-serving nature of the Lakshman affidavit and pointing out other alleged weaknesses in the document. The plaintiff contended that the court should give the report little or no weight.
50 Further, the plaintiff submitted that in circumstances where the defendants acknowledged in court on 15 May 2017 that the defects claim relating to the Seaton property could be set-off only against Anjan, then it was of no assistance to the third, fourth, fifth and sixth defendants because they were not parties to the Seaton contract. Thus, it was argued that the plaintiff should have judgment against the third, fourth, fifth and sixth defendants for the settlement sum of $100,000 plus interest and costs on an indemnity basis.
51 The plaintiff contended that because the claims in the case against Anjan totalled $142,000, comprising $100,000 for the settlement sum and $42,000 for the Seaton sum, if there were any set-off available to Anjan (which it denied), the set-off should operate against the total sum and not just the settlement sum. On this basis, the plaintiff would be entitled to judgment against Anjan in the sum of $69,668.40 and not $27,668.40 as suggested by the defendants.
52 In response to the plaintiff’s supplementary submissions, the defendants argued that the plaintiff wrongly assumed that there was only one defence available to the defendants, namely, the claim about the defects at the Seaton property. The defendants maintained that this overlooked their contention that there was no obligation to pay the Seaton sum until the proper completion of the Seaton contract – the dependency argument. This point was separate from, and additional to, the alleged set-off arising from the defects at the Seaton property. Thus, the defendants submitted that the Seaton sum was not yet payable and there was a set-off or counterclaim for $72,331.60.
53 Anjan relies upon both the defects argument and the dependency argument to avoid summary judgment. I regard both these arguments as sufficiently arguable that they could not be described as fanciful and having no real prospect of success. Hence, due to the operation of the defects argument and the dependency argument, there should be judgment entered against Anjan in the sum of $27,668.40 together with interest. This outcome accepts it is arguable that the rectification costs of the defects at the Seaton property can be set-off against the settlement sum and that the Seaton sum is not yet payable. Beyond that amount stated, Anjan has leave to defend.
54 The plaintiff sues Deepa for the Seaton sum of $42,000. Deepa seeks to avoid liability due to the dependency argument. Because the dependency argument has the potential to affect payment of the whole of the Seaton sum, Deepa has leave to defend the plaintiff’s claim.
55 The third, fourth, fifth and sixth defendants are in a different position from Anjan and Deepa. Because the third, fourth, fifth and sixth defendants are not party to the Seaton contract, these defendants cannot use the dependency argument. Also, the set-off claim based on the defects at the Seaton property does not help them because they do not own that property and are not party to the Seaton contract. For practical purposes, the defendants’ counsel acknowledged at the hearing that the grounds relied upon by Anjan and Deepa to avoid summary judgment would not assist the remaining defendants. Accordingly, the plaintiff is entitled to judgment for $100,000 against those defendants together with interest.
56 Even if I were wrong in my view regarding the fancifulness of the defences raised by Anjan and Deepa, in my opinion the circumstances of the case are such that, with the factual and legal issues involved, the proceeding should not, other than to the extent already noted, be disposed of summarily because it is not in the interests of justice to do so and a full hearing on the merits is appropriate.
Costs
57 In relation to costs the defendants contend that due to the complicated nature of the proceeding where the plaintiff has obtained only limited judgment and the trial will continue as to the balance of the claim, costs should be reserved. While I agree that the actual taxation exercise would be complicated and hard to undertake before completion of the trial (at which various factual and legal findings would be made), some questions of principle can be stated with reasonable clarity. Insofar as the proceeding and application were against the third, fourth, fifth and sixth defendants, they should pay the plaintiff’s costs of both, such costs to be taxed on an indemnity basis. This was consistent with the terms of the agreement between the plaintiff and the defendants and, indeed, was acknowledged in argument by the defendants’ counsel. Insofar as the proceeding and application were against Deepa, the costs should be reserved because it is too soon to say where the burden of these costs should fall.
58 In relation to Anjan, I consider the appropriate order is to reserve costs of the proceeding to the extent that they related to him but to order that he pay so much of the costs of the application as concern him, such costs to be taxed on an indemnity basis. Without the application the plaintiff would have no judgment. When submissions were made on costs, the defendants’ counsel made no reference to any evidence which suggested Anjan made any offers of compromise or other offers whereby the plaintiff could effectively have obtained the same relief without going to court. It remains the case that the plaintiff brought an application for summary judgment and enjoyed some success which it would not have had without the application.
59 On 15 May 2017 I ordered that the defendants pay the plaintiff’s costs of the adjournment, such costs to be fixed in the sum of $3,300. In the usual course, the costs would not be payable by the defendants until the conclusion of the proceeding or further order. The plaintiff has asked that I make a further order enabling it to immediately enforce that costs order.
60 At the hearing of the application, the defendants initially submitted that the first, third, fourth, fifth and sixth defendants should have the benefit of the defects claim regarding the Seaton property. But the defendants’ counsel in effect acknowledged during argument that the third, fourth, fifth and sixth defendants had no defence available to the claim of the settlement sum. For that reason, the defendants now say that the reason for the adjournment was to assist only the first and second defendants to clarify the amount in the defects claim.
61 Notwithstanding the argument made today, I consider that the order I made on 15 May 2017 should stand in its current terms. No objection or point was taken at the time, and in my view, the defendants had ample opportunity to seek an amendment, or variation of, the order on the day. The matter of costs was subject to argument and the order was not made peremptorily or without giving the defendants a reasonable opportunity to make whatever submissions they saw fit.
62 The plaintiff has asked that the costs order be enforceable immediately and not await the conclusion of the trial. In the circumstances, I regard the request as reasonable and I grant it. The adjournment was of considerable benefit to the defendants, or some of them, and represented a useful indulgence for them. The plaintiff had no responsibility for the adjournment and the grant of the adjournment delayed the prosecution of the application. This matter will not go to trial before 30 October 2017 and so judgment is not guaranteed to be handed down this year. Especially where the costs have been fixed, and will remain unaffected by the ultimate outcome of the trial, there is no sufficient reason why the defendants should be prevented from enforcing the order.
63 I invite the parties’ counsel to frame orders giving effect to these reasons and to submit them to the court. If there is a difficulty or disagreement, I shall hear the parties further.
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