Lendlease Engineering Pty Ltd v Owners Corporation No. 1 (Costs)

[2021] VSC 471

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMON LAW DIVISION
JUDICIAL REVIEW AND APPEALS LIST

S ECI 2019 05851

LENDLEASE ENGINEERING PTY LTD (ACN 000 201 516)	Applicant
v
OWNERS CORPORATION NO.1 PS526704E (and others according to the Schedule)	Respondents

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JUDGE:	Forbes J
WHERE HELD:	Melbourne
DATE OF HEARING:	22 July 2021
DATE OF JUDGMENT:	10 June 2021
DATE OF RULING:	6 August 2021
CASE MAY BE CITED AS:	Lendlease Engineering Pty Ltd v Owners Corporation No. 1 & Ors (Costs)
MEDIUM NEUTRAL CITATION:	[2021] VSC 471

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COSTS – Appeal – Orders for costs – Degree of success – Issues decided in favour of both appellant and respondents – Whether order for costs should be made reflecting outcome and success on issues – Whether no order for costs should be made.

JOINDER – Appeal – Whether the respondents should remain joined to the proceeding at VCAT for the purposes of extant or alternative claims.  

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APPEARANCES:	Counsel	Solicitors
For the Applicant	Mr H. Redd	Thomson Geer
For the Respondents	Mr R. Harris	Marchesin & Co. Lawyers

HER HONOUR:

1. I handed down judgment in this proceeding on 10 June 2021, in which I granted leave to appeal the orders of the Victorian Civil and Administrative Tribunal (Tribunal) in Owners Corporation No. 1 PS526704E v Lendlease Engineering Pty Ltd (Building and Property) [2019] VCAT 1909. Consistent with my reasons[1] it is appropriate to order that leave to appeal be granted and to allow the appeal in part.  

   [1]Lendlease Engineering Pty Ltd v Owners Corporation No. 1 & Ors [2021] VSC 338.

1. At mention on 22 July 2021 and by written submissions,[2] the parties ventilated two further matters to be addressed in the orders. Both sought pursuant to s 148(7) of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) (VCAT Act) that I make further orders in place of those made by the Tribunal regarding the joinder of parties, the issue which succeeded on appeal.  The parties also sought different costs orders.

   [2]Appellant, ‘Lendlease’s outline of submissions on final orders’, Submissions in Lendlease Engineering Pty Ltd v Owners Corporation No. 1 & Ors, S ECI 2019 05851, 27 July 2021 and 29 July 2021; see also Respondent, ‘Respondents submissions on costs’, Submissions in Lendlease Engineering Pty Ltd v Owners Corporation No. 1 & Ors, S ECI 2019 05851, 27 July 2021 and 30 July 2021.

The issues in the appeal

1. The appeal proceeded on questions of law that were not in dispute and the appellant was granted leave on all questions. The appeal dealt with two issues: error in the construction of the statutory limitation period under s 134 of the Building Act 1993 (Vic) (Building Act), and error in permitting joinder of individual lot owners as applicant parties after the expiry of that limitation period.  

1. On the statutory limitation question I held that the Tribunal was correct in finding that the Owners Corporations respondents commenced proceedings within time. Accordingly, the appeal was not allowed on this point.  The appeal was allowed on the question of joinder. The Tribunal erred in permitting joinder of new parties that were statute barred.  It could not relate the effect of joinder back to the commencement of proceeding to bring it within time.

Orders regarding the joinder of private lot owners

1. Before the Tribunal, the application made by the Owners Corporations for joinder of parties had three aspects. First was the joinder of the private lot owners as further applicants to the claim against Lendlease. This was determined by the Tribunal and a subject of the appeal before me. Second, the Owners Corporations sought the joinder of a further respondent, the firm of solicitors that had provided advice to them. This was adjourned at the commencement of the hearing before VCAT and has not yet been argued.  Third, the Owners Corporations sought to amend the Points of Claim to add a further claim against Lendlease, described as ‘the Townsend claim’.  Townsend was a subcontractor engaged by Lendlease, responsible for the installation of the louvre system. The claim alleges Lendlease failed to obtain, and then assign in favour of the respondents, a Deed of Warranty from the sub-contractor.. This failure is said to have deprived the Owners Corporations and/or private lot owners of an opportunity to rely on it to require rectification. The amendment to include the Townsend claim, although ventilated at the Tribunal, did not present any issue for determination in the questions of law on appeal.

1. Paragraph 2 of the Tribunal’s orders provided the following:

Under s 60 of the Victorian Civil and Administrative Tribunal Act 1998 the private lot owners named in the Schedule of Applicants are joined as the third to one hundred and thirty-seventh applicants.

1. The appellant submits, in light of my finding that the private lot owners’ claims are statute-barred, that paragraph 2 of the Tribunal’s orders be set aside, and that pursuant to s 148(7)(b) of the VCAT Act, I dismiss the joinder application.

1. The respondents contend that pursuant to s 148(7)(b) I should not dismiss the joinder application but should simply in effect declare any claim by those joined applicants against Lendlease statute barred by operation of s 134 of the Building Act.

1. Section 148(7)(b) provides:

The Court of Appeal or the Trial Division, as the case requires, may make any of the following orders on an appeal

(a)an order affirming, varying or setting aside the order of the Tribunal;

(b)       an order that the Tribunal could have made in the proceeding;

…..

1. The power is discretionary. It is however, to be exercised with some restraint bearing in mind the nature of the appeal being limited to questions of law. It does not generally permit orders that would go beyond the questions of law determined by the appeal or that might resolve other outstanding matters, factual or legal, before the Tribunal.[3]

   [3]Osland v Secretary to the Department of Justice (2010) 241 CLR 320, [21]; Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771, [48] (Warren CJ); Hoe v Manningham City Council [2011] VSC 37, [3]-[4].

1. The respondents submit that it is appropriate that the joined applicants remain joined for two reasons. First, the Townsend claims are yet to be determined by the Tribunal and that claim is not affected by the limitation period in s 134 of the Building Act. Second there is a possible claim against the solicitors. Until each of those matters are determined by VCAT the private lot owners should remain joined.

1. I do not accept that the private lot owners should remain joined pending the outcome of the two outstanding issues. The Tribunal has not determined whether it was appropriate that they should be joined on a basis relating to either issue.

1. When delivering its reasons the Tribunal said at [49]:

In circumstances where neither party addressed me as to the Tribunal’s jurisdiction to hear and determine a claim in negligence, had I otherwise not ordered joinder of the Owners, I would not have ordered their joinder for the purposes of the Townsend claim without hearing further from the parties on jurisdiction.

1. This reflected the argument between the parties as to whether or not the Townsend claim was properly characterised as a ‘building action’ or a cause of action in negligence for not passing on warranties given by Townsend.[4] It was said that the warranties, if available to the Owners Corporations and private lot owners, would run fifteen years from the 23 February 2007 and the joinder would be within time.[5] Although it is said that the negligence claim was ventilated at the appeal, the question of whether or not such a claim was a ‘building action’ was not an issue to be considered.  

   [4]Transcript of Proceedings, Owners Corporation No. 1 PS526704E & Ors v Lendlease Engineering Pty Ltd (ACN 000 201 516) (BP188/2017, Deputy President Aird, 5 December 2019) 30.12 (per appellant) T46.19. (per respondent) (‘T’).

   [5]T 47.2.

1. The effect of the appeal is that the Tribunal ought not have joined the private lot owners on the basis that it did. Questions regarding their joinder on the basis of a Townsend claim were specifically otherwise left open to be further argued before the Tribunal. This argument involved both the characterisation of the Townsend claim and it would seem questions of jurisdiction. Without expressing any view on the correct characterisation of that cause of action, in my view it is appropriate that jurisdiction and joinder on this basis be argued and decided by the Tribunal. 

1. It is not clear on the proposed pleading how the private lot owners have any potential claim against solicitor. That claim as set out in the proposed amendments is based upon a retainer with the Owners Corporation. The Tribunal has not yet heard any argument about joinder and in my view, if private lot owners seek to be made a party on this basis, then the matter is better heard and determined with joinder then ordered if appropriate.

1. I will make an order setting aside paragraph 2 of the Tribunal’s order and remit the matter for the determination of the remaining issues to the Tribunal.  

Order in respect of costs

1. It is well established that in matters of costs the court has a wide discretion.[6] As a general rule costs follow the event. But what if the event is a successful outcome by both parties on one of the two discrete questions of law raised?

   [6]Supreme Court Act 1986 (Vic), s 24(1).

1. Although the applicant successfully appealed the joinder application, the applicant recognises that it was unsuccessful on the ground concerning the limitation issue. Accordingly, despite the general rule that costs follow the event, the applicant submits that it is appropriate that there be no order as to costs. It relies on Mandie v Memart Nominees Pty Ltd (No 2),[7] submitting that each party has enjoyed a substantial measure of success.

   [7]Mandie v Memart Nominees Pty Ltd (No 2) [2002] VSCA 320, [24] (per Tate, Niall, Emerton JJA).

1. The respondents contend that the outcome was that the appellant was unsuccessful on one issue and they should receive a costs order in its favour apportioned for that issue.  They rely on Chen v Chan (No 2) (Chen),[8] and submit appropriate apportionment is that the applicants pay 75% of the respondents costs, including any costs reserved. This apportionment reflects the limitation issue, on which the appellant was unsuccessful, being one of greater time and focus.

   [8][2009] VSCA 233.

1. In Chen, the principles for consideration in relation to costs, where a party succeed are summarised by seven points. Stated briefly they are:

(1)A successful party is entitled to recover costs even where it has not succeeded on all heads of claim;

(2)A court has significant flexibility in attempting to do ‘substantial justice’ between the parties on costs;

(3)Mixed success on a multiplicity of issues may lead a court to take a pragmatic approach by approaching costs on an ‘issues basis’ so that the mixed success is reflected in an order awarding a proportion of costs;

(4)Where a court apportions costs it does so as a matter of impression and evaluation rather than arithmetical precision;

(5)Where fixing costs in a claim with mixed success, complications arising on taxation  may be considered;

(6)Where multiple parties are jointly represented there is a rule of thumb that apportionment of costs is proportional for each party; and

(7)Usually costs are ordered on a standard basis but indemnity costs may be orders where special or unusual circumstances have been demonstrated.[9]  

[9]Ibid, [10].

1. In Mandie, the court made reference in particular to a relevant matter as being ‘the importance of the matters on which the parties have been successful or unsuccessful’, quoting in particular the fifth principle above. Both Chen and Mandie are distinctive in the complexity of parties, issues, claims and cross-claims and various appeals that were dealt with. In this case despite the joinder involving a further large number of private lot owners to the proceeding, there was in effect one appellant and one position taken by the respondents. The two issues for determination were each a stand-alone issue as a matter of legal analysis, but ones that were interdependent upon each other reflected by the way proceeding had been conducted below.[10]

   [10]Both parties at VCAT accepted that the joinder application and the limitations point ought be heard together as each affected the outcome of the other.

1. The respondents identified no further claims beyond those issues raised by the appellant in its Notice of Appeal.  They were successful on an issue of significant practical effect in the underlying litigation, and which is capable of broader application in actions under the Building Act. Similarly, the joinder issue may be a significant one in relation to the underlying litigation, and also raised questions more broadly as to the conduct of proceedings at VCAT.  The respondents took no positive step to broaden the issues in the appeal. Nor was there any differentiation amongst respondents in presentation of the issues on appeal as between the Owners Corporation and the private lot owners.

1. In Mandie, one of the factors influencing the discretion as to costs was that the successful party succeeded on grounds that were described as ’ultimately marginal to the overall proceeding’ but that nevertheless achieved in the setting aside of the trial judge’s order.  In this case, the success is not marginal overall to either party.  The respondents in my view are entitled to an order that the appellant pay a proportion of their costs of the appeal.

1. The respondents seek 75% of their costs on the basis that the limitations issue occupied significantly more time, both at VCAT and on appeal. The submissions outlined in a mathematical way the relative time spent in written and oral submissions, as well as the paragraphs in the judgment. The principles above, particularly (4), guard against attempting a mathematical precision. Both issues involved a degree of legal complexity not necessarily reflected in the number of  words or paragraphs addressed to its solution. Approaching the matter impressionistically, I would allow an apportionment of 60%.

1. Accordingly, in addition to the orders outlined above,  I will order that the appellant pay 60% of the respondents’ costs of the appeal, including any reserved costs on a standard basis.