Macdiggers Pty Ltd v Dickinson
[2008] VSC 576
•17 December 2008
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL & EQUITY DIVISION
No. 9912 of 2007
| Macdiggers Pty Ltd | Appellant |
| v | |
| Maria Dickinson and Peter Dickinson | Respondents |
---
JUDGE: | Warren CJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 4 September 2008 | |
DATE OF JUDGMENT: | 17 December 2008 | |
MEDIUM NEUTRAL CITATION: | [2008] VSC 576 | |
---
PRACTICE and PROCEDURE – Appeal from Victorian Civil and Administrative Tribunal (VCAT) – Application for adjournment before VCAT – Self-represented litigant – conduct of Tribunal – natural justice / procedural fairness – whether breach of hearing rule.
Victorian Civil and Administrative Tribunal Act 1998 s 148, s 98, s 102.
---
APPEARANCES: | Counsel | Solicitors |
| For the appellant | Mr J Pizer | Monahan + Rowell |
| For the respondents | Mr S Waldren | Rodriguez Lawyers |
HER HONOUR:
This is an appeal from an order of the Victorian Civil and Administrative Tribunal (‘the Tribunal’) made on 13 November 2007. The effect of the order was to require the appellant to pay the respondents the sum of $392,023.62 plus interest of $18,172.71 and costs of $4,058. The Tribunal imposed a stay on the order of one month.
The appeal is brought under s 148(1) of the Victorian Civil and Administrative Tribunal Act 1998 (‘the VCAT Act’). Leave to appeal was granted by a master and the order to pay was stayed pending determination of the appeal.
Factual and procedural background
Arising from the affidavit evidence and submissions of both parties before me, the factual background is broadly as follows.
The respondents are the registered proprietors of the land at 376-378 Highett St Richmond. On or about 16 October 2005, the respondents entered into a building contract with the appellant for the appellant to build four new townhouses on the property. The contract price was $855,906.
In or about August 2006, the appellant ceased carrying out building works under the contract. In or about December 2006, the respondents issued a notice to the appellant purporting to terminate the contract. The respondents paid part of the contract price to the appellant and commenced a proceeding in the Tribunal seeking to recover costs for rectification and completion of the contract works.
In or about June 2007, the solicitors for the respondent employed a private investigator, one Niomi Burton, to investigate the appellant. Ms Burton attended the home address of Mr Macfarlane and spoke with him. The contents of that conversation are in dispute and are discussed below.
On 27 September 2007, the first directions hearing for the Tribunal proceeding was conducted. There was no appearance for the appellant. Orders were made setting a timeline for the filing and service of various documents and setting the matter down for hearing on 13 November 2007.
On 13 November 2007, the respondents appeared, represented by counsel. The sole director and shareholder of the appellant company, Mr Macfarlane, appeared in person purporting to represent the appellant. Mr Macfarlane advised the Tribunal that he had not been notified of the hearing and only discovered the day before that it was scheduled. The Tribunal put to Mr Macfarlane that to be granted an adjournment he would have to pay costs. Mr Macfarlane expressed that he could not ‘put his hand up’ for further costs given his financial situation. The Tribunal purported to accept that he had withdrawn his request for an adjournment, proceeded to hear the matter and ultimately found against the appellant. The details of the various submissions, what transpired at the hearing and its outcome is the context of this appeal.
The Notice of Appeal
In the notice of appeal, the question of law is expressed as, in the circumstances, did the Tribunal:
(i) breach the hearing rule of natural justice, contrary to section 98(1)(a) of the VCAT Act; and/or
(ii) fail to provide the appellant with a reasonable opportunity to call or give evidence, contrary to section 102(1)(a) of the VCAT Act; and/or
(iii) fail to provide the appellant with a reasonable opportunity to cross-examine witnesses, contrary to section 102(1)(b) of the VCAT Act; and/or
(iv) fail to provide the appellant with a reasonable opportunity to make submissions, contrary to section 102(1)(c) of the VCAT Act?
In essence, all four grounds allege that the Tribunal failed to afford the appellant procedural fairness.
The Tribunal hearing
By affidavit sworn and filed 14 December 2007, Mr Macfarlane deposed that on 12 November 2007, having ‘heard a rumour the previous week that [he] had been taken to court and had not turned up’, he rang VCAT and was advised by the Tribunal registry that the proceeding brought against him was listed for the following day. He was advised that in order to seek an adjournment he must attend the hearing.
On the transcript of the hearing that occurred on 13 November, Mr Macfarlane advised the Tribunal that he had only become aware of the proceeding the day prior, he had not had an opportunity to obtain any legal advice and was seeking an adjournment. The Tribunal queried how it was possible that Mr Macfarlane was unaware of the proceedings. It transpired that the registered office address of the appellant was the address of Mr Macfarlane’s former accountants, Brandi & Co.[1]
[1]I consider the matters relating to service in paragraphs [36] to [46].
At the Tribunal hearing, upon Mr Macfarlane seeking an adjournment, the following exchanges took place:
Tribunal: Are you aware of the possibility relating to costs if this matter gets adjourned?
Mr Macfarlane: I’ve got no idea about any of it. I haven’t been able to get advice. I only found out about this yesterday, and to be honest, I can’t afford costs at the moment anyway.
Tribunal: Because if you want this adjourned, the likelihood is that there will be a costs penalty involved, you’ll have to pay the other people.
…
Tribunal: … let me put a couple of scenarios to you. Let’s suppose we adjourn this case, and let’s suppose that I make an order for costs to be paid by you, which would be about $1600, and let’s suppose then you’re in the position where the case is not going ahead today. But you won’t have, by then, filed any affidavits in response to those – or that of the applicants. Now, I can extend time to enable you to do that, but are you going to have any defence to the action, that’s the other question. I mean, that’s a serious issue. If you’re not going to have a defence to the action, you’re just burning money.
Mr Macfarlane: Yes, and I don’t want to burn anyone’s money --
Tribunal: Your money, I’m talking about burning your money.
Mr Macfarlane: Yes, well, the whole thing is – as far as a defence, it was – look, I haven’t had a lot of time to look at it, but the – I would dispute the amount of the costs. Significantly, I would dispute the amounts of the costs.
Tribunal: So, the 390 [thousand dollars] would not be justifiable, from your perspective.
Mr Macfarlane: No, definitely not.
…
Mr Macfarlane: Can I appeal it afterwards? Or it’s all over today?
Tribunal: It’s going to cost you a fortune. Worry about now. Appealing it to the Supreme Court will cost you a fortune, and they wouldn’t – I can’t advise you, but the likelihood is, you would not be able to appeal it. I can’t advise you, but the likelihood is not, because you know of the hearing here today, and unless I make a mistake in law in arriving at the conclusion that would be sought from me, then the likelihood is that you would not be able to appeal it. But I can’t advise you. I’m just saying that to you as a general proposition.
…
If you think that [the amount] is too much against you, one possibility would be for me to say, ‘this matter should be adjourned, but you’ll have to pay the costs of today’…
The Tribunal granted a short adjournment for Mr Macfarlane to obtain informal legal advice from the Legal Aid office on the Tribunal premises. In Mr Macfarlane’s affidavit of 14 December 2007, he deposed as follows:
I went downstairs and spoke with the Legal Aid lawyer. He could only speak with me for 5 or 10 minutes. He told me to tell the VCAT Member that the whole process is supposed to be based on fairness and that, to be fair, the VCAT should either make no order as to costs or order that costs be reserved. (I understood that an order reserving costs simply meant that Macdiggers would have to pay those costs at a later date, not that the question whether any costs should be ordered would be argued at a later date).
I then went back upstairs to the hearing room. I repeated the fact that I had told the Dickinson’s solicitors that in order to communicate with me, they should be notifying me at my home address, because I was not getting any other mail.
The transcript discloses that at the resumption of the hearing some 40 minutes later, little seemed to come of the advice obtained. The following exchange occurred:
Tribunal: Now, what’s happening, Mr Macfarlane? Did you go downstairs?
Mr Macfarlane: Yes, I did. The advice was basically similar to what you’d said, and other than, in the circumstances, with the other party having been notified by me at the door with this girl that turned up, that I wasn’t getting anything other than at my address, if they could address it to me, it should have been sent to me. I don’t know where VCAT got the address from, so I don’t know why the documents went to Punt Road.
Tribunal: Don’t worry about those people. When did you tell the girl?
Mr Macfarlane: June.
Tribunal: June of this year.
Discussion ensued about the ‘girl’ to whom Mr Macfarlane was referring, who appears to have been Ms Burton, the private investigator engaged by the respondents’ solicitors. Ms Burton deposed on affidavit sworn 24 September 2007[2] that she attended 23 Moona Street, Burwood (elsewhere identified as Mr Macfarlane’s home address) to ascertain Mr Macfarlane’s attitude toward the respondents’ claim and the trading and financial position of the company. She deposed she spoke to Mr Macfarlane, who said he had received correspondence concerning the claim and the company was ‘dead and there is no money’. Mr Macfarlane told the Tribunal, and subsequently deposed on affidavit, that he had told Ms Burton when she attended his house that ‘if she needed to get any documents to me, she had to send them to my home address as I was not receiving any mail that was being sent elsewhere.’ Ms Burton’s affidavit makes no reference to this point. Transcript discloses that the Tribunal queried how the registered address had come to be, and had remained, the address of the former accountants. Mr Macfarlane said the accountants had changed the details to their address and he had not changed them back.
[2]Exhibited to the affidavit of Mr Paul Rodriguez, 1 February 2008, before me.
Before the Tribunal (and before this Court), counsel for the respondents submitted, notwithstanding any notice given to Ms Burton as to address for correspondence, there was no requirement to serve anywhere other than the registered office address.
Counsel for the respondents indicated to the Tribunal, given the alleged dire financial position of the company and that the appellant was ‘applying for the indulgence at a late stage’, the respondents would be ‘seeking an order that any costs that [the Tribunal] were minded to order be paid before the proceeding be proceeded with’.
The hearing of the application continued, relevantly, as follows:
Mr Macfarlane: I don’t want to reserve costs for the future… I don’t want to be clocking up costs…
Tribunal: Can’t have it all ways, I’m sorry.
…
Tribunal: So, I don’t want to pressure you into doing anything, but I do want you – do want to know what you want me to do.
Mr Macfarlane: Well I really just want it all over with, to be honest. I’ve had this going on for a year now.
Tribunal: What does that mean to me? I don’t know what you mean by that.
…
Tribunal: Do you want me to go ahead, or do you want me not to go ahead? That is, do you want me to adjourn it, or not? If you want me to adjourn it, you’ll have to pay the costs.
Mr Macfarlane: I can’t pay the costs.
Tribunal: Well, do you want me to adjourn it?
Mr Macfarlane: I can’t pay the costs, and I don’t want to put my hand up for that.
…
Tribunal: I’m under a duty always to act fairly to accord natural justice but I think you’ve indicated to me enough, Mr Macfarlane, that, really, you want the matter over and done with, and I should proceed today.
Mr Macfarlane: Yes.
Tribunal: And there’s nothing I can help you with any further. I’ve done the best I can.
…
[The Tribunal asked a series of questions, enquiring whether Mr McFarlane could gain $1600 from other sources]
…
Tribunal: …you can’t get out of this for nothing.
Mr Macfarlane: I’m not asking to get out of it for nothing, necessarily, sir.
Tribunal: You are. You want it adjourned for nothing… I can’t adjourn it for nothing.
…
Tribunal: Honestly, I’m very uncomfortable proceeding, Mr Macfarlane, but you won’t – you’re not giving me the opportunity to be able to do otherwise, really because I’m – there would be an application for costs that I would have to entertain, and you haven’t got the money to do that, and I’m – it sort of puts me in a position where I can’t adjourn it for nothing, because the other side has been put to expense in having to be here, and they’ve done nothing wrong. The money just doesn’t sort of fall out of the sky. They’ve got to be paid for, and you haven’t got any means of coming up with that money, and you want the matter over and done with, but you do want to take issue with some of the points which are in the affidavit.
After further questioning by the Tribunal about where Mr Macfarlane may be able to source $1600 and Mr Macfarlane’s responses about various financial difficulties, the Tribunal continued:
Tribunal: All right. Well, Mr Waldren, would you submit in those circumstances I should be proceeding?
Mr Waldren: I would, Senior Member.
Tribunal: Well, I’m under a duty always to act fairly to accord natural justice, but I think you’ve indicated to me enough, Mr Macfarlane, that, really, you want the matter over and done with, and I should proceed today.
Mr Macfarlane: Yes.
Tribunal: And there’s nothing I can help you with any further. I’ve done the best I can.
The Tribunal proceeded to hear the matter, which from transcript seemed to comprise reading the affidavits before the member. Mr Macfarlane was briefly questioned about the defence. He did not give evidence. Shortly thereafter the Tribunal delivered its reasons for judgment against the appellant company.
Ultimately, the Tribunal found against the appellant and delivered the following ex tempore reasons.
1. I am satisfied the Respondent has been duly served and given proper notice of the proceedings this day.
2. I am satisfied also that the Respondent (via Mr MacFarlane) does not want the proceedings adjourned; I have referred Mr MacFarlane to legal aid. He is not prepared to pay costs (of about $1,600.00) if the matter is adjourned. The matter, therefore, is to proceed.
3. I allow[ed] Mr MacFarlane to address me on the affidavits in support of the claim despite paragraph 3 of the orders made on 27 September 2007 not having been complied with. He has not, however, given me evidence on oath or affirmation and has not subjected himself to cross-examination. I pointed out to him evidence on oath or affirmation carries more weight than statements from the Bar table.
4. In accordance with the orders made on 27 September 2007 I rely upon the affidavits of Paul Rodriguez sworn 21 September 2007, [Niomi] Burton sworn 24 September 2007 and of Maria Dickinson sworn 3 October 2007.
5. On the basis of the same I am satisfied it is fair and proper to order the Respondent to pay the Applicants the sum of $392,023.62.
6. I am satisfied it is proper also to order interest in the sum of $18,172.71.
7. Further I consider it fair to order costs under s 109 of the Victorian Civil and Administrative Tribunal Act 1998 which I fix in the sum of $4,058.00 based on County Court Scale ‘D’.
The adjournment application
As a matter of general principle, a party will be granted an adjournment requested on procedural grounds provided any prejudice to the opposing parties may be compensated by an order for costs.[3] The rationale for this principle was expressed in Queensland v JL Holdings:
Justice is the paramount consideration in determining an application such as [an application to amend a defence]. Save in so far as costs may be awarded against the party seeking the amendment such an application is not the occasion for the punishment of a party for its mistake or for its delay in making the application. Case management, involving as it does the efficiency of the procedures of the court, was in this case a relevant consideration. But it should not have been allowed to prevail over the injustice of shutting the applicants out from raising an arguable defence, thus precluding the determination of an issue between the parties.[4]
[3]Queensland v JL Holdings (1997) 187 CLR 146 (‘JL Holdings’).
[4]JL Holdings, 155 (Dawson, Gaudron, McHugh JJ).
As observed by Balmford J in The Warehouse Group,[5] ‘whilst that passage does not relate directly to an application for an adjournment, it is equally apposite in that context’.[6]
[5]The Warehouse Group (Australia) Pty Ltd v Bevendale Pty Ltd (No 2) [2002] 11 VPR 321.
[6]Ibid [43].
The statutory framework in which questions of proper procedure are to be viewed is clear from the VCAT Act. Section 98(1)(a) states that the Tribunal is bound by the rules of natural justice. Section 102 states that the Tribunal must allow a party a reasonable opportunity -
(a) to call or give evidence; and
(b) to examine, cross-examine or re-examine witnesses; and
(c) to make submissions to the Tribunal.
These sections read together have been interpreted as giving the ‘overwhelming impression that fairness and the reasonable opportunity to present a case before the Tribunal were regarded by Parliament as important’.[7]
[7]Ibid [41].
The principles of fairness and reasonable opportunity to put one’s case are particularly relevant in circumstances where a party is not legally represented. It imposes a ‘special burden’ on the Tribunal to ensure it complies with its obligations.[8] Furthermore, as Nettle J said in Collection House Ltd v Taylor,[9] whilst the decision whether to grant an adjournment is discretionary,
an appellate court will interfere if satisfied that the discretion has been exercised in such a way as to result in an injustice to one of the parties… The paramount consideration is to do justice and thus to enable the parties to present their case as fully as necessary within the limits of the law.[10]
[8]Dona Homes (Vic) Pty Ltd v Stevens (2005) 24 VAR 139, [4].
[9](2004) 21 VAR 333.
[10]Collection Homes Ltd v Taylor (2004) 21 VAR 333, 341.
Before me, counsel for the appellant submitted that these principles had not been adhered to and the appellant had not been afforded the fairness and opportunity to present his case as required by law. Before the Tribunal, the appellant made it clear that he disputed the claim and would seek to defend it. However, he had had no time to seek legal advice, prepare his case, call witnesses or tender evidence. In response to the mention of the amount of the claim against him, the following was said:
Mr Macfarlane: It’s outrageous actually.
Tribunal: Well maybe but if you want to be able to say that, you’ve got to be able to participate in the hearing. And at the moment, you’re not in a position to do so.
The Tribunal acknowledged that he could only defend the claim if he was able to participate in the hearing and further acknowledged that he could not participate without an adjournment.
On the matter of costs, counsel for the appellant submitted that the Tribunal gave Mr Macfarlane a ‘false choice’ between proceeding on that day or adjourning with an order for costs. Counsel for the appellant submitted that the appropriate course was for the adjournment to be granted and costs reserved. It was further submitted that the Tribunal referred ‘fleetingly’ to the option of reserving the question of costs and that Mr Macfarlane understood this to mean delaying his payment of the respondents’ costs, as opposed to saving the argument and determination of who is responsible for costs for a later date. Mr Macfarlane deposed to this subsequently in his affidavit of 14 December 2007.
It was further submitted that a breach of fairness can be inferred from the Tribunal seeking consent to a costs order of $1600 and in the absence of consent, ordering against the appellant, including costs of over $4000.
It was submitted for the appellant, that in line with JL Holdings it was not appropriate to punish the appellant. The adjournment application was not withdrawn and it should have been granted, notwithstanding Mr Macfarlane’s objection to costs, as this was the only way in which the Tribunal could ensure a fair hearing and comply with the requirements of the VCAT Act.
Counsel for the respondents submitted an adjournment would have prejudiced the respondents in that, given the purported financial position of the company, it was unlikely that the respondents would achieve full recovery. The adjournment would result in prejudice to at least the costs of the adjournment, estimated at $1600, and any associated delays with recovery of the same. Therefore, a costs order would be hollow and as such an insufficient remedy.
Further, it was submitted, the choice given to Mr Macfarlane was not ‘false’ for leaving out an option to reserve costs. The Tribunal had determined that if the adjournment was to be given, a costs order was appropriate in the circumstances. The Tribunal continued on the basis of this decision and, therefore, reserving costs was not an option to be given to Mr Macfarlane.
These submissions disclosed before me three related issues; namely, whether in fact there had been effective service on the appellant, whether there was evidence of solvency or otherwise of the appellant before the Tribunal and whether Mr Macfarlane withdrew his application for an adjournment as found by the Tribunal. If Mr Macfarlane did in fact withdraw his application, the other issues would not fall to be determined. However, as will become apparent, I do not accept that the application was withdrawn. I will deal with each issue in turn.
Service
At the hearing below, it was accepted by the Tribunal that service was effected on the appellant at the address of the former accountants, notwithstanding no proof of service.[11] Although Mr Macfarlane was present, his standing as the representative of the company was never clarified. The efficacy of the purported service was neither proved nor properly considered.
[11]See the Tribunal’s reasons set out above at paragraph [22].
Before me, there was evidence as to the process undertaken by the respondents’ solicitors. Mr Paul Rodriguez, principal of Rodriguez lawyers for the respondents, deposed in his affidavit of 1 February 2008 the following:
·On 22 May 2007, he arranged for an ASIC search to obtain the registered office address of the appellant;
·The address was 233 Punt Road, Richmond;
·On 3 September 2007, he commenced the application in VCAT on behalf of the respondents;
·On the application form, he listed the appellant’s registered office address as the address specified in the ASIC search;
·In accordance with VCAT usual practice, the application should have been served on the appellant at the specified address;
·Subsequent affidavits were served by post to the registered office address.
Evidence for the appellant as to notice (or lack thereof) of the proceeding was provided by Mr Macfarlane in his affidavit of 14 December 2007. He deposed he informed the Tribunal that, in or about June 2007, he had told Ms Burton ‘that if she needed to get any documents to me, she had to send them to my home address as I was not receiving any mail that was being sent elsewhere.’ He further deposed that at the Tribunal hearing, he explained that the application and related documents would have been sent to his former accountants and that he never received notice of the application or the related documents.
In a further affidavit filed on 18 March 2008, Mr Macfarlane deposed that two letters, one dated 20 December 2006 and the other dated 21 September 2007, had been sent to him from Rodriguez lawyers to his post office box address which he had received. Further, he had read Ms Burton’s affidavit and accepted that he was ‘reluctant’ to discuss his business affairs ‘with a woman [he] had never met and who had come to the house “unannounced”’. He deposed he did not specifically recall making the statements she attributes to him, however, he had a ‘very clear recollection’ of stating that all correspondence should be sent to his home address.
In the hearing before me, counsel for the appellant agreed that whilst Mr Macfarlane believed the documents were served at the address of the former accountants, he did not actually know. Similarly, counsel for the respondents conducted its case on the basis that the documents had been served, though no proof of service was produced.
For the appellant it was argued that the appellant had done nothing wrong and there was a live issue as to whether there was fault on the part of the respondents’ solicitors. For the respondents, it was argued that they had satisfied the requirements for service in accordance with the relevant legislation and as such were not at fault.
According to the instructions provided by VCAT to applicants,[12] once an application is filed in the Domestic Building List, VCAT arranges service. Pursuant to s 140 of the VCAT Act, service on a company incorporated under the Corporations Act 2001, may be effected by
(i) by delivering it personally to the registered office of the company; or
(ii) by sending it by post, facsimile or other electronic transmission to the registered office of the company; or
(iii) in any other way that service of documents may be effected on a body corporate.[13]
[12]Exhibit PR3 to Mr Paul Rodriguez’s affidavit of 1 February 2008.
[13]See also Corporations Act 2001 s 109X.
There is no evidence before me that service was effected on the company. There is also no evidence tendered for either party as to the position of the occupants of the registered address, Brandi & Co.
In any event, there was neither a dispute that Mr Macfarlane was not aware of the proceeding until the day before, nor that he was the sole representative of the appellant company. There was a dispute about whether there was fault on the part of the respondents’ solicitors. In all the circumstances, there was insufficient material before the Tribunal on which to make a determination as to whether service had been lawfully effected for the purposes of the hearing and, ultimately, to order for judgment against the appellant. The Tribunal ought to have required formal proof of service by way of an ASIC search and the formal affidavit of service. Mr Macfarlane was a non-lawyer attempting to protect the interests of his company. The uncertain circumstances surrounding the efficacy of service was a factor that ought to have weighed in the mind of the Tribunal in the exercise of the discretion whether to grant an adjournment.
The appellant, through Mr Macfarlane, needed legal advice generally as to its defence of the proceeding. The efficacy of service, in all likelihood, would have been one matter considered in such legal advice. The potential for injustice arising from ineffectual service does not seem to have featured in the Tribunal’s consideration. The disregard for this matter is exacerbated by the fact that, first, the respondents were not put to the formal proof of service and, secondly, Mr Macfarlane, by his presence, was inferentially treated as representing the company in the circumstances. Taking these points together, the Tribunal did not properly exercise the discretion whether to grant an adjournment as sought.
I am of this view separate from the substantive submission of the appellant concerning the interconnection between the adjournment and the appellant’s solvency to which I now turn.
The appellant’s financial position
As to evidence of solvency, it was submitted for the respondents that the evidence of the appellant and Mr Macfarlane’s incapacity to pay was in the affidavit of Ms Burton, to whom Mr Macfarlane made statements in June 2007 and in the statements made to the Tribunal by Mr Macfarlane. Ms Burton deposed in her affidavit[14] that, upon attending Mr Macfarlane’s house, Mr Macfarlane said:
[14]Exhibited to the affidavit of Mr Paul Rodriguez, 1 February 2008, before me.
·‘The company “is dead and there is no money”’;
·‘The company ceased operations due to its debts, and that it did not have enough funds to appoint a liquidator’;
·Accountants had ‘prepared a part-tender for bankruptcy on his behalf’;
·‘He had received correspondence’ regarding the claim;
·‘He was unable to respond to the claim because he is suffering from stress due to the failure of the company’;
·‘He cannot confront issues and avoids phone calls as he doesn’t want to address any situations in regards to the failed company’.
Mr Macfarlane’s statements to the Tribunal, as recorded by transcript, include:
· He had ‘lost everything’;
· ‘I just cannot afford to be putting my hand up to have extra costs added to anything in my life at the moment, and I wouldn’t like to go down that track, making promises or racking up bills that I can’t pay, because at the moment, I wouldn’t have a clue how I would go about paying that anyway.’;
· ‘I don’t have money… I’m finished.’
and other like statements.
One of the respondents, Ms Maria Dickinson, deposed in her affidavit of 3 October 2007 before the Tribunal[15] that Mr Macfarlane advised her the building works ceased because he was ‘having significant cash-flow difficulties’.
[15]Exhibited to the affidavit of Mr Paul Rodriguez, 1 February 2008, before me.
For the appellant, it was submitted that there was no satisfactory evidence before the Tribunal upon which the Tribunal could determine the company’s solvency on the basis that Ms Burton’s affidavit related to a time approximately five months prior to the hearing; and, the purported statements by Mr Macfarlane were insufficient to form a conclusion on the company’s solvency and were irrelevant to determining the question of whether the adjournment should be granted. Furthermore, contended the appellant, Mr Macfarlane’s comments at the hearing must be viewed in the context of his state of mind during the hearing. In his affidavit of 14 December 2007, Mr Macfarlane described how he felt at the hearing. He deposed as follows:
I found the whole process in the VCAT to be extremely stressful – I had a significant headache for the rest of the day.
…
What happened caught me totally off guard. I certainly had not expected to feel totally pressured into accepting a significant costs liability to enable me to effectively ‘buy’ an opportunity to get a fair and reasonable time to digest and review the case against my company.
…
I felt overwhelmed and badgered. Although I really wanted an adjournment, I felt I had absolutely no choice but to continue with the hearing.
There was no application made before me to cross-examine Mr Macfarlane on his affidavit about his feelings or perceptions of the hearing, and there was no rebuttal of this evidence. Indeed, it is apparent from reading the transcript below as a whole, there is a tone throughout that supports Mr Macfarlane’s perceptions. From early in the hearing, there was a pressing of Mr Macfarlane to accept an order for costs. This continued following the temporary adjournment allowing Mr Macfarlane to obtain advice from Legal Aid and despite the Tribunal’s acknowledgment of the requirement to afford natural justice.
In the circumstances, it is difficult to know the true state of the financial affairs of the company at the time of the Tribunal hearing. Mr Macfarlane’s statements must be seen in the context of the hearing, his lack of knowledge and therefore preparation of the matter, unfamiliarity with the process and the absence of legal advice. The evidence of Ms Burton was of some months earlier and also recounted oral statements made by Mr Macfarlane. As a self-represented person, Mr Macfarlane had no opportunity to explain or answer those matters. No other documentary evidence of the appellant’s financial position was tendered.
Even if the company was insolvent and unlikely to meet an order for costs, the justice of the situation necessitated an adjournment to enable Mr Macfarlane, on behalf of his company, to seek legal advice, to defend a substantial claim and, if necessary, to merely dispute the amounts claimed. At that point there was no determination on the merits of the claim and the putative defence. The Tribunal could have reasonably anticipated that if the claim failed or was only partially successful then the appellant’s financial position may alter. The fact was that as at the date of the hearing at VCAT, the insolvency of the appellant was not sufficiently established for the Tribunal to use that factor as a basis to determine that the prejudice to the respondents could not be disposed of by an order for costs. The Tribunal simply did not know the position. In exercising its discretion to refuse the adjournment in the absence of capacity to pay the order for costs, the discretion was not exercised in accordance with the relevant principle.[16]
[16]See Australian Coal and Shale Employee’s Federation v Commonwealth (1955) 94 CLR 621; JL Holdings (1997) 187 CLR 146; Commonwealth v Verwayen (1990) 170 CLR 394.
Withdrawal of the application
As to Mr Macfarlane’s purported withdrawal of his application, Mr Macfarlane deposed on affidavit before me that ‘it is quite wrong to say that Macdiggers did not want the proceeding adjourned. I always wanted that. I never changed my mind on that. That was why I was there.’[17] It is clear that Mr Macfarlane was unprepared to proceed, was without legal representation and, as acknowledged by the Tribunal, was unable to participate without an adjournment.
[17]Affidavit of Mr Macfarlane sworn 14 December 2007, [11].
It appears that, in accordance with his evidence on affidavit, Mr Macfarlane did not withdraw the application. The statement to the Tribunal ‘I really just want it all over with’[18] must be read in context. It is unclear whether his comment was intended as a broad expression concerning all the circumstances of the business, or just the financial situation; or whether he spoke out of frustration, a lack of understanding or something else. The fact is Mr Macfarlane is not legally trained. He therefore is unlikely to be fully apprised of the ramifications for his application of ‘off-the-cuff’ comments made during the hearing. The Tribunal had a special responsibility to Mr Macfarlane given the circumstances of him appearing in person.[19]
[18]See transcript quoted at [19].
[19]See Tomasevic v Travaglini and anor (2007) 17 VR 100 (and the thorough analysis of the relevant authorities therein); Dona Homes (Vic) Pty Ltd v Stevens (2005) 24 VAR 139; Collection House Ltd v Taylor (2004) 21 VAR 333.
Just prior to the hearing of the substantive matter, the following exchange occurred:
Tribunal: All right. Well, Mr Waldren, would you submit, in those circumstances, I should be proceeding?
Mr Waldren: I would Senior Member.
Tribunal: Well, I’m under a duty always to act fairly to accord natural justice, but I think you’ve indicated to me enough, Mr Macfarlane, that, really, you want the matter over and done with, and I should proceed today.
Mr Macfarlane: Yes.
Tribunal: And there’s nothing I can help you with any further. I’ve done the best I can.
Mr Macfarlane: Yes.
I do not accept that this exchange demonstrates Mr Macfarlane’s withdrawal of the application. It too must be read in the context of the transcript as a whole and Mr Macfarlane’s status as a self-represented litigant.
It is obvious from the transcript as a whole that Mr Macfarlane was floundering. The Tribunal in effect told him a costs penalty would attach to any adjournment, even before it was sought by the respondent and without hearing from the appellant. It indicated the costs would be $1600 without consideration of whether costs should be paid on a party/party, solicitor/client or indemnity basis, or whether there ought be a taxation. Yet the figure of $1600 was put to Mr Macfarlane in the context of a choice between two options: proceed with the hearing now, or adjourn and pay an additional $1600.
In so doing, the Tribunal implied that the appellant had no choice but to pay the costs of the adjournment when, in fact, a number of discretionary options were open to the Tribunal. The Tribunal could choose to make no order as to costs, reserve costs, or stay any order for costs in the event.
I do not accept the submission that the Tribunal had determined that reserving costs was out of the question. Even if that were the case, the Tribunal would have been required to explain this determination to the appellant. There is no such consideration or explanation on the transcript.
The Tribunal also questioned Mr Macfarlane as to whether his company had ‘any defence’. This was carried out in the knowledge that he is not a lawyer and had not obtained legal advice as to whether a defence was reasonably open to him. In these circumstances, the Tribunal ought reasonably to have anticipated that Mr Macfarlane did not understand the intricacies of a technical, legal concept such as a defence or what might constitute a defence. The Tribunal then proceeded to imply to Mr Macfarlane that an adjournment may be a waste of time if no defence was open.[20] This was despite the fact that no evidence had been tendered and no argument had been heard for the company. The situation was compounded when the Tribunal said to Mr Macfarlane it would cost ‘a fortune’ to appeal the Tribunal’s decision and that the likelihood was the company would not be able to appeal in any event.[21] The gravity of these statements was not alleviated by the proviso given by the Tribunal member that he was not providing and could not provide advice to Mr Macfarlane.[22]
[20]See transcript quoted at [13].
[21]See transcript quoted at [13].
[22]See transcript quoted at [13].
It should be borne in mind that a self-represented litigant is vulnerable and is susceptible to suggestions made by a tribunal or court. In this context, the exchange was extraordinary, particularly in the circumstances of a self-represented litigant attempting to act for a company, who clearly stated his desire to dispute the amount claimed. Furthermore, the dispute involved a relatively substantial sum and service of the initiating documents was uncertain. It is apparent from the transcript, even without considering his affidavit evidence before me, that Mr Macfarlane was corralled by the Tribunal into acquiescing to the hearing proceeding because he could not pay $1600 costs to the respondent and wanted things ‘over and done with’ that day.
To recapitulate, as may be gleaned from the transcript, Mr Macfarlane was put in a position to acquiesce and surrender to what was presented as the inevitable. It was inappropriate in the circumstances for the Tribunal to postulate a cost of $1600 and put to Mr Macfarlane that he couldn’t ‘get out of this for nothing’. It was equally inappropriate for the Tribunal to state that Mr Macfarlane ‘wanted it adjourned for nothing’ when he made no such request and further to say Mr Macfarlane wanted the matter ‘over and done with’ when in fact he had come to VCAT seeking an adjournment.
Conclusions
In considering whether the Tribunal discharged its obligation to afford natural justice, and in particular the ‘special burden’ imposed on the Tribunal, the following facts are relevant: The appellant was not legally represented; and its representative was unfamiliar with the process or requirements for an application; its representative became aware of the claim, and the points of claim, the day prior; the claim was sizeable – in excess of $400,000; its representative was clear that he would defend the claim and needed an adjournment to do so; and, the representative did not understand, and therefore could not press for, ‘reserved’ costs.
Justice is the paramount consideration. Various factors will weigh in the determination of what is just in the circumstances, including of course the ‘litigation strain’ to all involved,[23] the prejudice to the applicant if refused, the prejudice to the respondent if granted, and the appropriateness of a costs order. The decision whether to exercise the discretion to grant an adjournment is not a situation to punish an applicant for any mistake or otherwise but to ensure a fair and reasonable hearing.[24]
[23]Howarth v Adey [1996] 2 VR 535, 544 (Winneke P); See also Ketteman v Hansel Properties [1987] AC 189, 220 (Lord Griffiths).
[24]JL Holdings, 155 (Dawson, Gaudron, McHugh JJ).
In the circumstances of this case, I consider that the Tribunal erred in proceeding to hear the matter. It was not possible for the appellant, through Mr Macfarlane, to effectively put its case. There was sufficient dispute regarding procedural matters for the question of costs to have been reserved. In light of the heavy prejudice against the appellant in proceeding with the hearing, the appellant’s consent to an order for costs was irrelevant.
Any prejudice to the respondents in the nature of delay, the lost costs of the day (the $1600) and difficulties of recovery could not have outweighed the fundamental requirements that the appellant be able answer the case against it and the issues between the parties be determined.[25]
[25]Howarth v Adey [1996] 2 VR 535; Commonwealth of Australia v Verwayen (1990) 170 CLR 394.
Whilst the granting of the adjournment is a matter of discretion for the Tribunal, in the circumstances of this case, the requirements of natural justice could only have been met by granting the adjournment. In proceeding to hear the matter, the appellant was not provided with a fair hearing, in contravention of the VCAT Act.
Often enough, applications for adjournments and applications that give rise to an adjournment are difficult to determine. They require the exercise of a discretion that weights up the interests of both parties. So much is plain from JL Holdings,[26] Verwayen[27] and Howarth v Adey.[28] Ultimately, the justice of the situation is the determining factor.[29]
[26]JL Holdings (1997) 187 CLR 146.
[27]Commonwealth of Australia v Verwayen (1990) 170 CLR 394.
[28]Howarth v Adey [1996] 2 VR 535.
[29]JL Holdings (1997) 187 CLR 146, 155 (Dawson, Gaudron and McHugh JJ)
In answer to the questions on the notice of appeal,[30] I answer:
(i) yes;
(ii) unnecessary to answer;
(iii) unnecessary to answer; and
(iv) unnecessary to answer.
[30]See paragraph [9].
I therefore order that the appeal be allowed and the matter be remitted to VCAT for rehearing, by a differently constituted Tribunal.
4
6
0