MK Builders Pty Ltd v 420 Balcombe Road Pty Ltd
[2015] VSC 547
•12 October 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
JUDICIAL REVIEW AND APPEALS LIST
S CI 2014 04871
| IN THE MATTER OF the Victorian Civil and Administrative Tribunal Act 1988 BETWEEN | |
| MK BUILDERS PTY LTD (ACN 097 069 399) | Appellant |
| v | |
| 420 BALCOMBE ROAD PTY LTD (ACN 098 592 879) | First Respondent |
| and | |
| TAKY KAPLAN | Second Respondent |
---
JUDGE: | McDONALD J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 10 June 2015 |
DATE OF JUDGMENT: | 12 October 2015 |
CASE MAY BE CITED AS: | MK Builders Pty Ltd v 420 Balcombe Road Pty Ltd & Anor |
MEDIUM NEUTRAL CITATION: | [2015] VSC 547 |
---
APPEAL ― Appeal from decision of Associate Judge refusing application for leave to appeal out of time ― Appellant sought to tender further evidence explaining reasons for delay ― Not in the interests of justice to admit further evidence ― Appellant bound by conduct of its lawyers who failed to tender further evidence in proceedings before Associate Judge ― Appeal dismissed.
Corporations Act2001 (Cth) s 553C; Supreme Court (General Civil Procedure) Rules 2005 (Vic) O 77; Victorian Civil and Administrative Tribunal Act 1998 (Vic) s 148.
---
APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr J D Pizer QC with Mr J S Mereine | Meier Denison Guymer Pty Ltd |
| For the Respondents | Mr J L Evans | Madgwicks Lawyers |
HIS HONOUR:
On 23 December 2014, Zammit AsJ (as her Honour then was) refused an application by MK Builders Pty Ltd (‘MKB’) for an extension of time within which to bring an application for leave to appeal from orders made by the Victorian Civil and Administrative Tribunal (‘VCAT’), constituted by Senior Member Lothian, on 11 May 2012. In accordance with s 148(2) of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) (‘the VCAT Act’), the application for leave to appeal in respect of those orders should have been made on or before 8 June 2012. In fact, the application was made some 27 months out of time on 12 September 2014. Zammit AsJ rightly described this delay as ‘remarkable’.[1] Further, her Honour concluded that the reasons for the delay provided by MKB were unsatisfactory and that the delay was likely to have some adverse effect on the respondents’ ability to call evidence in their defence.[2] Her Honour concluded that there was substantial public interest in achieving finality in litigation[3] and that MKB’s own conduct had given rise to the remarkable period of delay.[4] Her Honour concluded that MKB had made a ‘deliberate decision’ not to appeal the VCAT decision, but rather decided to treat another appeal from the VCAT as ‘its vehicle for a test case’.[5]
[1]MK Builders Pty Ltd v 420 Balcombe Road Pty Ltd & Anor (Unreported, Supreme Court of Victoria, Zammit AsJ, 23 December 2014) [50].
[2]Ibid [47] and [50]-[53].
[3]Ibid [54].
[4]Ibid [53].
[5]Ibid.
MKB accepts that her Honour’s findings were properly based upon the evidence and submissions which were before the Court.[6] However, it submits that the evidence and other material before the Court was ‘seriously deficient’.[7] MKB points to the fact that the evidence before the Court did not include evidence contained in the affidavits dated 20 January 2015 of Tom Lefkovic, a director of MKB, and Lance James Guymer, MKB’s solicitor, and a further affidavit of Mr Guymer sworn 4 June 2015. MKB submits that the further evidence in those affidavits demonstrates that there was a good explanation for the delay, in that the delay was not due to MKB’s conduct, but rather, due to the incorrect advice and conduct of MKB’s legal representatives.[8]
[6]Appellant, ‘Appellant’s Outline of Submissions’, Submissions in MK Builders Pty Ltd v 420 Balcombe Road Pty Ltd & Anor, S CI 2014 04871, 9 June 2015, [6].
[7]Ibid [7].
[8]Ibid [8].
MKB accepts that if the affidavits of Mr Lefkovic and Mr Guymer are not admitted into evidence, it has no legitimate basis for challenging the decision of Zammit AsJ.[9] I have concluded that it is not in the interests of justice that MKB be permitted to rely upon the further evidence of Mr Lefkovic and Mr Guymer. Consequently, the appeal is dismissed.
[9]Transcript of Proceedings, MK Builders Pty Ltd v 420 Balcombe Road Pty Ltd & Anor (Supreme Court of Victoria, S CI 2014 04871, McDonald J, 10 June 2015) T44 LL21-24.
History of the proceedings
Having regard to the submissions advanced on behalf of MKB, it is necessary to set out in some detail the history of the proceedings.
According to MKB’s amended points of claim filed in the VCAT, it entered into a contract with 420 Balcombe Road Pty Ltd (‘420 BR’) to construct two townhouses at 420 Balcombe Road, Beaumaris on 9 February 2007. It also alleged that Taky Kaplan, a director of 420 BR, executed a guarantee on behalf of 420 BR.
On or about 5 May 2009, MKB’s directors appointed an external administrator, Joseph Lobenstein. On 20 May 2009, Richard John Cauchi and David James Lofthouse were appointed as joint and several administrators in lieu of Mr Lobenstein. On 21 July 2009, MKB executed a deed of company arrangement. The administrators were appointed as deed administrators to administer a fund of $50,000[10] to be distributed to MKB’s creditors. By virtue of clause 1.3 of the deed, s 553C of the Corporations Act2001 (Cth) (‘the Act’) was incorporated into the deed. Upon the execution of the deed, the control and management of the company reverted to its directors, and its assets also reverted to the company.[11]
[10]Together with all funds held by the adminsitrators in the voluntary administration bank account: see cll 5.1 and 6 of the deed of company arrangement dated 21 July 2009, exhibit “TK-9” to the affidavit sworn 28 March 2012 by Taky Kaplan, which is exhibit “LJG-7” to the affidavit of Lance James Guymer sworn 9 September 2014.
[11]Ibid cll 2.2 and 5.6.
On 28 September 2010, 420 BR lodged a formal proof of debt in the sum of $442,572. On 7 October 2010, the deed administrators declared a first and final dividend of 0.549 cents in the dollar and paid 420 BR the sum of $2,427.47 ‘on your debt as admitted to rank for dividend in the sum of $442,500’.
On 13 October 2010, the deed of MKB came to an end. On 20 June 2011, MKB commenced VCAT proceedings against 420 BR and an insurer (‘the Balcombe Road proceeding’). Mr Kaplan was joined to the proceeding on 15 December 2011. By its amended points of claim dated 20 February 2012, MKB sought damages in the sum of $445,473.55 plus interest and costs.
On 9 March 2012, 420 BR and Mr Kaplan applied for the Balcombe Road proceeding to be struck out or dismissed against each of them. On 11 May 2012, their application was upheld on the ground that any claim which MKB might have had against 420 BR and Mr Kaplan was extinguished in the set-off which took place pursuant to s 553C of the Act on 20 May 2009 (‘the Balcombe Road decision’).[12]
[12]MK Builders Pty Ltd v CGU Insurance Ltd & Anor [2012] VCAT 590. See especially [35] and [39].
On 8 October 2012, MKB commenced another VCAT proceeding (‘the Warrigal Road proceeding’) against a developer known as 36 Warrigal Road Pty Ltd (’36 WR’) and others. As with the Balcombe Road proceeding, the Warrigal Road proceeding raised the issue of the operation of s 553C of the Act in respect of amounts allegedly owed to MKB by a developer. Mr Kaplan was also the guarantor of 36 WR.
On 22 November 2012, 36 WR and the other respondents applied to have MKB’s application summarily dismissed or struck out against each of them. That application was upheld by the VCAT (constituted by Aird DP) by orders made on 12 March 2013. Aird DP’s reasons for decision include the following statement:
The tribunal has previously determined that the effect of the operation of s 553C was to extinguish any claims MKB might have against an unsecured creditor at the date of the DOCA,[13] a decision which MKB did not seek leave to appeal. Mr Forrest [counsel for MKB] submitted at the hearing of this application, that MKB had made a commercial decision not to appeal that decision, as any excess owed to it was minimal and an appeal would be costly.[14]
[13]MK Builders Pty Ltd v CGU Insurance Ltd & Anor [2012] VCAT 590.
[14]MK Builders Pty Ltd v 36 Warrigal Road Pty Ltd & Ors [2013] VCAT 267, [30].
On 5 June 2013, Mukhtar AsJ granted MKB leave to appeal the decision of Aird DP on the following questions:
(i)Did the Deputy President err in law when she found that after the automatic set-off and accounting required by s 553C of the Act there was no ‘balance’ owing to MKB?
(ii)Did the Deputy President err in law when she found that any claim MKB might have had against 36 WR had been extinguished by the deed of company arrangement?
On 7 April 2014, Almond J allowed the appeal.[15] His Honour’s reasoning and the submissions advanced by MKB are of importance in the current proceeding and are dealt with below.
[15]MK Builders Pty Ltd v 36 Warrigal Road Pty Ltd & Ors [2014] VSC 149.
On 12 September 2014, MKB applied for an extension of time under s 148(5) of the VCAT Act within which an application for leave to appeal may be made, and leave to appeal pursuant to s 148(1) of the VCAT Act from the VCAT orders of:
(a) 11 May 2012, striking out MKB’s claim against 420 BR and dismissing MKB’s claim against Mr Kaplan in the Balcombe Road proceeding; and
(b) 21 September 2012, awarding certain costs to 420 BR and Mr Kaplan in the Balcombe Road proceeding.
The further evidence on which MKB seeks to rely
The further evidence which MKB seeks to rely upon in the present proceeding consists of two affidavits of 20 January 2015, as well as an affidavit sworn on 4 June 2015 by Mr Guymer. There is no objection raised by the respondents to the admissibility of the affidavit of 4 June 2015.[16] That affidavit does no more than exhibit the transcript of the proceedings in the Balcombe Road proceeding on 19 April 2012. Significantly, the transcript records MKB’s counsel, Mr Watts, making the following submission:
The administrators have admitted to proof $442,500, and I would concede that the $442,000 [sic] needs to be set off against [the] claim of some $445,000 [MKB’s claim against the respondents] which leads to a net balance of $2973.55.[17]
[16]Transcript of Proceedings, MK Builders Pty Ltd v 420 Balcombe Road Pty Ltd & Anor (Supreme Court of Victoria, S CI 2014 04871, McDonald J, 10 June 2015) T93 LL8-12.
[17]Transcript of Proceedings, MK Builders Pty Ltd v CGU Insurance Ltd & Anor (Victorian Civil and Administrative Tribunal, No D476/2011, 19 April 2012) T23 LL3-5.
MKB’s outline of submissions in the current proceeding summarises the reasons provided by Mr Lefkovic and Mr Guymer for the failure to have placed before Zammit AsJ the evidence which is sought to be relied upon in the current proceeding: that is, that the delay in bringing the application for leave to appeal was due to incorrect advice and the conduct of MKB’s legal representatives. MKB’s outline of submissions summarises the evidence as follows:
19.Mr Lefkovic says that he did not put the further evidence before Zammit AsJ because:
19.1his independent recollection of events is not as good as it used to be since he suffered a minor stroke diagnosed in October 2011 and a further minor stroke diagnosed in July 2013;
19.2in September 2014 (when MKB made its application to seek leave to appeal from the VCAT decision out of time), he did not recall that MKB had received any written legal advice in relation to an appeal from that decision;
19.3in particular, he did not recall that MKB had received written legal advice from … Counsel dated 24 May 2012 … or a letter dated 4 April 2013 from Mr Guymer (“the 4 April letter”). In fact, he only found those advices on MKB’s files in mid-January 2015, after her Honour had made the Order;
19.4he did not search the files of MKB in September 2014 because he was not asked to and he did not think that there was any need to do so. In fact, he only searched those files in mid-January 2015, following a conference with Senior Counsel and Junior Counsel; and
19.5he was not advised by Mr Guymer that evidence in relation to the period from 7 April 2014 to 11 September 2014 was required to be given by him, or included in Mr Guymer’s affidavit.
20.Mr Guymer says that:
20.1when he prepared his affidavits for the application before the Associate Justice he did not review the advice that he had given to MKB or … [counsel’s] advice because, at the time, he did not consider that it was relevant to the issue of MKB’s delay in seeking leave to appeal from the VCAT decision. He now realises that this was a mistake on his part;
20.2he did not include all of the matters that are now in his further affidavit because it is no his practice to disclose, or refer to, confidential communications with a client because they are privileged. But having read the judgment of Zammit AsJ, he now considers that it is appropriate for MKB to waive privilege over those confidential communications to protect its interests, particularly given that the likely quantum of its claim is significantly more than $3,000; and
20.3he did not consider the matters contained in his further affidavit to be relevant to the issue of MKB’s delay in seeking leave to appeal from the VCAT decision and, as such, he did not inform Mr Mereine of Counsel (who appeared on MKB’s behalf before Zammit AsJ) of those matters. He now realises that he made a mistake in not informing Mr Mereine of those matters.
…
The first period: 11 May 2012 to 11 March 2013
41.On 11 May 2012, Mr Guymer received the VCAT decision.
42.On 24 May 2012, Mr Guymer received … [counsel’s] advice. The effect of that advice was that any appeal from the VCAT would, if successful, only allow MKB to pursue a claim of $2,973.55 from the Respondents.
43.Mr Lefkovic says that MKB did not file an appeal within 28 days of the VCAT decision because he believed that, even if MKB were successful, its best case scenario would be a right to receive $2,973.55. He says that his belief was based on … [counsel’s] advice (which he had highlighted in yellow).
44.Mr Guymer says that, shortly after receiving … [counsel’s] advice, he spoke with Mr Lefkovic and confirmed his instructions not to appeal given the legal advice that even if successful it would be for such a small amount.
45.As can be seen from paragraphs 33 and 35 above, … [counsel’s] advice was wrong.
The second period: 12 March 2013 to 6 April 2014
46.On 12 March 2013, the VCAT summarily dismissed MKB’s claim against Warrigal Road and others (“the Warrigal Road decision”). Its reasons for doing so were very similar to the reasons for the VCAT decision.
47.Later in March 2013, MKB sought legal advice on the prospects of appealing from the Warrigal Road decision.
48.On 4 April 2013, Mr Lefkovic received the 4 April letter. That letter was primarily concerned with appealing from the Warrigal Road decision. (It was considered that that appeal, if successful, would have entitled MKB to pursue a claim of more than $370,000 whereas an appeal from the VCAT decision, if successful to the same extent, would have only entitled MKB to pursue a claim of 2,973.55).
49.Even though the 4 April letter was primarily concerned with appealing from the Warrigal Road decision, it also advised MKB not to appeal from the VCAT decision. That advice was given because, even if an appeal from that decision succeeded, MKB would only be able to pursue a claim for $2,973.55. Mr Guymer says that his advice was based on … [counsel’s] advice (which, as already noted, was wrong).
50.Mr Lefkovic says that:
50.1in April 2013, MKB again decided not to appeal from the VCAT decision;
50.2MKB’s decision was only made because, based on the legal advice which it had received and relied upon, it would not be commercially sensible for it to appeal from the VCAT decision; and
50.3the decision not to appeal was not made because “MKB wanted to minimise costs and delay” and therefore wished to treat the appeal from the Warrigal Road decision (“the Warrigal Road appeal”) as a “test case”.
…
53.Indeed, it was only after Mr Lefkovic read the judgment of Almond J that he realised MKB’s claim against the Respondents might not be limited to $2,973.55. Mr Lefkovic had not considered that issue during the Warrigal Road appeal.
54.Accordingly, on 8 April 2014 – the very next day after Almond J’s judgment – Mr Lefkovic asked Mr Guymer to reconsider appealing from the VCAT decision.
55.On 17 April 2014, Mr Lefkovic asked Mr Guymer whether he had considered that issue.
56.On 23 April 2014, Mr Guymer suggested that he write to Robert James Lawyers, the Respondents’ then solicitors, to see whether they would consent to reinstating the VCAT proceeding. Mr Guymer says that he considered this to be the most cost-effective approach to dealing with the matter.
57.On 30 April 2014, Mr Guymer sent a letter to Robert James Lawyers. He did not receive a response.
58.On 2 May 2014, Mr Lefkovic received a letter from Madgwicks Lawyers which enclosed a Summons dated 28 April 2014 seeking leave to appeal from Almond J’s judgment. Mr Lefkovic informed Mr Guymer that an appeal had been filed. Mr Guymer says that, in the circumstances, he did not take any further steps to file an application on behalf of MKB to seek leave to appeal from the VCAT decision. Rather, he considered it prudent to wait until the Court of Appeal had either upheld Almond J’s judgment or found otherwise.
59.On 30 May 2014, Madgwicks Lawyers filed a notice of discontinuance in relation to the appeal from Almond J’s judgment. That appeal was not formally discontinued until 26 June 2014.
60.Meanwhile, on 13 June 2014, Mr Guymer sent an email to Mr Lefkovic in relation to a different matter. Relevantly, Mr Guymer noted that he still had to prepare the application in relation to the VCAT decision, and said he would do it next and have Counsel settle it.
61.On 24 June 2014, 9 July 2014 and 29 July 2014, Mr Lefkovic asked Mr Guymer for an update in relation to appealing from the VCAT decision.
62.On 29 July 2014, Mr Guymer told Mr Lefkovic that he would get onto the appeal the next day. Mr Guymer says that, during July 2014, he was extremely busy with another VCAT proceeding that required significant preparation and he just did not get around to drafting the appeal documents until 1 August 2014.
63.On 1 August 2014, Mr Guymer prepared a preliminary draft of the documents for MKB to seek leave to appeal from the VCAT decision. However, he still had other matters with more immediate deadlines. He mistakenly believed that it would not make much of a difference if it took him a couple more weeks to complete the documents because it had already been some time since the VCAT decision had been made. That same day Mr Lefkovic was told by Mr Guymer that he had prepared the draft appeal documents and the brief to Counsel.
64.On 8 August 2014, Mr Guymer sent a letter to Madgwicks Lawyers in relation to MKB appealing from the VCAT decision. Mr Guymer says that he did this because he had not received any response from Robert James Lawyers, because Madgwicks Lawyers were acting for the Second Respondent in relation to other matters, and because it was a last attempt to avoid the costs and expenses associated with appealing from the VCAT decision.
65.Mr Guymer did not receive a response to his 8 August letter.
66.On 11 August 2014, a brief to counsel was sent to Counsel by DX. On 20 August 2014, Mr Guymer received amended court documents from Counsel. Between 20 August 2014 and 11 September 2014, Mr Guymer attended to various amendments and sought instructions from Mr Lefkovic.
67.Then, on 12 September 2014, the application was filed in this Court.[18]
[18]Appellant, ‘Appellant’s Outline of Submissions’, Submissions in MK Builders Pty Ltd v 420 Balcombe Road Pty Ltd & Anor, S CI 2014 04871, 9 June 2015, [19]-[20], [41]-[50], [53]-[67] (emphasis in original) (citations omitted).
Before turning to the principles governing the exercise of the Court’s discretion to admit further evidence, it is necessary to make a number of observations regarding the evidence of Mr Lefkovic and Mr Guymer.
Initially, MKB contended that counsel’s advice regarding the prospects of successfully appealing the Balcombe Road decision was wrong. However, during the hearing on 10 June 2015, Mr Pizer QC, who appeared with Mr Mereine on behalf of MKB, expressly disavowed any reliance upon evidence and/or submissions to the effect that MKB had refrained from seeking leave to appeal the Balcombe Road decision on the basis of advice from counsel which was incorrect.[19] However, MKB did submit that it was only upon the delivery of Almond J’s judgment on 7 April 2014 that MKB appreciated that it might be able to go behind the deed administrator’s decision to accept a proof of debt from 420 BR in the sum of $442,500 (and thereby be able to claim more than the net balance of $2,973.55).
[19]Transcript of Proceedings, MK Builders Pty Ltd v 420 Balcombe Road Pty Ltd & Anor (Supreme Court of Victoria, S CI 2014 04871, McDonald J, 10 June 2015) T35 LL16-29.
Second, although the affidavit of Mr Guymer dated 20 January 2015 contends that ‘the likely quantum of its [MKB’s] claim is significantly more than $3,000’,[20] there was no evidence before the Court to support this contention. MKB seeks leave to appeal the decision of the Associate Justice in order that it might have the opportunity to pursue a claim that it is entitled to a sum in excess of the $2,973.55 differential between 420 BR’s admitted proof of debt of $442,500 and the $445,473.55 it claimed by its amended points of claim. There is no evidence before the Court which supports the conclusion that, if MKB was given the opportunity to do so, it would have a sound basis for challenging the deed administrator’s decision to admit MKB’s $442,500 proof of debt. The admitted debt of $442,500 was approximately 50% of the $885,144 which was initially claimed by 420 BR as the debt owing to it.[21] 420 BR proved for its debt on a without prejudice basis. Accordingly, if the Balcombe Road decision was set aside, in the event of a rehearing, 420 BR would be entitled to pursue the full amount of its claim for $885,144.
[20]Affidavit of Lance James Guymer sworn 20 January 2015, [12].
[21]Proof of debt lodged by 420 BR is exhibit “TK-6” to the affidavit sworn 28 March 2012 by Taky Kaplan, which is exhibit “LJG-7” to the affidavit of Lance James Guymer sworn 9 September 2014.
There is no material before the Court which indicates that the $445,473.55 claim which was struck out by the VCAT has merit. The administrator’s report to creditors of MKB dated 2 June 2009 discloses that the director of MKB estimated the value of the uninvoiced work in progress in respect of 420 Balcombe Road as $255,349.[22] However, there is some confusion regarding the value of the uninvoiced work in progress, because elsewhere the figure of $255,349 is attributed to the project at 36 Warrigal Road.[23]
[22]David J Lofthouse, Section 439A Report to Creditors of MK Builders Pty Ltd dated 2 June 2009, 12, which forms part of exhibit “TK-7” to the affidavit sworn 28 March 2012 by Taky Kaplan, which is exhibit “LJG-7” to the affidavit of Lance James Guymer sworn 9 September 2014.
[23]See MK Builders Pty Ltd v 36 Warrigal Road Pty Ltd & Ors [2014] VSC 149, [30] and [32].
Almond J delivered judgment in MK Builders Pty Ltd v 36 Warrigal Road Pty Ltd & Ors[24] on 7 April 2014. At [57], his Honour concluded:
Based on the above authorities, and consistent with the commentary in Derham and the terms of the Deed of Company Arrangement, in my view, the payment of a dividend to WAR by the Deed Administrators under the Deed of Company Arrangement neither automatically extinguishes the Appellant’s claim against the Respondents nor precludes the Appellant from pursuing its claim for any balance that may be outstanding. The mandatory nature of s 553C(1) means that the automatic set-off occurred, such that the original claims were extinguished and only the claim for the balance remained. It will be a matter for the Appellant to demonstrate in the litigation that a retrospective calculation of legitimate claims would result in a balance being due to it, although credit would need to be given for the dividend received if the retrospective calculation produced a balance in favour of WAR. In this regard, counsel for the Appellant properly conceded that the WAR had proved for its debt on a without prejudice basis and would be entitled to claim the full amount of its claim (presumably $100,000) in the litigation.[25]
[24][2014] VSC 149.
[25]Ibid [57] (citations omitted).
Exhibit “LJG-3” to Mr Guymer’s affidavit of 20 January 2015 records the following email exchange between himself and Mr Lefkovic on 17 April 2014:
Hi Lance
Have you considered the Balcombe Road matter and whether it should be reopened? …
Mr Guymer replied:
Thanks Tom,
With 420, yes I had thought about this, and as I understand it His Honour’s judgment and the references to two other cases he adopts, he makes it clear that the dividend paid is treated as a credit but not necessarily final in terms of the calculation of the set-off, so the figures can be reopened and litigated – but we would need leave out of time to appeal.
This email exchange discloses that in the immediate aftermath of Almond J’s judgment, both Mr Guymer and Mr Lefkovic were alive to the potential impact of the judgment upon the Balcombe Road proceeding and the requirement for an application for an extension of time to be made in respect of the period within which to bring an application for leave to appeal. As it transpired, that application was not made until 12 September 2014.
On 10 June 2015, I raised with Mr Pizer the question of whether Almond J’s conclusion at [57] reflected the submissions which had been advanced to him by MKB’s counsel on 21 November 2013. I requested a copy of the transcript of the proceedings and also a copy of MKB’s outline of submissions. It is clear from both the oral and written submissions which were advanced by MKB before Almond J that his Honour’s reasoning at [57] reflects his acceptance of submissions which had been advanced on behalf of MKB. For example, Mr Crutchfield SC, who appeared for MKB with Mr Mereine, made the following submissions:
No, they are relying on – they extrapolate from the effect of a DOCA and they say, because the DOCA has operated – I think this DOCA has terminated now, it’s over, and because 553C is incorporated into the DOCA, it must follow that because they received a dividend, that the calculation has been undertaken by which that balance has been produced. That’s their case and it’s not open to us to actually work out – it’s not open to us to suggest, that the calculation was not undertaken, that’s the first thing, we are not allowed to do that and perhaps even more passing strange, we respectfully submit, it’s not open to Your Honour or VCAT or a judicial officer to actually work out what the real balance is. That’s their case.[26]
Further, Mr Crutchfield submitted:
What His Honour is saying, he made it very clear in MS Fashions, you work out, once that claim, the contingent or unascertained claim that I have against Mr Styring [counsel for the respondents], matures and becomes an actual claim, once you work out what the claim is, judicially or in any other way which is final, then that’s the figure that goes back into the retrospective calculation.
If in the meantime Mr Styring’s received a dividend, he’s entitled, of course, because it’s a retrospective calculation, you go back to the set-off date and if our friend’s claim is $100,000, that’s the amount that gets put into the retrospective calculation. He then has to give credit for his $274 [the distribution received under the DOCA, rounded to whole dollars], he has to give that back or deduct it from the 100 but that’s how it works.[27]
[26]Transcript of Proceedings, MK Builders Pty Ltd v 36 Warrigal Road Pty Ltd& Ors (Supreme Court of Victoria, S CI 2013 01697, Almond J, 21 November 2013), T24 L28 ― T25 L10.
[27]Ibid T30 LL6-21.
Plainly, Almond J’s reference in [57] of his judgment to ‘a retrospective calculation of legitimate claims’ reflects his acceptance of the submissions which were advanced on behalf of MKB, which include those set out above.
Whilst it is true to say that it was not until 7 April 2014 that MKB was aware that its submissions had been accepted, there is no merit in any suggestion that it was not aware prior to 7 April 2014 that it could attempt to go behind the administrator’s acceptance of the proof of debt of $442,500. The inference is overwhelming that the submissions which were advanced on behalf of MKB were consistent with legal advice provided to the company at the time it sought leave to appeal against the Warrigal Road decision. According to Mr Guymer’s affidavit, that advice was given orally on 28 March 2013,[28] more than 12 months prior to Almond J’s decision of 7 April 2014.
[28]Affidavit of Lance James Guymer sworn 20 January 2015, [9].
Mr Guymer deposes that, notwithstanding the judgment delivered on 7 April 2014, he ‘first came to [a] … concluded view about Justice Almond’s decision, insofar as it affected MKB’s claim against Balcombe and Mr Kaplan, on 13 August 2014.’[29] It is very difficult to reconcile this evidence with the email exchange set out above, which clearly demonstrates that Mr Guymer was alive to the possibility of seeking leave to reopen the Balcombe Road decision in the immediate aftermath of Almond J delivering judgment. Mr Guymer’s explanation for the further delay of four months between 7 April and 13 August 2014 is as follows:
I did not turn my mind to how MKB’s claim against Balcombe and Mr Kaplan would be calculated until early August 2014 when I was drafting the appeal documents. This occurred because an appeal from the decision of the judgment of Justice Almond was filed, and I was attending to other clients’ matters and other legal proceedings for MKB, all of which seemed to me at the time to have more immediate deadlines.[30]
[29]Ibid [14].
[30]Ibid [21].
As to the appeal from the judgment of Almond J, Mr Guymer deposes:
On 2 May 2014, Tom Lefkovic informed me that Warrigal, Mr Kaplan and Mondland had filed an appeal from the judgment of Justice Almond … on 28 April 2014. In these circumstances, I did not take any further steps to file an application on behalf of MKB to seek leave to appeal from the orders of Senior Member Lothian. I considered it prudent to wait until the Court of Appeal had either upheld the judgment of Justice Almond or found otherwise.[31]
[31]Ibid [22].
The evidence set out above supports a finding that Mr Guymer clearly understood that the judgment of Almond J did have ramifications in respect of the potential to seek leave to appeal the Balcombe Road decision. Plainly, he made a decision to await the outcome of the Court of Appeal proceedings. However, he also deposes that on 16 May 2014, he was informed by Madgwicks Lawyers that their clients were not proceeding with the appeal.[32] Notwithstanding this, nearly four further months passed before an application for leave to appeal was filed.
[32]Ibid [23].
The application of principles in respect of the admission of further evidence
Pursuant to r 77.06.9(2)(a) of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) (‘the Rules’), the Court has power, when hearing an appeal from a decision of an Associate Judge, to receive further evidence upon questions of fact by way of affidavit. The evidence contained in the affidavits of Mr Lefkovic and Mr Guymer of 20 January 2015 is ‘further evidence’, not ‘fresh evidence’. MKB did not dispute that all of the evidence which it now seeks to rely upon was available at the time of the proceedings before Zammit AsJ.[33]
[33]See, for example, Transcript of Proceedings, MK Builders Pty Ltd v 420 Balcombe Road Pty Ltd & Anor (Supreme Court of Victoria, S CI 2014 04871, McDonald J, 10 June 2015) T52 LL7-10.
The principles governing the admissibility of further evidence are set out in the High Court’s judgment in CDJ v VAJ (No 1) (‘CDJ’).[34] CDJ concerned the exercise of the discretion to receive further evidence on questions of fact conferred upon the Family Court of Australia by s 93A(2) of the Family Law Act 1975 (Cth). Section 93A(2) is in very similar terms to r 77.06.9(2)(a) of the Rules.
[34](1998) 197 CLR 172.
In CDJ, the plurality stated:
In the exercise of the discretion conferred by a power such as s 93A(2), the critical factor is the subject matter of the proceedings with which the appeal is concerned. This is because the purpose of the power to admit further evidence is to ensure that the proceedings do not miscarry. Tests such as those stated in Wollongong Corporation based on the need for finality in litigation are therefore not necessarily applicable to cases in which the interests of third parties, such as children, are at stake, although factors such as finality, discoverability of the evidence and its likely effect on the orders made are usually relevant to the exercise of the discretion.
…
The power to admit the further evidence exists to serve the demands of justice. Ordinarily, where it is alleged that the admission of new evidence requires a new trial, justice will not be served unless the Full Court is satisfied that the further evidence would have produced a different result if it had been available at the trial. Without that condition being satisfied, it could seldom, if ever, be in the interests of justice to deprive the respondent of the benefit of the orders made by the trial judge and put that person to the expense, inconvenience and worry of a new trial.
…
The failure to have adduced the evidence before the primary judge will be a variable factor, the weight of which will depend upon all the other factors pertinent to the case. Where the evidence has been deliberately withheld, the failure to call it will ordinarily weigh heavily in the exercise of the discretion. In other cases, the failure to call the evidence even if it could have been discovered by the exercise of reasonable diligence may be of little significance. No invariable rule concerning the failure to call the evidence can or should be laid down in view of the wide discretion conferred on the court by the section.[35]
[35]Ibid [104], [111] and [116] (citations omitted).
In CDJ, the plurality held that the critical factor in the exercise of the discretion to admit further evidence is the subject matter of the proceeding with which the appeal is concerned. In contrast to CDJ, the present proceeding does not involve the interests of third parties, such as children. The proceeding involves a contractual dispute relating to the construction of two townhouses. Further, on the material before the Court, the issue in contention is primarily whether MKB should be afforded an opportunity to contend in the VCAT that it has a claim for more than the $2,973.55 differential between the $442,500 proof of debt admitted by the administrators, and the $445,473.55 claimed in MKB’s amended points of claim.
No material was placed before the Court which supports a finding that, if given the opportunity to re-litigate in the VCAT, MKB would have any basis for challenging the $442,500 proof of debt admitted by the administrators. Further, if MKB was permitted to re-litigate its claim in the VCAT, 420 BR would be entitled to claim the full amount of its counterclaim of $885,144. Moreover, there is no material before the Court which provides any explanation for the differential of approximately $190,000 between the director’s estimate of the value of the uninvoiced work in progress of $255,349 in respect of the Balcombe Road project, and the quantum of MKB’s claim of $445,473.55 as set out in its amended points of claim.
Given the inordinate delay of 27 months before MKB sought leave to appeal out of time, considerations relating to the desirability for finality in litigation are relevant to the question of whether the further evidence should be admitted. The dispute between the parties relates to a contract executed in February 2007. If MKB was granted leave to appeal and then succeeded in the substantive appeal, the result would be likely to be a further hearing in the VCAT some time in 2016. Inevitably, that lengthy passage of time will adversely impact on 420 BR’s and Mr Kaplan’s ability to prepare and call evidence in their defence. Such an outcome would be most unfair to both 420 BR and Mr Kaplan.
The further evidence which MKB now seeks to rely upon was readily available prior to the hearing before Zammit AsJ. I accept the submissions of Mr Evans, who appeared for 420 BR and Mr Kaplan, that the written submissions filed on their behalf prior to the hearing before Zammit AsJ placed MKB squarely on notice of their contention that there was no satisfactory explanation for MKB’s delay in seeking leave to appeal out of time. The outline of submissions dated 17 November 2014, filed on behalf of 420 BR and Mr Kaplan, included the following:
11.Further, MKB’s justification of the reasons for delay is unconvincing, or incomplete. The justification for this application is said to be a realisation, in April 2014, by Mr Lefkovic, that the decision of Senior Member Lothian resulting in the Orders might be wrong. The origin of that realisation is said to be the reasons for decision of Justice Almond delivered on 7 April 2014. But:
(1)The reasons for decision of Justice Almond were in an appeal instituted by MKB itself, not by a stranger, and therefore the existence of the proceeding ultimately determined by Justice Almond was always known of by MKB;
(2)It follows that MKB (or its lawyers) must have known about the potential for Justice Almond’s findings of error, at the time when MKB instituted the application for leave to appeal which ultimately resulted in Justice Almond’s reasons for decision. (That appeal was from a decision made on 12 March 2013, so assuming the application for leave to appeal from that order was made within the time prescribed by section 148 of the VCAT Act., the application for leave must have been made by 9 April 2013.);
(3)MKB’s lawyers in both this proceeding and the proceeding before Justice Almond have at all times been the same firm (and same person, being Mr Guymer). No explanation is provided as to why the potential error in the decision of Senior Member Lothian resulting in the Orders was not identified by MKB’s lawyers (if that be the case), or if identified, not advised to Mr Lefkovic (if that be the case);
(4)It seems incomprehensible that the error found to have existed in the proceeding for Justice Almond should not therefore also have been perceived by MKB and its lawyers to have potentially existed with respect to the making of the Orders, since at least April 2013.
12.There is a powerful inference to be drawn that MKB adopted a wait and see approach with respect to the making of this application for extension of time, during the period when the proceeding ultimately heard by Justice Almond was on foot, rather than incurring the costs of bringing this application in April 2013.
13.Further, the justification for delay between 7 April 2014 and 12 September 2014 in instituting this proceeding are [sic] also inadequate. A letter was first written on 30 April 2014 regarding the potential for this proceeding to be commenced. That letter required a reply within 7 days. No reply was received. Nothing then appears to have been done for the next 3 months by MKB, until a second letter was sent on 8 August 2014 to the respondents’ present lawyers. That letter did not invite consent – it merely notified an intention to commence the present proceeding. It still took more than 28 days (i.e. more than the time allowed under section 148(2) of the VCAT Act for an application for leave to appeal to be instituted) from the date of that letter before the present proceeding was issued on 12 September 2014.[36]
[36]Respondents, ‘Outline of Respondents’ Submissions’, Submissions in MK Builders Pty Ltd v 420 Balcombe Road Pty Ltd & Anor, S CI 2014 04871, 17 November 2014, [11]-[13] (citations omitted).
On 8 December 2014, MKB filed reply submissions which included the following:
A.REASONS FOR THE DELAY
3.The respondents contend that MKB’s justification for the delay is “unconvincing, or incomplete”. Further, MKB is criticised for adopting a “wait and see approach…rather than incurring the costs of bringing this application in April 2013”.
4.Clearly MKB knew of the appeal before Almond J. However the appeal involved complicated principles of insolvency law and its success was certainly not guaranteed. Consistent with the Civil Procedure Act 2010 (Vic), MKB sought to conduct its appeal before Almond J in an efficient, timely and cost effective manner. If MKB had added a second proceeding to that appeal, it would have further complicated the matter and unnecessarily added additional costs in circumstances where the outcome was uncertain.
5.MKB’s appeal before Almond J was effectively a test case. The position is analogous to the situation where in one proceeding a challenge is mounted to a piece of legislation or a specific legal principle and other similar proceedings are stayed until that proceeding is determined by the appellate courts.[37]
[37]Applicant, ‘Applicant’s Outline of Submissions in Reply’, Submissions in MK Builders Pty Ltd v 420 Balcombe Road Pty Ltd & Anor, S CI 2014 04871, 8 December 2014, [3]-[5] (emphasis in original) (citations omitted).
During the course of the hearing on 10 June 2015, Mr Pizer confirmed that a draft of MKB’s reply submission, including [3] to [5] as set out above, was forwarded to both Mr Lefkovic and Mr Guymer for their approval prior to filing.[38]
[38]Transcript of Proceedings, MK Builders Pty Ltd v 420 Balcombe Road Pty Ltd & Anor (Supreme Court of Victoria, S CI 2014 04871, McDonald J, 10 June 2015) T87 L28 ― T88 L30. See also affidavit of Lance James Guymer sworn 20 January 2015, exhibit “LJG-9”.
Zammit AsJ’s conclusion that MKB made a deliberate decision by at least April 2013 not to institute an extension of time application and ‘[t]he reasons given were that it wanted to minimise the costs and delay and therefore chose to use the Warrigal Road appeal as its vehicle for a test case’,[39] do no more than repeat MKB’s submissions in reply.
[39]MK Builders Pty Ltd v 420 Balcombe Road Pty Ltd & Anor (Unreported, Supreme Court of Victoria, Zammit AsJ, 23 December 2014) [53].
A striking feature of the present proceeding is that MKB challenges a finding by Zammit AsJ which did little more than repeat its own submissions. Having advanced one explanation before Zammit AsJ for its delay, it now seeks to advance a different explanation based upon the poor memory of Mr Lefkovic and numerous ‘mistakes’ on the part of Mr Guymer.
The evidence of Mr Lefkovic and Mr Guymer has not been subject to cross-examination because it has not been admitted into evidence. However, even untested, it provides no satisfactory explanation for delay. The inference is overwhelming that the true position is as set out in MKB’s written submissions of 8 December 2014. The attempt by MKB to resile from that position is implausible.
I have set out earlier in this judgment extracts from the submissions advanced by Mr Crutchfield SC in the proceedings before Almond J. Those submissions must have reflected advice provided to MKB at about the time it commenced an appeal in April 2013 from the VCAT decision in the Warrigal Road proceeding. The contention now advanced―that it was not until August 2014 that there was an appreciation on the part of Mr Guymer or Mr Lefkovic that there was a capacity to go behind the administrator’s acceptance of the proof of debt― is not credible. The inference is overwhelming that the true position is as set out in MKB’s own submissions: it made a deliberate decision to await the outcome of the proceedings before Almond J before seeking leave to appeal the Balcombe Road decision.
Even if I had accepted MKB’s contention that it was oblivious to the potential application of Almond J’s reasoning to the Balcombe Road proceeding until his Honour delivered judgment, there is still no satisfactory explanation for the further period of delay of five months prior to MKB filing its application for leave to appeal on 12 September 2014. The ‘mistakes’ deposed to by Mr Guymer by way of explanation do not bear recounting. At face value, Mr Guymer’s affidavit is a candid admission of his failure to have acted in the best interests of his client. However, it is certainly not in the interests of justice that such failure warrants the Court exercising its discretion to grant MKB leave to rely upon the further evidence.
Mr Guymer’s affidavit, particularly his admission of numerous ‘mistakes’, raises the potential application of the principle that, generally, a party is bound by his/her lawyers’ conduct of legal proceedings.[40] Mr Pizer expressly disavowed any submission that Mr Guymer’s conduct was so flagrant as to have led to a miscarriage of justice.[41] Rather, Mr Pizer submitted that Mr Guymer’s evidence was relied upon to demonstrate the existence of an acceptable reason for delay.[42]
[40]Vu v Community Association Deposited Plan No 270263 [2010] FCA 1126, [37]-[40], [49].
[41]Transcript of Proceedings, MK Builders Pty Ltd v 420 Balcombe Road Pty Ltd & Anor (Supreme Court of Victoria, S CI 2014 04871, McDonald J, 10 June 2015) T76 LL16-19.
[42]Ibid T77 LL3-5.
When considering the evidence of Mr Guymer, it is important to distinguish between the question of:
(i)whether the advice and conduct of Mr Guymer constitutes an acceptable explanation for the delay in bringing the leave to appeal application; and
(ii)whether MKB should be bound by the failure of its legal representatives in the proceeding before Zammit AsJ to have put forward that explanation for delay and evidence of it.
Prior to the hearing before Zammit AsJ on 8 December 2014, both Mr Guymer and Mr Mereine of counsel were squarely on notice that 420 BR and Mr Kaplan challenged the adequacy of MKB’s evidence explaining the reasons for its delay in bringing the application. Mr Guymer read and approved the draft of Mr Mereine’s reply submissions, the relevant parts of which are set out above.
The observations of Kaye J (as his Honour then was) in Dudas v Monash City Council; Tarawa-Shearer v Darebin City Council,[43] are apposite:
Ordinarily, a party is bound by the conduct of its case at first instance. However, that principle is not absolute in its application, and it admits of exceptions. The ultimate test is whether it is in the interests of justice that the parties be entitled to agitate, on appeal, an issue which was either not argued, or conceded, at first instance. The interests of justice include the public interest in the finality of litigation, and in the proper and orderly administration of justice, by which, ordinarily, the issues between parties are settled at first instance. On the other hand, it is recognised that where all the facts have been properly established at first instance, and where the point, sought to be agitated for the first time on appeal, is one of construction or of law, it may be in the interests of justice for the appellate court to entertain the point.[44]
[43][2012] VSC 578.
[44]Ibid [25] (citations omitted).
In the present case, the point which is sought to be agitated for the first time on appeal is not one of construction or law. Rather, the point raised is whether MKB should be permitted to advance further evidence of factual matters.
If, contrary to the findings set out above, I was satisfied that Mr Guymer’s affidavit provides a satisfactory explanation for delay, I would nevertheless refrain from exercising the discretion to admit the further evidence. MKB is bound by the conduct of its lawyers. If it considers that they have acted negligently, there may be avenues available to it to recover any consequential loss.
Mr Pizer quite properly conceded that, absent the further evidence, the appeal from Zammit AsJ’s decision had no prospects of success.[45] In circumstances where I have refused to admit the further evidence, the appeal from Zammit AsJ’s decision must be dismissed. I shall provide an opportunity to the parties to make submissions on the question of costs.
[45]Transcript of Proceedings, MK Builders Pty Ltd v 420 Balcombe Road Pty Ltd & Anor (Supreme Court of Victoria, S CI 2014 04871, McDonald J, 10 June 2015) T44 LL21-24.
3
0