Nazari v Zedcorp Pty Ltd

[2020] VCC 1936

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

BUILDING CASES LIST

Case No. CI-20-04134

Mohammad Hussain Nazari	Plaintiff
v
Zedcorp Pty Ltd	First defendant
and
Thomas Verghese	Second defendant

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JUDGE:	Judicial Registrar Burchell
WHERE HELD:	Melbourne
DATE OF HEARING:	On the Papers
DATE OF JUDGMENT:	7 December 2020
CASE MAY BE CITED AS:	Nazari v Zedcorp Pty Ltd & Anor
MEDIUM NEUTRAL CITATION:	[2020] VCC 1936

REASONS FOR RULING
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Subject:  CONTRACTS – PRACTICE AND PROCEDURE

Catchwords:             Building contract – whether proceeding should be stayed – indemnity costs

Legislation Cited:     Domestic Building Contracts Act 1995 (Vic) ss 54, 57; Civil Procedure Act 2010 (Vic)

Cases Cited:            Nettleton v Vero Insurance Ltd & Anor [2008] VSC 554; Maxtra Constructions Pty Ltd v Aust Group Pty Ltd [2015] VCC 783; Simpson v Andrew Maynard Architects Pty Ltd [2014] VSC 365; Colgate-Palmolive Company and Colgate-Palmolive Pty Limited v Cussons Pty Limited (1993) 46 FCR 225

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APPEARANCES:	Counsel	Solicitors
For the plaintiff	Ms R Nida	-
For the defendants	In person	-

JUDICIAL REGISTRAR:

1       By writ dated 23 July 2020, the plaintiff (“Mr Nazari”) pleads various causes of action against the defendants (including breaches of the Domestic Building Contracts Act 1995 (Vic) (“DBCA”), and s 18 of the Australian Consumer Law). The proceeding concerns the construction of a house at 33 Montbrae Circuit, Narre Warren North.

2 On 6 November 2020, the proceeding was listed for a first directions hearing before Judge Woodward. During that hearing, it became apparent that s57 of the DBCA may apply to the proceeding. That is, the proceeding may need to be stayed in circumstances where the proceeding arises wholly or predominantly from a domestic building dispute. The defendants indicated that they sought that stay.

3 A question also arose as to the appropriate costs order in the proceeding generally, and in respect of the DBCA application. The plaintiff indicated it would press for indemnity costs.

4 By orders dated 6 November 2020, the parties were to file and exchange written submissions as to the DBCA and indemnity costs questions. I have been assisted by those submissions in determining the stay and indemnity costs issues on the papers.

5 In my view, the proceeding must be stayed pursuant to s 57(2) of the DBCA. However, the costs of the proceeding, including the costs of and incidental to the application for a stay, must be reserved for determination by VCAT upon the hearing of any proceeding issued by the plaintiff (or by the defendants), in relation to the dispute in this proceeding or, if no such proceeding is issued, within a reasonable period upon application to the County Court.

6       Should VCAT be unable to, or refuse to determine the costs of the proceeding in the County Court, the County Court will determine those costs on application.

The factual background

7       On or about 9 June 2016, the plaintiff expressed an interest to the second defendant for the construction of a house at 33 Montbrae Circuit, Narre Warren North. 

8       The second defendant was working on the neighbouring property which was being built by Seascape Constructions (“Seascape”).  The plaintiff alleges that the second defendant misrepresented to him that he was an agent of Seascape.  The second defendant says that Seascape did not want to continue with the project. The project was transferred to the first defendant as a new builder and the building surveyor was informed of the transfer. 

9       On 12 September 2016, the plaintiff and first defendant entered into a major domestic building contract whereby the first defendant would construct a house on the property. 

10      It is common ground between the parties that the plaintiff paid a 5% deposit, being $32,500.00.  There is a dispute as to whether the plaintiff paid a further $385.00.

11 The plaintiff claims that he never received a signed copy of the contract and only received an incomplete contract, has not received a contract signed by the first defendant, and that the deposit is incorrectly stated as 10% and not 5%. The plaintiff claims that the second defendant was not a registered building practitioner at the time of signing the major building contract. As such, the second defendant is said to have breached ss 16, 25, 29, 29A of the DBCA and s18 of the ACL.

12      The defendants claim that all signed pages were provided to the plaintiff on completion of execution, which was witnessed.  The defendants contend that the contact was signed as an agent of the first defendant and the second defendant was a sub-contractor in a supervisory capacity for the first defendant. 

13      The plaintiff claims that on 3 November 2018, the second defendant informed him that the first defendant was terminating the contract.  The second defendant states that he wrote to the plaintiff on behalf of the first defendant in early September 2018 informing him that, due to the City of Casey raising a building order for unauthorised works allegedly done by the plaintiff in relation to the retaining wall, before obtaining a permit, the contract had ceased.

14      The defendants claim that the plaintiff terminated the contract on 26 September 2018 due to the City of Casey order.  The plaintiff contends that the plaintiff was never served with a termination notice in a proper form or mode in accordance with clause 6 of the contract.  As such, he claims that the first defendant breached its obligation to construct the house pursuant to the contract and has suffered loss and damage in the approximate sum of $162,234,00, mainly comprising excavation works, testing and retaining wall construction in preparation for building works.  The defendants claim that they have incurred expenses in preparation for the construction in the sum of $97,500. 

Stay application

15 At the first directions hearing, the defendants sought orders that the proceeding be stayed pursuant to s 57 of the DBCA. The defendants contend that the proceeding is a “domestic building dispute” arising between a building owner and a builder in relation to a domestic building contract for the carrying out of domestic building work (s 54(1)(a)). The plaintiff resists the stay application on the basis that the elements of s 57 are not satisfied (Nettleton v Vero Insurance Ltd & Anor[1]), and the delay on the part of the defendants.

[1][2008] VSC 554.

16 The question under s 57(4) of DBCA is whether the dispute is a “domestic building dispute” within the meaning of s 54 of the DBCA.

17      If the dispute is a “domestic building dispute”, then if the action could be heard by VCAT and the court has not heard any oral evidence concerning the dispute itself, the proceeding must be stayed and the dispute can only be litigated in VCAT (s 57(2)). The word “must” in section 57(2) indicates that once subsections 57(1) and 2(a) and (b) are satisfied, the court has no discretion and must grant the stay.

18 It has been suggested that s 188 of the Australian Consumer Law and Fair Trading Act 2012 (Vic) is in similar terms to s 57(2) and is a different power to force the jurisdiction to VCAT (Maxtra Constructions Pty Ltd v Aust Group Pty Ltd (“Maxtra”)[2] and Simpson v Andrew Maynard Architects Pty Ltd[3].) 

[2][2015] VCC 783 at [8]-[9] per Anderson J.

[3][2014] VSC 365 per Garde J at [26]-[27].

19      In the Court of Appeal decision of Swintons Pty Ltd v Age Old Builders Pty Ltd[4], Calloway J (at [7]) had regard to the public policy behind section 57(2). His Honour stated that:

… Section 57(2) contemplates that an action will be stayed. In other words, if a party chooses to litigate, the litigation may be forced into the Tribunal. There is no implication that the parties may not jointly adopt alternative dispute resolution. The following passage in the Attorney-General’s second reading speech demonstrates, if further proof were needed, that it was proceedings in court to which s. 57(2) was directed:

“The public policy rationale for [s.57] is the intention to provide a single, inexpensive, time-efficient and expert forum for the resolution of domestic building disputes. Domestic building disputes are a special category of dispute where timeliness of resolution is critical, and where less formal proceedings are more likely to reach the heart of the matter than the full panoply of the law. Therefore, a party to the dispute should be able to have the option of taking advantage of the benefits offered by the tribunal if a matter is brought before the courts for resolution.”

[4][2005] VSCA 217.

20      In Maxtra, Judge Anderson found (at [10]) that if a substantial part of the dispute must be stayed pursuant to the Act, then it is appropriate that the entire proceeding be stayed, insofar as the dispute relates to the building work excluded by the Act.  His Honour said “[t]o do so otherwise, would leave the parties in a very difficult position to decide how their disputes might be determined, either in this Court or at VCAT”.

21      The definition of “builder” under section 3 of the DBCA “means a person who, or a partnership which (a) carries out domestic building work; or (b) manages or arranges the carrying out of domestic building work.

22      I note the plaintiff’s concession that the standard contract falls within the definition of “builder” who “manages or arranges carrying out of domestic building work.”

23      The defendants argued that the first defendant was a domestic builder and the relevant project was a residential project. They say the work performed by them related to expenses for the early stages of the project (e.g,: obtaining warranty insurance, building permit issues, suite visits and arranging for supplies) for the specific purpose of constructing the dwelling the subject of the domestic building contract.  The defendants claim that they were a “builder” within the meaning of the Act and that the dispute was “in relation to a domestic building contract or the carrying out of domestic building work”.

24      It was common ground between the parties that the relationship was that of builder and building owner.  What was in issue was whether the defendants have satisfied the court that the dispute was in relation to a domestic building contract or the carrying out of domestic building work. 

25      On the material before me, I am satisfied that the dispute between the parties was “in relation to a domestic building contract or the carrying out of domestic building work” and “arises wholly or predominantly from a domestic building dispute”.  As such, the proceeding must be stayed in this court and the dispute can only be litigated in VCAT. 

Indemnity costs

26      The plaintiff seeks an indemnity costs order against the first and second defendants for the proceedings filed in this court.

27      Maxtra stipulates the standard costs orders upon the court determining that the proceeding be stayed under s 57(2) of the DBCA. At [12], Judge Anderson awarded –

The costs of the proceeding, including the costs of the defendant’s summons filed 22 May 2015, are to be reserved for determination by the Victorian Civil and Administrative Tribunal, upon the hearing of any proceeding issued by the plaintiff in relation to the dispute articulated in this proceeding, or if no such proceeding is issued within a reasonable period, upon application to this Court.

28      In Radojevic v JDA Design Group Pty Ltd & Anor[5] (“Radojevic”), Ginnane J dealt with a judicial review application of a Magistrates’ Court decision dismissing an application under s 57 of the DBCA.  The dispute was between the building owners and their architect. The Radojevics sought damages against their architects for alleged breaches of architectural services under contract. The architects counterclaimed for their fees.  The Radojevics applied in the Magistrates’ Court for a stay of the proceedings on the basis that VCAT had jurisdiction. 

[5][2017] VSC 796.

29      Radojevic contemplates outcomes arising from the fact that a sub-section 57(2) stay can occur until the point before a court receives oral evidence on the dispute. Ginnane J was critical of the delay in bringing the stay application and observed that –

It is unclear why Parliament has enabled a party to make a stay application up until oral evidence concerning the dispute is called.  That provision is not consistent with the overarching purpose of the CPA nor with the second object contained in s 4(b) of the DBC Act.

30      The Radojevics were 7 months into their proceeding when they sought a stay.  At [24], Ginnane J observed that this conduct was a breach of the overarching purpose and obligations under the Civil Procedure Act 2010 (Vic).

31      Although the delay in making the applicant hampered the just, efficient, timely and cost-effective resolution of the real issues in dispute, Ginnane J did not consider that the provisions of the Civil Procedure Act 2010 (Vic) could remove the rights afforded under section 57 of the DBCA, of which they were permitted to avail themselves.  However, his Honour noted that the plaintiffs’ conduct was relevant to the question of costs in the Magistrates’ and County Courts and that “[i]t is clear that the granting of a stay under s 57 does not prevent those Courts  awarding the costs of the proceeding.”

32      At [70] of Radojevic, Ginnane J said that if the stay is granted but the plaintiffs do not promptly commence proceedings in VCAT, then the defendant could apply to lift the stay.  Further, given that he was hearing a judicial review of the Magistrates’ Court refusal but that the application would have to be made again on remittal to the County Court (as the Radojevics had amended their claim to increase its quantum to exceed the Magistrates’ Court jurisdiction), his Honour said that when granting the stay, the County Court would also be able to deal with the costs of the action.

33 His Honour noted that the defendant placed the plaintiffs on notice that unless the plaintiffs complied with the provisions of s 56 of the DBCA and commenced proceedings at VCAT, then the defendant would apply to have the stay of this proceeding lifted.

34      The plaintiff relies on the following matters in support of his application for indemnity costs:

(a)  he made the first request for return of the subject deposit in 2018 and had no intention to file legal proceedings if the defendants agreed to pay the subject deposit;

(b)  his former legal practitioner made several attempts to settle the dispute without going to court; however, the defendants continued to prolong the dispute by failing to respond and/or refusing to return the deposit;

(c)  the defendants’ conduct caused significant financial and emotional distress to the plaintiff;

(d)  he has lost an opportunity to build a family home when he had the capacity to do so;

(e)  he had to hire a private investigator to serve a writ and ascertain relevant information about the court proceedings;

(f)   the defendants have contradicted themselves multiple times and have acted in wilful disregard of known facts or clearly established law;

(g)  the defendants have engaged in unconscionable conduct by incorporating terms into the contract;

(h)  the plaintiff has limited English-speaking capacity;

(i)    the plaintiff never received a full copy of the contract he was induced to sign, which constitutes a wilful disregard of clearly established contract law (Colgate-Palmolive Company and Colgate-Palmolive Pty Limited v Cussons Pty Limited[6]); and

(j)    the defendants have failed to provide full, sufficient and proper copies of the contract or have provided ones which are not genuine.

[6](1993) 46 FCR 225.

35 In my view, the matters on which the plaintiff relies concern issues in dispute between the parties. Those matters require a final adjudication on the merits. In relation to attempts to discuss resolution of the dispute without resorting to litigation, the court notes that the parties obtained a referral under s45 of the DBCA and that a conciliation certificate was obtained on 30 July 2019. These issues are ultimately matters for VCAT to determine upon any re-litigation of the proceeding.

36      By email dated 16 November 2020, the plaintiff’s counsel further submitted that the plaintiff had concerns about possible abuses of indulgences provided by the court to the defendants as self-represented litigants given the length of time taken for the defendants to be served and to file a notice of appearance. If there is a delay in issuing any VCAT proceedings, the stay may be lifted.

37      Further, as set out in Radojevic, a stay can occur right up to the point before a Court receives oral evidence concerning the dispute.  If the plaintiff can point to any delay on behalf of the defendants in the conduct of the proceeding that resulted in prejudice to the plaintiff, then this may be relevant to the question of costs in the VCAT proceeding.

38      In the circumstances, it is premature to make a ruling on whether a special costs order ought to be made in relation to the costs of and incidental to the County Court proceedings.  The appropriate costs order is as set out in Maxtra: that the costs of the proceeding, including the costs of the defendants’ application for a stay, are to be reserved for determination by VCAT. 

39      If no such proceeding is issued, then the costs may be determined by this court pursuant to liberty to apply. 

Conclusion

40 For the foregoing reasons, the proceeding is stayed pursuant to s 57(2) of the DBCA. The costs of the proceeding, including the costs of and incidental to the application for a stay of the proceedings under s 57(2) of the DBCA, are reserved for determination by VCAT.

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Certificate

I certify that these 8 pages are a true copy of the ruling of Judicial Registrar Burchell delivered on 7 December 2020

Dated: 7 December 2020

Sean Bricknell

Associate to the Judge in Charge of the Building Cases List