Scott Russell Constructions Pty Ltd v Brewis & Foulger
[2015] QCAT 393
•6 October 2015
| CITATION: | Scott Russell Constructions Pty Ltd v Brewis & Foulger [2015] QCAT 393 |
| PARTIES: | Scott Russell Constructions Pty Ltd (Applicant) |
| v | |
| Vanessa Brewis Gavin Foulger (Respondents) |
| APPLICATION NUMBER: | BDL118-14 |
| MATTER TYPE: | Building matters |
| HEARING DATE: | On the papers |
| HEARD AT: | Brisbane |
| DECISION OF: | Senior Member Brown |
| DELIVERED ON: | 6 October 2015 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | 1. There is no order as to costs. |
| CATCHWORDS: | COSTS – building dispute – where proceedings resolved prior to hearing – where parties entered into heads of agreement – where terms of settlement agreement stated to be confidential - where each party claims an entitlement to the recovery of costs – discretion to award costs Queensland Building and Construction Commission Act 1991 (Qld), s 77, sch 2 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 Latoudis v Casey (1990) 170 CLR 534 at 557 Lyons v Dreamstarter Pty Ltd [2011] QCATA 142 Waterman v Gerling Australia Insurance Co Pty Ltd (No.2) [2005] NSWSC 1111 |
APPEARANCES:
This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (‘QCAT Act’).
REASONS FOR DECISION
What is this application about?
The applicant, a builder, entered into a contract with the respondents to undertake domestic building works (‘the contract’). The contract was subsequently terminated. The applicant thereafter commenced proceedings in the Tribunal. The respondents filed a counter application for the cost of rectification and completion works. The parties settled the dispute. Both parties now seek their costs of the proceedings.
Background
The applicant entered into a contract with the respondents for the performance of alteration and extension building works at the respondents’ home.
The date for practical completion was 13 December 2014. The date passed without the works having reached that stage. It is common ground that the parties subsequently agreed to vary the contract. In the Tribunal proceedings the parties disputed the nature and effect of the variation. The applicant says that the date for practical completion was extended. The respondents deny this.
Pursuant to the varied contract, the building works were to be completed by 14 March 2014. This did not occur. The applicant says that it was prevented from completing the works as a result of the actions of the respondents. The respondents deny this.
On 31 March 2014 the respondents gave notice to the applicant terminating the contract. The applicant subsequently issued the respondents with a notice to remedy breach and thereafter on 1 April 2014 gave notice to the respondents terminating the contract.
The respondents lodged a complaint with the Queensland Building and Construction Commission on 20 May 2014.
The applicant subsequently commenced proceedings in the Tribunal on 26 May 2014 seeking an amount of $87,945.36 in respect of monies due and owing under the contract and for damages for breach of contract.
The respondents filed a counter claim seeking $125,156.06 in respect of rectification and completion costs.
The proceedings in the Tribunal thereafter progressed. The parties were required to file statements of evidence, including expert evidence, a compulsory conference was held and an experts’ conclave was convened.
The matter was initially listed for hearing in the Tribunal on 30 and 31 March 2015. By consent, the hearing was adjourned and the matter was re-listed for a hearing on 20 and 21 August 2015.
Prior to the adjourned hearing dates, the parties resolved the issues in dispute and the hearing did not proceed. At a directions hearing on 18 August 2015 directions were made for the parties to file submissions on the issue of costs.
It is thus that the matter falls for determination.
What do the respondents say?
As the respondents filed their submissions first, and the applicant in essence responded to those submissions, I will first deal with the respondents’ contentions.
The respondents say that the behaviour of the applicant was ‘reprehensible’ and significantly contributed to the legal costs they incurred. They say that they lodged a complaint with the Queensland Building and Construction Commission (‘the QBCC’) regarding the subject building works and that the applicant then commenced the present proceedings in the Tribunal which had ‘the effect of blocking’ the QBCC complaint.
The respondents say that the applicant’s case was not strong, largely based on invoices raised after the respondents’ had terminated the contract and lacked substance or supporting evidence.
The respondents refer to the various expert opinions which they say supported their position that the issues in relation to the building works arose as a result of the conduct of the applicant. They say that prior to the termination of the contract an independent building inspection report was obtained which identified a number of defects in the building works.
The respondents say that prior to the scheduled hearing in the Tribunal in March 2015, the applicant had been notified of a determination by the QBCC that the respondents had validly terminated the contract and, despite this, the applicant persisted with the prosecution of the application.
The respondents say that the conduct of the applicant contributed to their incurring unnecessary legal costs. Examples of the applicant’s conduct complained of by the respondents include:
a) The compulsory conference being rescheduled as a result of the applicant’s failure to file an expert report;
b) Failing to comply with dates for steps to be undertaken in the proceedings;
c) Seeking a resolution of the proceedings with the respondents as late as the commencement of the hearing on 30 March 2015 resulting in an adjournment;
d) Failing to agree to an adjournment of the hearing on 20 August 2015 resulting in costs being incurred as a result of the directions hearing which was scheduled on 18 August 2015 at which the applicant withdrew its claim.
What does the applicant say?
The applicant says that the proceedings were commenced following the respondents’ unlawful termination of the contract.
The applicant says that the merits of the claims by the respective parties cannot be determined in the absence of a full hearing and thus it is not possible, on an application for costs, for there to be a consideration of the relative strengths of the parties’ positions.
The applicant says that the substantive issue for determination at a hearing would have been which party had lawfully terminated the contract which would determine who was liable for the incomplete works.
The applicant says that the decision by the QBCC in relation to the termination of the contract is irrelevant as the decision was reviewable and the parties had entered into an agreement to resolve the issues in dispute prior to the expiration of the period to lodge a review application.
In relation to the adjourned hearing in March 2015, the applicant says that the parties were engaged in negotiations in the period leading up to the hearing including the exchange of various offers. The applicant says that the parties agreed to adjourn the hearing of the matter while they negotiated an agreement.
The applicant says that the respondents filed their counter application in circumstances where they intended to seek compensation through the QBCC Home Warranty Insurance Scheme and thus contributed to the quantum of legal costs incurred by the parties.
The applicant says that it was an implied term of the settlement agreement between the parties that each party would bear their own legal costs. It says that the facts and circumstances by reason of which such a term can be implied are:
a) The conduct of the parties and their intentions prior to signing the heads of agreement; and
b) The conduct of the respondents in not seeking costs at the adjourned hearing in March 2015.
The applicant says that both parties incurred significant expenses in relation to the matter and for this reason they agreed to settle. The applicant says that in the interests of justice each party should bear their own costs of the proceeding.
The applicant says that if the Tribunal makes any orders as to costs, then it should be entitled to its costs.
Discussion
In proceedings in the Tribunal, each party usually bears their own costs.[1] Costs may be awarded against a party if the Tribunal considers the interests of justice require such an order to be made.[2]
[1] QCAT Act s 100.
[2] Ibid s 102(1).
However, the presumption that each party should bear their own costs is subject to the proviso that the determination of costs may be as provided for in an enabling Act.
Any claim by the parties for costs is made pursuant to s 77(3)(h) of the Queensland Building and Construction Commission Act 1991 (Qld) (‘the QBCC Act’).
The dispute, the subject of the application and counter claim, was a domestic building dispute[3]. Proceedings were commenced in the Tribunal by the applicant.[4] The Tribunal may make an award of costs in the resolution of a building dispute.[5]
[3] QBCC Act Schedule 2.
[4] Ibid s 77(1).
[5] Ibid s 77(3)(h).
The effect of s.77(3)(h) of the QBCC Act is that the general presumption in the Tribunal that each party bear their own costs is displaced.
The discretion to award costs is a broad one, to be exercised judicially and not upon irrelevant or extraneous considerations but upon facts connected with or leading up to the litigation.[6]
[6]Lyons v Dreamstarter Pty Ltd [2011] QCATA 142 citing Latoudis v Casey (1990) 170 CLR 534 at 557.
In the present case, the parties reached an agreement to resolve the matters in dispute between them.
The respondents’ claim for costs is, in essence, premised upon their having incurred legal costs as a result of being required to defend an unmeritorious claim and in the context of the applicant’s conduct which resulted in those legal costs being unnecessarily increased.
I will deal with each of the issues raised by the respondents.
The respondents say that the applicant’s case was not strong and the application was filed without any supporting expert evidence or properly prepared particulars of the claim.
The absence of an expert report at the time of the filing of an application is not uncommon in the Tribunal. It is not, in itself, an indication of the relative strength or weakness of a claim. I do not consider there is any significance to this complaint by the respondents.
The respondents say that they obtained an expert report prior to the termination of the contract and that the applicant had agreed to be bound by that report. What being ‘bound by’ is not explained by the respondents in their submissions however presumably it relates to some agreement by the applicant to carry out building work identified by the expert.
There is no evidence before me in relation to this assertion. Even if there was such evidence it is unclear from the respondents’ submissions what weight, if any, should be given to such evidence in the context of the claim for costs.
The respondents rely upon the Scott Schedule filed in the proceedings as evidence of the fact that the overwhelming majority of the items in dispute were agreed upon between the experts for the respective parties. This, they point to, is further evidence of the relative weakness of the applicant’s claim.
The identified and costed items in the Scott Schedule, 87 in number, total $128,233.35. The Schedule does, as the respondents contend, list a significant number of items identified by the experts for the respective parties as falling within the category of ‘Agree that the works are incomplete and agree this is to be completed as contracted’. Many of the items are however of a relatively minor nature in the context of individual rectification cost.
The Schedule identifies 2 significant items totalling $76,084.00 in relation to which the experts note disagreement on the cause or scope of required works.
The parties have filed in the Tribunal experts’ reports which are extensive and comprehensive. Together the reports comprise almost 200 pages. The respective experts reach differing conclusions on a range of issues in relation to a number of the identified building works.
In the absence of a hearing and a consideration of the evidence, it is not possible to make any findings as to the relative strengths of the parties’ claims concerning the cause, extent and cost of the required works.
The respondents say that they incurred $10,000 in counsel’s fees, plus expenses associated with their expert and solicitors fees as a result of the late adjournment of the hearing in March 2015.
The applicant says that in the period of 10 days leading up to the March hearing date, the parties were exchanging offers to resolve the matter. The applicant says that the respondents made an offer to settle on 27 March 2015 which was followed by an offer by the applicant on 30 March 2015 which resulted in the adjournment of the hearing. The applicant says that it is disingenuous of the respondents to allege that the applicant was the sole contributor to the costs incurred as a result of the vacated hearing.
The directions made by the Tribunal on 30 March 2015 adjourning the hearing were by consent. There is nothing before me to suggest that either party made an application at the time for an order for the costs thrown away by the adjournment. The adjournment was by agreement between the parties. Any costs application should and could, in my view, have been made at the time and in the immediate circumstances and context of the adjournment. The Tribunal could at that time have considered the relative merits of any such application for costs.
The respondents say that they have incurred legal costs as a result of the late adjournment of the hearing in August 2015. They say that they filed an application to adjourn the hearing and that the applicant’s failure to agree to the adjournment in a timely manner resulted in the respondents incurring legal costs associated with the directions hearing which was required to be conducted.
The August 2015 hearing dates were set at a directions hearing in June 2015. On 10 August 2015 the respondents filed in the tribunal an application for an adjournment of the hearing dates to enable the terms of the settlement agreement between the parties to be carried out. On 18 August 2015 each of the parties filed Notices of Withdrawal, the applicant withdrawing its application and the respondents their counter application.
The application for an adjournment by the respondents was filed 10 days before the hearing date. Presumably the parties were well aware of the hearing dates, those dates having been set some 2 months prior. It appears that in the period leading up to the August hearing dates, the parties were implementing the terms of the settlement agreement they had reached.
There is nothing before me to suggest that the adjournment application could not have been filed earlier or that the conduct of the applicant was in any way unreasonable or otherwise resulted in unnecessary legal costs being incurred by the respondents.
The respondents say that the QBCC made a determination prior to the March hearing dates that the respondents had validly terminated the contract. They rely upon this as further evidence of the unreasonable conduct of the applicant and of the relative weakness of its claim.
The applicant says that it received the QBCC decision on 12 March 2015. It says that within the 28 day review period, the parties entered into an agreement to resolve the issues in dispute. The applicant says that had the agreement not been entered into, it would have been entitled to seek a review of the QBCC decision.
For the respondents to have validly terminated the contract they must have had a right to do so as at the date of termination. The issue of the entitlement to terminate was central to the present application. It would also have been central to any application by the applicant to review the decision by the QBCC.
There is no material before the Tribunal in relation to the decision by the QBCC. No copy of the decision has been produced. It is not possible to speculate on what may or may not have occurred in relation to the QBCC decision other than the assertion by the applicant that the settlement agreement meant that an application to review the decision was not necessary.
It is not possible to make any findings about the relative merits of the parties’ claims by reference to the QBCC decision.
The respondents say that the applicant failed to file an expert’s report prior to the originally scheduled compulsory conference despite having provided a copy of the report to the respondents. The respondents say that this necessitated a further compulsory conference. The applicant does not address this issue in its submissions.
The Tribunal made directions on 7 July 2014 appointing a date for a compulsory conference. The conference was, by consent, rescheduled to a later date. The conference proceeded on that later date.
There is nothing before me to support the respondents’ contention that the conference was rescheduled as a result of any action or inaction on the part of the applicant or to what extent additional legal costs were incurred as a result.
The respondents say that the applicant caused other delays and rescheduling of dates as a result of the applicant’s not being prepared or failing to inform his expert of dates. The applicant does not respond specifically to this complaint.
The respondents’ submissions do not set out with any specificity the delays and rescheduling of dates complained of. I am therefore unable to give any consideration to this aspect of the submissions.
The applicant in its submissions makes reference to various offers made by the parties to resolve the issues in dispute which were made on a ‘without prejudice save as to costs’ basis. These offers were said by the applicant to have been made prior to the parties negotiating the heads of agreement. These were the negotiations resulting in the adjournment of the March 2015 hearing dates. Clearly, at this time, and presumably during the course of the proceedings, the parties had considered the issue of legal costs.
The offers, which are attached to the applicant’s submissions, are all expressed to be “without prejudice save as to costs”. I am of the view that I may therefore have reference to those offers.
Neither party makes specific reference to the terms of the offers in their submissions on costs nor seeks to rely upon the offers in any specific way.
In the absence of any submissions from the parties, it is not possible to consider the relevance of the offers in the exercise of the discretion to award costs.
The terms of the settlement agreement entered into by the parties are expressly stated to remain confidential except for two specified and limited purposes. Those purposes do not, in my view, include the determination of legal costs by the Tribunal.
Whilst the applicant has attached the settlement agreement to its submissions, and has arguably waived its entitlement to confidentiality in respect of its terms, the respondents have not done so.
I am therefore of the view that I cannot have regard to the terms of the agreement (and thus the basis of the settlement reached by the parties) in considering the issue of costs.
The relevance of an offer to settle in the context of determining costs is, in essence, whether the final outcome for one or the other of the parties is more or less favourable than the terms of any offer made by the party. In this case, the final outcome was one negotiated by the parties by agreement, the terms of which are to remain confidential.
Accordingly, I am of the view that the terms of the offers to settle exchanged by the parties and attached to the applicant’s submissions, are of no assistance or relevance in determining the issue of costs. Even if I am wrong about this and the settlement agreement can be referenced in considering costs, in the absence of detailed submissions from the parties about the offers, the agreement is of no relevance.
Conclusion
The significant difficulty facing each of the parties in seeking an award for costs, is that they came to an agreed resolution of the issues in dispute and did not, in reaching that agreement, address the issue of legal costs.
One imagines that the parties and their legal advisors turned their minds to the question of legal costs at various junctures in the course of the proceedings.
As I have observed, no application for costs was made at the time of the adjournment of the hearing in March 2015. The parties, in negotiating the settlement of the issues in dispute between them, did not address the issue of costs.
The applicant submits that it was an implied term of the settlement agreement reached between the parties that each party would bear their own costs. As I have found, I do not believe that I may have reference to the settlement agreement in considering the issue of costs. If I am wrong about this then I make the following observations and findings.
The requirements for implying a term into a contract are clearly established.[7] As the High Court has clearly stated, it is not enough that it is reasonable to imply a term; it must be necessary to do so to give business efficacy to the contract.[8]
[7] Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337.
[8] Ibid at 347.
I find that there is no evidence before me upon which a finding of an implied term could be made as contended for by the applicant on the basis that the requirements for the implication of such a term have not been met[9]. The agreement does not require such a term to give it business efficacy, nor is such a term so obvious that it “goes without saying”.
[9] BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283
Generally speaking a successful plaintiff/applicant is entitled to their costs. It is for the defendant/respondent to establish a basis for departing from that rule. A successful plaintiff who has failed on certain issues may be deprived of costs on those issues, or even ordered to pay the defendant’s costs of them.[10]
[10] Waterman v Gerling Australia Insurance Co Pty Ltd (No.2) [2005] NSWSC 1111.
In this case, neither party has been successful as the matters in dispute were resolved without the matter proceeding to a hearing. It is not possible to make any findings as to whether and to what extent either party would ultimately have been successful had the application and counter application been determined after a hearing before the Tribunal.
For the reasons outlined, it is not possible for me, in the context of this application for costs, to make findings as to the relative strengths and merits of the parties’ cases.
The issue of legal costs could, and should, have been addressed by the parties prior to this very late juncture. In all the circumstances I am not persuaded that it is appropriate to exercise my discretion and make a costs order in favour of either party.
There will be no order as to costs.
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