Skabaw Pty Ltd v Morphett

[2011] VSC 489

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

JUDICIAL REVIEW AND APPEALS LIST

S CI 2011 02620

SKABAW PTY LTD (t/as Detailed Homes) (ACN 006 056 524)	Appellant
v
ANTHONY DONALD MORPHETT & ORS (According to the schedule attached)	Respondent

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JUDGE:	HARGRAVE J
WHERE HELD:	Melbourne
DATE OF HEARING:	27 September 2011
DATE OF JUDGMENT:	27 September 2011
CASE MAY BE CITED AS:	Skabaw Pty Ltd v Morphett & Ors
MEDIUM NEUTRAL CITATION:	[2011] VSC 489

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COSTS – Victorian Civil and Administrative Tribunal – Unrepresented party became represented during course of hearing – Hearing adjourned – Whether natural justice required legal practitioner for previously unrepresented party to be given a reasonable opportunity to review materials and take instructions before being required to make submissions as to whether any costs thrown away and, if so, their extent – So held - No reasonable opportunity provided – Costs orders set aside in part. 

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APPEARANCES:	Counsel	Solicitors
For the Appellant	Mr R Andrew	Rodriguez Lawyers
For the First and Second Respondents	Mr R Fink	Taylor Splatt & Partners Lawyers
For the Third Respondent	No appearance

HIS HONOUR:

1. Anthony and Janet Morphett engaged Skabaw Pty Ltd to build a house on their land.  Skabaw is a company controlled by Tony Barbagello.  Disputes arose between the parties and the building contract was terminated.  Mr and Mrs Morphett sued Skabaw in the Victorian Civil and Administrative Tribunal, claiming damages exceeding $700,000. 

1. Skabaw engaged solicitors and counsel to defend the proceeding through most of the interlocutory stages.  However, following a dispute with its lawyers in February this year, a decision was made to terminate the solicitor's retainer and for Mr Barbagello to represent the company as, in effect, a litigant in person.  No objection was taken to that course by the tribunal. 

1. The final hearing of the proceeding commenced on Monday 2 May 2011.  At the outset, Mr Barbagello applied to strike out the claims.  The strike out application was refused, but an order was made in his favour for the production of some relevant documents.  Mr Barbagello applied for an adjournment, which was refused.  The hearing of Mr and Mrs Morphett’s claim then commenced and was heard on 2 and 3 May. 

1. Early in the hearing, it became clear that Mr Barbagello was out of his depth.  In these circumstances the tribunal member properly brought to his attention the desirability of seeking legal representation. 

1. Following an opening by counsel for Mr and Mrs Morphett, the first defendant's evidence-in-chief and some cross-examination, there was a lay day in the hearing on 4 May, and then a compulsory conference on 5 May in an endeavour to compromise the proceeding.  That endeavour was unsuccessful. 

1. The matter came on for hearing again on Friday, 6 May.  By this time Mr Barbagello, on behalf of Skabaw, had secured legal representation for the company.  Mr Powell appeared.  He applied for an adjournment to enable Skabaw to be effectively represented during the course of the hearing.  The adjournment application was acceded to by the tribunal member who, understandably, wished that Skabaw be represented so as to assist the tribunal and so that Skabaw could receive a fair trial. 

1. Any fault leading to the necessity for an adjournment lay squarely at the door of Mr Barbagello and Skabaw.  Mr Barbagello had made a conscious choice to proceed without legal representation.  That choice was ill-advised and led to the necessity for an adjournment to enable justice to be done. 

1. There was substantial debate before the tribunal member as to the costs consequences of the adjournment.  Mr Powell consistently and repeatedly sought that the costs implications of the adjournment be adjourned for a further period, which he described as not being ‘the never-never’, to enable him to review the materials, take instructions and make responsible submissions to the tribunal in light of that preparation. 

1. On behalf of Mr and Mrs Morphett, orders were sought that all of the costs of preparation by counsel and all of the costs of the hearing to date, for both counsel and solicitors and for transcript, be paid by Skabaw as representing ‘costs thrown away’.  An amount of $16,750 was sought. 

1. The tribunal member determined to take an arbitrary mid‑course.  She fixed an amount for part of the costs thrown away, in the sum of $6,600, and otherwise adjourned the application for costs thrown away for two weeks.  Accordingly, a further hearing was to be necessary in any event. 

1. Skabaw then sought leave to appeal against the costs orders.  An associate justice granted leave.  The notice of appeal raises a number of grounds of appeal.  However, it is only necessary to deal with one of them. 

1. The primary ground of appeal is denial of natural justice. By s 98(1) of the Victorian Civil and Administrative Tribunal Act 1998 (‘the Act’), the tribunal is bound by the rules of natural justice.  A denial of natural justice is an error of law.  It was submitted on behalf of Skabaw that the tribunal member’s conduct breached the rules of natural justice, because its lawyer, Mr Powell, was not given a reasonable opportunity to be heard on all questions concerning the costs of the adjournment; in particular, as to whether any costs had been thrown away and, if so, in what amount. 

1. It was submitted on behalf of Mr and Mrs Morphett that an adjournment was only required because of Skabaw's fault, and that a reasonable opportunity was given for costs submissions to be made in those circumstances. Reference was made to s 98(1)(d) of the Act which requires that the tribunal:

(d)must conduct each proceeding with as little formality and technicality, and determine each proceeding with as much speed, as the requirements of this Act and the enabling enactment and a proper consideration of the matters before it permit. 

1. I do not accept the submissions made on behalf of Mr and Mrs Morphett.  In my opinion the tribunal member was, in the exceptional circumstances of this case, obliged by the rules of natural justice to provide Mr Powell, on behalf of Skabaw, with a reasonable opportunity to consider the materials and take instructions before requiring him to make submissions concerning the costs consequences of the adjournment.  The time asked for was a matter of weeks; that may well have been too long.  However, the one hour period offered by the tribunal member was obviously insufficient, given the volume of material and the complexity of the issues.  It is unnecessary to consider what a reasonable time would have been for Mr Powell to prepare and take instructions.  Each case will depend on its own facts. 

1. In my opinion, where a legal practitioner responsibly asks for a reasonable opportunity to consider material and make submissions on an important matter, the failure to give that opportunity may  constitute a denial of natural justice.  This is such a case. 

1. That denial was an error of law. In those circumstances, the court has power under s 148(7) of the Act to make such orders as the case requires. Those orders include an order affirming, varying or setting aside the order of the tribunal; an order that the tribunal could have made; an order remitting the proceeding to be heard and decided again by the tribunal, either with or without directions; or any other order that the court thinks appropriate.

1. It was submitted on behalf of Skabaw that the Court should set aside the whole of the costs orders made against it by the tribunal on 6 May, and remit those orders for re-consideration by the tribunal.  Such a course would involve remitting the whole of the relevant costs issues to the tribunal member who hears and determines the proceeding on its merits.  The proceeding is presently fixed for a period of between 10 and 15 days commencing on 14 November this year.  Insofar as the orders for costs thrown away of preparation and the first two days of the hearing are concerned, I agree with that submission.  The issue remains as to whether there should be an order preserving the costs order made by the tribunal member for the costs of the day on which the adjournment was granted, that is, 6 May 2011. 

1. It was submitted on behalf of Skabaw that the costs of the day order should also be set aside and remitted because, as events have transpired, it is obvious that the hearing would in any event have needed to be adjourned for a number of reasons, including:

(1)       the late discovery by Mr and Mrs Morphett of voluminous diaries, relating to the time spent by the builder who has completed and, it is alleged, rectified the subject building;

(2)       the fact that the tribunal member subsequently recused herself for reasons including the discovery issues and the course she adopted in that regard, and the approach taken to Mr Barbagello's initial application for an adjournment concerning Dr Eilenberg’s inability to provide an expert report. 

1. In my opinion, given the obvious cause of the adjournment was fault by Skabaw, and that nothing was done on 6 May to progress the hearing on the merits of the proceeding, the better course is to preserve the costs of the day orders.  Taking the facts as a whole, there is no doubt that at least one day’s costs have been thrown away by reason of Skabaw’s default.  It is fair that Skabaw pay those costs at least.[1]  Whether the other aspects of the costs orders have in fact been thrown away by reason of the adjournment should be decided by the tribunal member who has heard and determined the proceeding. 

(Discussion ensued)

[1]See s 109(3)(a)(iv) of the Act.

1. The question arises as to whether this Court should fix the costs of the day on 6 May 2011 when the adjournment was granted.  It is clear that this portion of the costs as ordered by the tribunal member was calculated by reference to counsel's fees alone in the sum of $2,200 per day.  Were the costs of the day to be taxed, they would of course include any costs for the attendance of a solicitor on that day. 

1. For convenience, and to avoid further disputes and associated costs, it was submitted on behalf of Mr and Mrs Morphett that the amount of $2,200 should stand as the whole of the costs of the day on 6 May. 

1. In response, it has been submitted on behalf of Skabaw that the Court lacks the necessary expertise and experience to determine the quantum of costs; and that there are special features in a jurisdiction such as the tribunal, which is prima facie a no‑costs jurisdiction.  In those circumstances it was submitted on behalf of Skabaw that the order should direct the tribunal to fix the amount of the costs of the day after hearing submissions from the parties and in accordance with its experience in the jurisdiction. 

1. In my opinion, certainty is to be preferred. The costs disputes in this case have already caused considerable further costs to the parties. If the costs of the day are not resolved today, it will just cause further associated costs in the future. In all the circumstances, I accept the submission made on behalf of Mr and Mrs Morphett that a single figure should be fixed for the costs of the day on 6 May 2011 in the sum of $2,200. The Court will so order under s 148(7) of the Act.

1. For the avoidance of doubt, nothing in these reasons is intended to state any general principle that a party seeking time to put submissions concerning the costs consequences of an adjournment is prima facie entitled to that time.  As I have said this was an exceptional and, hopefully, rare case.  In the usual course, the parties will be able to deal with costs at the time the adjournment is granted.  Where there is uncertainty as to the extent to which costs may be thrown away by reason of the adjournment, the better course will usually be to make a general order for the payment of ‘any costs thrown away’, and for those costs to be assessed at the conclusion of the proceeding or relevant application when the facts are known. 

(The Court then directed counsel to provide minutes of orders to reflect the Court’s reasons.) 

SCHEDULE OF PARTIES

S CI 2011 02620
BETWEEN:
SKABAW PTY LTD (t/as Detailed Homes) (ACN 006 056 524)	Appellant
- and -
ANTHONY DONALD MORPHETT	First Respondent
JANICE ELIZABETH MORPHETT	Second Respondent
KCE CONSULTING ENGINEERS PTY LTD (ACN 103 920 341)	Third Respondent