Turner Constructions Pty Ltd v Keen
[2017] WADC 91
•10 JULY 2017
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: TURNER CONSTRUCTIONS PTY LTD -v- KEEN [2017] WADC 91
CORAM: PRINCIPAL REGISTRAR MELVILLE
HEARD: 12 APRIL 2017
DELIVERED : 10 JULY 2017
FILE NO/S: CIV 279 of 2017
BETWEEN: TURNER CONSTRUCTIONS PTY LTD
Plaintiff
AND
DAVID ALBERT KEEN
First defendantMAY CHING MEEI KONG
Second defendant
Catchwords:
Conferral - Summary judgment - Indemnity costs
Legislation:
Home Building Contracts Act 1991
District Court Rules 2005
Rules of the Supreme Court 1971
Result:
Leave granted and application dismissed
Representation:
Counsel:
Plaintiff: Mr T G Camp
First defendant : Mr M S Macdonald
Second defendant : Mr M S Macdonald
Solicitors:
Plaintiff: Mony De Kerloy
First defendant : Macdonald Rudder
Second defendant : Macdonald Rudder
Case(s) referred to in judgment(s):
Alcoa of Australia Ltd v Apache Energy Ltd (No 7) [2016] WASC 370
Argosy Strata Plan SP 21513 v Chu Underwriting Agencies Pty Ltd [No 3] [2015] WADC 37
Barclay Mowlem Construction Ltd v Dampier Port Authority (2006) 33 WAR 82
Barrick Gold of Australia Ltd v F L Smidth Inc [2007] WASC 186
Flotilla Nominees Pty Ltd v Western Australian Land Authority (2003) 28 WAR 95
Gould v Mount Oxide Mines Ltd (In Liq) (1916) 22 CLR 490
Murchison Zinc Company Pty Ltd v Thiess Contractors Pty Ltd [2000] WASCA 167
Semmens v Ocram Constructions Pty Ltd [2012] WADC 54
SMEC Australia Pty Ltd v Valentine Falls Estate Pty Ltd [2011] WASCA 138
Walter v Buckeridge [No 5] [2012] WASC 495
PRINCIPAL REGISTRAR MELVILLE: By chamber summons dated 13 March 2017 the defendants brought an application for an extension of time to apply for summary judgment against the plaintiff under the Rules of the Supreme Court 1971 (RSC) O 16. The application was limited to the plaintiff's claim insofar as it was based on a claim in debt and damages for breach of contract. As an alternative, the defendants sought that pars 9 – 15 of the statement of claim be struck out pursuant to the RSC, O 20 r 19(1)(a) on the basis that the statement of claim disclosed no reasonable cause of action, or pursuant to O 20 r 19(1)(c) on the basis the paragraphs may prejudice, embarrass or delay the fair trial of the action.
The plaintiff opposed the application on the following grounds:
(a)the application was brought without proper conferral as required by r 22 of the District Court Rules 2005 (DCR);
(b)there is no justification for an extension of time to bring the summary judgment application;
(c)that the defendants have failed to show there is no serious question to be tried;
(d)the pleadings do disclose a reasonable cause of action and are generally unobjectionable.
Absence of conferral
Rule 22 of the DCR requires the parties to attempt to resolve as many of the issues giving rise to a chamber summons before filing it. Upon filing the summons, the person filing it is required to file a certificate that the parties have conferred about the issues giving rise to the summons and have not resolved them or, if they have not conferred, the reasons why they have not conferred. In this case the summons contained a certificate of conferral to the effect that there had been conferral about the issues giving rise to the summons but the parties have not resolved them. This factual statement is disputed and the plaintiff's position is that the absence of conferral or circumstances justifying such absence means the application must be struck out, citing Barrick Gold of Australia Ltd v F L Smidth Inc [2007] WASC 186, at [11] and Argosy Strata Plan SP 21513 v Chu Underwriting Agencies Pty Ltd [No 3] [2015] WADC 37.
In my opinion, Barrack Gold of Australia provides limited support for the plaintiff. However, that case dealt with O 59 r 9 of the RSC which is in different terms to r 22 of the DCR. Unless waived, RSC O 59 r 9(1) provides that 'no order shall be made on an application in chambers unless the application was filed with the memorandum stating the parties had conferred'. In this case a memorandum was filed and DCR r 22 does not expressly prohibit an order being made.
In Argosy Strata Plan SP 21513 v Chu Underwriting Agencies Pty Ltd [No 3], Sweeney DCJ waived the requirement for conferral, taking the view that even had there been compliance with the obligation to confer, the plaintiffs would not have consented to the action being struck out and there was no practical purpose to be served in insisting on compliance because should the application be dismissed, there would be nothing to stop the defendants then complying with the rules and filing the identical application.
This approach taken by Sweeney J does not mean there are no consequences for non‑compliance with the DCR. Among the possible consequences is an adverse costs order being made against the party or their solicitors on the basis that had there been proper conferral, the likely outcome is that there would have been no need to utilise the courts and therefore the communities resources to deal with an unnecessary application: Alcoa of Australia Ltd v Apache Energy Ltd [No 7] [2016] WASC 370 [27].
Like Sweeney DCJ, it is my view having regard to the history leading up to this application being brought and the amount or work undertaken by the parties to prepare for it, no useful purpose is served by dismissing the application for non-compliance with DCR r 22. I do not consider it necessary for me therefore to determine whether in fact in this case there had been proper conferral about the application itself as distinct from the issues underlying the application. I am satisfied that had there been proper conferral this application would still have been brought.
Extension of time to bring the application
The application for summary judgment has been brought outside of the 21 days after appearance as provided for by RSC O 16(1). It has been bought 34 days after the memorandum of appearance was filed so is 13 days late. It was also bought 18 days after the statement of claim was filed.
The explanation for the delay is that the defendants' solicitor did not understand the nature of the claim insofar as it was framed in debt and needed to see the statement of claim before being in a position to advise on the prospects of successfully bringing the summary judgment application.
The general rationale for the requirement to bring the application within 21 days is that these applications should be brought before too much expense has been incurred. Accordingly the longer the delay and the more expense incurred the less likely it becomes that an extension of time will be granted. The extent of the prejudice suffered by the plaintiff and the merits of the application are relevant considerations in deciding whether leave should be granted.
In this case it is my view the delay is minor, the prejudice is little or none and, for the reasons that follow, there is some merit in at least part of the application. In my view the explanation that the defendant wanted to see the statement of claim before deciding to bring the summary judgment application also has some merit. In fact, in practical terms the RSC require the plaintiff to file the statement of claim before the summary judgment application is brought. By RSC O 20 r 1 the statement of claim should be filed within 14 days of the appearance, with the summary judgment application being brought within 21 days of the appearance and accordingly the rules can be said to contemplate that the application will not be brought before the statement of claim is served. In terms of prejudice, the only expense the plaintiff has been put to is the filing of the statement of claim, something it had to do in any event.
For the above reasons and because for the reasons that follow the application for summary judgment was arguable, I would grant leave to bring the application.
Summary judgment
The defendants' application is brought pursuant to the RSC O 16 r 1. This rule empowers the court to enter judgment for the defendant if satisfied the action is frivolous or vexatious, or that the defendant has a good defence on the merits, or that the action should be disposed of summarily. The application is to be made by summons supported by affidavit and the plaintiff may show cause against any such application by affidavit. The relevant principles are set out in SMEC Australia Pty Ltd v Valentine Falls Estate Pty Ltd [2011] WASCA 138 [20]. There it was said:
The power to order summary judgment is one that should be exercised with great care: Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87, 99. It is only in the clearest of cases, when there is a high degree of certainty about the ultimate outcome of the proceedings if it went to trial, that summary judgment ought properly be granted: Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 [57]; Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256 [46]. And whilst the court may determine any difficult question of law on such an application, it will usually be appropriate to leave the determination of such questions for trial: see Theseus Exploration NL v Foyster [1972] HCA 41; (1972) 126 CLR 507, 514 - 515; Casella v Hewitt [2008] WASCA 13; (2008) 36 WAR 1 [36].
The onus is on the applicant, in this case the defendants, to show there is no serious question to be tried.
Background to the application
At this point it is convenient to consider the background to this case as outlined in the statement of claim and in the affidavit material filed by both parties.
In brief, it is alleged the plaintiff and the defendants entered into a contract on around 21 March 2016 whereby the plaintiff was to perform building works by way of the addition of a second story to a residence on the property owned by the defendants known as 4 Tarradee Circuit, Thornlie. In the statement of claim the plaintiff alleges the contract was a cost plus contract within the meaning of s 14 of the Home Building Contracts Act 1991 (WA) (the Act). The consideration for the building work was that the defendants would pay the plaintiff the costs of the works plus a fee of 20%.
It is further alleged that it was an express term of the contract that the defendants would pay the plaintiff the costs of the works plus 20% within five days of receipt of a progress claim.
It is then alleged that on or about 29 May 2016 the plaintiff submitted a progress claim in respect of the works and that the defendants failed to pay that progress claim. On 27 June 2016 it is alleged the defendants repudiated the contract by way of an email, which repudiation was accepted by the plaintiff on 28 June 2016 by way of email.
In par 13 of the statement of claim the plaintiff alleges that following the defendants repudiation, three further invoices were issued on 18 July 2016 and 23 September 2016 which invoices the defendants failed or refused to pay.
In par 15 it is alleged that the defendants are indebted to the plaintiff in the sum of $87,287.28 as the result of the unpaid invoices raised by the plaintiff to the defendants, of which the majority of those invoices were raised after the alleged acceptance of the defendants' alleged repudiation.
The application for summary judgment was supported by an affidavit of David Albert Keen who had made the affidavit on behalf of both he and the second‑named defendant who he says was his wife, and as having been duly authorised by the second‑named defendant. Among the documents annexed to his affidavit at DAK 1, are the documents he said he gave to the plaintiff, being a design for the renovations, an energy report, an engineering plan, and a two page document called Builders Brief, which he said set out specifications for the building work he wanted done.
At DAF 2 is a document described as the cost plus contract. The contract has a number of glaring deficiencies.
Firstly, the contract purports to be between the builder named and described in item 1 (the plaintiff) and the owner named and described in item 2. The second defendant does not appear as a named owner in item 2.
Secondly, where provision is made for the signature for and on behalf of the builder, the words 'Turner Constructions P/L' appear.
Thirdly, that part of the box on the contract that provides for the date of the contract to be inserted has been left blank. Having observed that, it is also observed that the parties have dated the document at the time that they applied their signatures and that the owners state that they have received a copy of the contract and the 'Construction Documents'.
Fourthly, by cl 1(a) of the contract, the agreement appears to be in respect of building work described in item 3 upon the land described in item 3 in accordance with the drawings, plans and specifications agreed between the parties '… and annexed hereto and for the purpose of identification signed by each of them (which said drawings, plans and specifications and colour schedules are hereinafter referred to as "the Construction Documents")'. The site is described as 4 Tarradee Circuit, Thornlie. No Construction Documents are annexed to the contract.
As a result of these deficiencies the defendants submit that there is no contract in writing as required by s 14 of the Act, the consequence being that there is no contract and no debt and no damages for breach of contract.
Section 14 of the Act provides as follows:
14.Cost plus contracts, requirements as to
(1)A builder must not enter into a cost plus contract with an owner for the performance of home building work unless the contract is in writing and the written contract —
(a)has a heading at the beginning that includes the words 'cost plus contract'; and
(b)contains an acknowledgment by the parties that the contract is a cost plus contract and that this Act, apart from this section and Part 3A, does not apply to the contract.
Penalty: $10 000.
(2)Subsection (1) does not apply to a cost plus contract that comes within paragraph (b) of the definition of home building work contract in section 3.
(3)If a builder enters into a cost plus contract in breach of subsection (1), the contract may be terminated by the owner in accordance with section 19.
The Act, including the regulations, does not prescribe a form containing the terms and conditions that must be part of the contract although it does prescribe a form of the notice to be given under s 4(2) of the Act. Accordingly, it seems open to the parties to have the contract written in any manner and form as they please provided it otherwise meets the requirements of the Act. This could mean the written contract is constituted by one or more documents evidencing the parties' mutual intent.
Further, another relevant consideration, in my view, is the fact that whilst s 14 creates an offence punishable by a fine of up to $10,000 for a builder to enter into a cost plus contract that is not in writing, it does not follow from this that the illegality makes the contract a nullity. In Walter v Buckeridge [No 5] [2012] WASC 495 [45] it was said:
A contract expressly or impliedly prohibited by a statute is void and unenforceable. However, a failure to comply with a statutory requirement does not necessarily render a contract void and unenforceable. One must determine as an exercise in statutory construction whether the statute intends that result or some other consequence: Chakera v Kuzamanovic [2003] VSC 92 [11] (Nettle J).
The plaintiff's solicitors have referred to Semmens v Ocram Constructions Pty Ltd [2012] WADC 54 a case dealing with a cost plus contract that appears to be the same as this, in support of the proposition that the Construction Documents even though not annexed to the contract or signed by the parties as supposed by item 3 nevertheless form part of the written contract. However it is far from clear that this was an issue before the court which required a decision and it appears to me not to have been. I don't find this case supportive of the plaintiff's submission.
However I accept the plaintiff's submissions that a written contract can be constituted by several documents that together constitute the final record of what has previously been agreed and that oral evidence can be given as to what document or documents constitute the written contract.
The extent to which evidence of prior negotiations can be considered, the extent to which parol evidence of what documents form part of a written contract can be given and what ambiguities in a contract actually mean, raise complex questions of law which are best left for trial.
In this case it is arguable that having regard to the statutory scheme as a whole, that a contract that falls short of constituting a written contract in circumstances where the Act itself provides remedies for entering into a contract in breach of s 14(1) is not void. More particularly, at s 14(3), it is provided that the contract may be terminated by the owner in accordance with s 19. This suggests that the contract, rather than being void is voidable at the election of the owner who can avoid it by terminating in accordance with s 19. Section 19 of the Act seems to contemplate that the contract subsists until terminated, providing that the notice of termination under s 14(3) must be given before the completion of the home building work under the contract.
Section 19 provides:
19.How contract terminated
(1)Where under section 4(5), 10(4) or 14(3) or Schedule 1 a party to a contract may terminate the contract the party may give notice of termination to the other party and the contract is terminated at the time when the notice is given.
(2)A notice given by a party under subsection (1) must be in writing signed by the party and must be given to the other party before the completion of the home building work under the contract.
With respect to the first issue, whilst the second‑named defendant is not named as an owner, she has signed the agreement and in those circumstances it is arguable that the court would find that she is a party to the agreement.
With respect to the second issue, in my opinion there is no evidence that the contract was signed by the plaintiff, being a corporation, in accordance with any of the provisions of s 127 of the Corporations Law. However, a company can also transact by way of a duly authorised agent. In this case Mr John Jeffcoat Turner swears that he was 'the director of the plaintiff' and is authorised to make the affidavit on behalf of the plaintiff. At par 6 of his affidavit he says he signed on behalf of Turner Constructions Pty Ltd. If he was the sole director of the plaintiff as it appears, then it would seem he was the duly authorised agent of the plaintiff.
With respect to the third issue, whilst the second defendant was not described at item 2, given she has signed the contract it seems arguable that she is a party to the contract. The failure to describe her at item 2 in circumstances where she has signed the contract arguably gives rise to an ambiguity that might be resolved by parol evidence. This calls for a trial.
With respect to issue 4, whilst the contract does not in item 3 identify the works to be done, it is arguable that the court may consider the documentation provided to the builder forms part of the contract.
This again begs the question, was the contract in writing for the purposes of s.14 of the Act? If not, then the defendants would seem to be entitled to terminate in which case the plaintiff would have no contractual right to issue a progress claim thereafter and would have no claim in debt based on any invoices it raised thereafter. If the contract is in writing, the purported termination would seem to be a repudiation of the contract by the defendant, giving the plaintiff the right to elect to affirm the contract and seek damages or to terminate the contract and, subject to or in addition to any other remedies given to it under the contract in these circumstances, seek damages.
In this case the contract by cl 15(a) and cl 16 provides the plaintiff with the right to terminate the contract where there is breach of the contract by the owner or failure to pay within five days monies due by way of progress payments. Clause 15(c) then provides that the plaintiff is entitled to be paid forthwith all costs together with the builder's fee thereon incurred to that date. Given what I regard to be the ambiguity of the expression 'costs incurred' and whether the expression means cost actually paid by the builder or includes the builder's liability to pay costs, it follows that the plaintiff may have the right to recover under cl 15(c) the cost of the unpaid work its contractors have invoiced it prior to the termination even though the plaintiff has not invoiced the defendant until after the termination. In such a case the plaintiff may be entitled to the costs claimed as a debt.
The evidence shows that the defendants gave notice of termination of the contract by email dated 27 June 2016. The reason advanced was that the bank refused to lend them the money necessary to have the works performed. No reason for the termination was advanced on the basis that the contract was not in writing. Section 19 of the Act does not require a reason for termination to be given although the right to terminate under s 19 can only arise where the contract is not in writing.
In the circumstances, it seems to me that this is not the clearest of cases in which it can be said there is a high degree of certainty that the court will find no written contract has been entered into between the plaintiff and the two defendants. It follows then there is no high degree of certainty the court will find the contract was lawfully terminated by the defendants. For the defendants to have the claim in debt summarily dismissed, they have to persuade me that there is a high degree of certainty they would be successful at trial on this issue. I am not persuaded.
Strike out application.
I have previously said that the purpose of pleadings is to appraise the other parties to the proceedings of the case they have to meet, to enable an assessment of whether the pleadings give rise to an arguable cause of action or defence as the case may be, to define issues to be determined at trial and to enable the court to control the preparation of the case and the conduct of the trial. This means the plaintiff is required to plead the material facts that establish the foundation for the case being brought against a defendant and a defendant is required to either admit or deny those facts. If this is done as contemplated by the rules of pleading the facts that are not in dispute and those that are in dispute are neatly identified and the parties and the court's time and money can be concentrated on the real issues.
The Court of Appeal in Murchison Zinc Co Pty Ltd v Thiess Contractors Pty Ltd [2000] WASCA 167 applied the following words of Isaacs and Rich JJ in Gould v Mount Oxide Mines Ltd (In Liq) (1916) 22 CLR 490, 517.
Undoubtedly, as a general rule of fair play, and one resting on the fundamental principle that no man ought to be put to loss without having a proper opportunity of meeting the case against him, pleadings should state with sufficient clearness the case of the party whose averments they are. That is their function. Their function is discharged when the case is presented with reasonable clearness. Any want of clearness can be cured by amendment or particulars. But pleadings are only a means to an end, and if the parties in fighting their legal battles choose to restrict them, or to enlarge them, or to disregard them and meet each other on issues fairly fought out, it is impossible for either of them to hark back to the pleadings and treat them as governing the area of contest.
More recently in addressing the adequacy of pleadings, the Chief Justice of the Supreme Court of Western Australia said in Barclay Mowlem Construction Ltd v Dampier Port Authority (2006) 33 WAR 82, 83:
It is, I think, important when approaching an issue of that kind to bring to mind the contemporary purposes of pleadings. The purposes of pleadings are, I think, well known and include the definition of the issues to be determined in the case and enabling assessment of whether they give rise to an arguable cause of action or defence as the case may be, and apprising the other parties to the proceedings of the case that they have to meet.
In the same case at page 84 he observed contemporary case management techniques have the effect of promoting full disclosure prior to trial and minimizing or eliminating the risk of surprise at trial and against that background. He said:
In my view, it follows that provided a pleading fulfils its basic functions of identifying the issues, disclosing an arguable cause of action or defence, as the case may be, and appraising the parties of the case that has to be met, the Court ought properly be reluctant to allow the time and resources of the parties and the limited resources of the court to be spent extensively debating the application of technical pleadings rules that evolved in and derive from a very different case management environment.
In my view the pleadings at pars 9 ‑ 15 cause no prejudice to the defendant. If any of the paragraphs are subject to criticism, such as on the basis they are irrelevant or plead evidence, to strike then out would in my opinion be a triumph of technicality over substance. Having regard to the words of the Chief Justice that the courts should be reluctant to strike out pleading on the grounds of technicality, it seems pointless to do so. The case can easily go to trial with the issues clearly defined with no ambiguity or prejudice to either party.
I would refuse the application to strike out pars 9 ‑ 15 of the statement of claim.
Costs
The defendants seek an order for indemnity costs. In support of their application they refer to several Supreme Court authorities. The difficulty the defendants face is that those decisions are respect of a rule that says an order cannot be made in the absence of conferral, a rule that does not apply in the District Court. It follows to make an application for orders in the absence of conferral when it is known that an order cannot be made stand in a different category. To observe this is not to imply that a failure to confer as required by the DCR is a matter of no consequence.
In Flotilla Nominees Pty Ltd v Western Australian Land Authority (2003) 28 WAR 95, 101 Pullin J observed there was still a place for indemnity costs where there has been improper or unreasonable conduct on the part of a party or his legal advisors. His Honour observed that an indemnity costs order is a mark of disapproval of improper or unreasonable conduct of litigation.
In this case, as in all cases, parties are required to properly confer before bringing these applications. To fail to do so might be regarded as improper or unreasonable.
However, even then an indemnity costs order will not be made if the costs will be covered by an order for party and party costs or a special costs order per Flotilla Nominees (97).
I have earlier in these reasons expressed the view that if there was not proper conferral it did not change the outcome. It seems to me arguable that there is no written contract and that the defendants had the right to terminate. Whilst I have found this is an issue that needs to be determined at trial rather than by way of a summary judgment application, it may be that the defendants' contentions will be found to be correct. I do not regard this application as frivolous.
Assuming there was not proper conferral I do not consider that the plaintiff has been put to a cost that it was likely not to have incurred had there been proper conferral. In my view, if the behaviour of the defendants or their solicitors warrants criticism, in this case it falls short of justifying an indemnity costs order. Nor am I satisfied that the costs incurred by the plaintiff will not be covered by the costs prescribed under the Legal Profession (Supreme Court) (Contentious Business) Determination 2016.
Accordingly I would order that the defendant pay the plaintiff's costs of the application to be taxed.
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