Plaintiffs v Defendants

BUILDING CONTRACTS - Dispute between building owners and architect - Owners' proceeding in Magistrates' Court for damages and architect's counterclaim for fees - Owners' application to stay Magistrates' Court proceeding because VCAT had jurisdiction - Stay application dismissed - Judicial review of Magistrate's decision - Domestic Building Contracts Act 1995 s 57.

PRACTICE AND PROCEDURE - Judicial review proceeding - Summons to dismiss on grounds that proceeding lacked utility or was an abuse of process.

1 I have to determine the first defendant's application to dismiss the plaintiffs' judicial review proceeding which seeks to quash a Magistrate's ruling to not stay a proceeding between them as building owners and the first defendant as their architect. The plaintiffs contended that the Victorian Civil and Administrative Tribunal ('VCAT') had jurisdiction to determine the matters that were the subject of the Magistrates' Court proceeding. The issue arises in the following circumstances.

2 Dragan and Ivana Radojevic, the plaintiffs, ('the Radojevics') were building owners seeking the building and construction of four apartments in Brighton and JDA Design Group, the first defendant, ('JDA Design') provided the architectural services for the project. In November 2016, the Radojevics sued JDA Design in the Magistrates' Court in tort and contract alleging defective work and unreasonable delay causing them loss. JDA Design denied these claims and counterclaimed for its unpaid fees.

3 On 4 July 2017, shortly before the case was to be heard, the Radojevics asked the Magistrates' Court to stay the 'matter' under s 57 of the Domestic Building Contracts Act 1995 (the DBC Act), because it could be heard in the VCAT and the Court had not heard any oral evidence concerning 'the dispute'. In the alternative, they sought an adjournment of the hearing until October 2017 as Mr Radojevic was overseas. JDA Design opposed the stay application and the Magistrate dismissed it because he considered that VCAT lacked jurisdiction to determine the proceeding. He also gave the Radojevics leave to file a further amended complaint statement of claim and an amended defence to counterclaim and ordered that the parties serve experts' statements. The case was fixed for hearing on 6 September 2017.

4 The Radojevics delivered an amended statement of claim seeking damages of $144,376.28 which exceeded the Magistrates' Court jurisdiction of $100,000. On 24 August 2017, after objection by JDA Design because the claim now exceeded $100,000, the Radojevics sought the transfer of the proceeding to the County Court. I do not regard that application as a decision by the Radojevics to abandon the stay application, but as an alternative step that they considered necessary to take in case the proceeding remained in the courts.

5 On 2 August 2017, the Radojevics commenced proceedings in this Court seeking to judicially review and quash the Magistrate's decision refusing a stay.

6 JDA Design has applied to have the judicial review proceeding stayed or dismissed as 'inutile', or alternatively as being an abuse of process. That is the application that I am now to decide.

7 The grounds relied on in the judicial review proceeding allege that the Magistrate erred in deciding that the DBC Act did not apply to the dispute between the parties and in failing to grant a stay.

8 Section 6 defines the scope of the DBC Act and states:

Building work to which this Act does not apply

(1) This Act does not apply to the following work -

...

(e) design work carried out by an architect or a building practitioner registered under the Building Act 1993 as an engineer or draftsperson

9 Part 5 of the DBC Act is headed 'VCAT Jurisdiction' and the following provisions fall under this heading. Section 53 provides in part:

Settlement of Building Disputes

(1) VCAT may make any order it considers fair to resolve a domestic building dispute

(2) Without limiting this power, VCAT may do one or more of the following -

...

What is a domestic building dispute?

(1) A domestic building dispute is a dispute or claim arising -

(a) between a building owner and -

...

(iv) an architect -

in relation to a domestic building contract or the carrying out of domestic building work; or

...

(c) between a building owner or a builder and -

(i) an architect; or

(ii) a building practitioner registered under the Building Act 1993 as an engineer or draftsperson.

in relation to any design work carried out by the architect or building practitioner in respect of domestic building work.

VCAT to be chiefly responsible for resolving domestic building disputes

(1) This section applies if a person starts any action arising wholly or predominantly from a domestic building dispute in the Supreme Court, the County Court or the Magistrates' Court.

(2) The Court must stay any such action on the application of a party to the action if -

(a) the action could be heard by VCAT under this Subdivision; and

(b) the Court has not heard any oral evidence concerning the dispute itself.

(3) This section does not apply to any matter dismissed by VCAT under section 77 of the Victorian Civil and Administrative Tribunal Act 1998.

(4) If an action is stayed under this section, any party to the action may apply to VCAT for an order with respect to the dispute on which the action was based.

(5) If a person applies to VCAT under subsection (4) VCAT must notify the Court and on such notification the Court must dismiss the action.

(6) Subsection (5) does not apply if VCAT refers the matter to the Court under section 77(3) of the Victorian Civil and Administrative Tribunal Act 1998.

12 Section 57A provides, that subject to specified exceptions, a party to a domestic building work dispute may not commence an action in a court arising wholly or predominantly from the dispute without a certificate of conciliation or leave of the court. In the hearing of this application, the parties did not address the significance of s 57A.

The Magistrate's reasons concerning VCAT's jurisdiction

13 This application I now determine is not whether the Magistrate made an error about VCAT's jurisdiction, but whether JDA Design has established that the Radojevics' judicial review application should be dismissed on the grounds of inutility or abuse of process. But to give some context to the application, I will briefly state my understanding of the Magistrate's reasons.

14 The Magistrate gave oral reasons for dismissing the Radojevics' stay application but I do not have the transcript of them. However, the affidavits and submissions suggest that his Honour decided that JDA Design's work was not domestic building work because by s 6(1)(e), the DBC Act did not apply to design work carried out by an architect. The Radojevics' construction of the DBC Act was that s 6(1)(e) had to be reconciled with s 54(1)(c), which defined a 'domestic building dispute' as a dispute or claim arising between a building owner or a builder and an architect in relation to any design work carried out by the architect in respect of domestic building work. The appropriate reconciliation of those provisions, so they submitted, results in VCAT having jurisdiction to determine this dispute.

The steps taken in the Magistrates' Court proceeding

15 Next, I will describe the steps taken in the Magistrates' Court. By 4 July 2017, much work had occurred to ready the proceeding for trial. The parties are likely to have spent many thousands of dollars in legal costs. Further thousands of dollars are likely to have been incurred by the commencement of this Supreme Court proceeding. The Radojevics delivered a complaint and statement of claim for damages of $100,000 and then an amended complaint and statement of claim for damages of $90,450. JDA Design delivered a counterclaim and the Radojevics delivered a defence to the counterclaim. The parties had filed affidavits of documents and particulars were given or had been sought. JDA Design had served a Notice to Admit.

16 The proceeding was fixed for hearing on 31 May 2017. In June 2017, the Radojevics' current solicitors replaced the solicitors who had commenced their Magistrates' Court proceeding. The proceeding was adjourned to 26 July 2017 and then fixed for 6 September 2017.

17 JDA Design obtained enforcement orders requiring the Radojevics to carry out procedural steps including providing the proper basis certificates required by the Civil Procedure Act 2010. For example, on 14 June 2017, the Radojevics were ordered to provide further particulars and a further affidavit of documents and to comply with a Notice to Produce and pay JDA Design costs of $1,624.80. They were also ordered to pay costs on 18 April 2017 and to pay JDA Design's costs of the unsuccessful stay application made on 4 July.

18 As stated, after the Magistrate's orders of 4 July, the Radojevics on 14 July 2017 filed and served a further amended complaint and statement of claim seeking damages of $144,376.28, which amount exceeded the jurisdiction of the Magistrates' Court. They then commenced this judicial review proceeding. JDA Design delivered a defence claiming that the amount claimed exceeded the jurisdictional limits of the Magistrates' Court, but that defence was rejected for being filed out of time. But the Radojevics then applied under the Courts (Case Transfer) Act 1991 for the transfer of the proceeding to the County Court.

19 The Radojevics could have, but did not, discontinue the Magistrates' Court proceeding. They have not commenced proceedings in VCAT and have not stated when, or if, they may do so.

20 I will next consider the two grounds of JDA Design's summons on which it seeks the stay or dismissal of this judicial review proceeding: the inutility of the proceeding and that it is an abuse of process.

21 JDA Design submitted that the Radojevics' judicial review proceeding lacked utility. I understood that to mean that the judicial review proceeding was useless and would not achieve anything. Remedies in judicial review proceedings can be refused in the exercise of discretion if they would serve no useful purpose. The arguments in support of the inutility ground were that the Radojevics were now claiming amounts in excess of the Magistrates' Court jurisdiction and seeking to transfer the proceeding to the County Court and that therefore the Magistrate's order that was the subject of this judicial review proceeding could have no effect. Therefore, the quashing of that ruling served no point. In any event, the Radojevics could discontinue their Magistrates' Court proceeding and reissue their claim in VCAT.

22 I do not accept JDA Design's argument that the Radojevics' judicial review proceeding lacks utility. The Magistrate's ruling may have a significant effect legal effect on them. It may prevent them making a s 57(2) stay application to the County Court if the proceeding is transferred to that Court. This might be because the issues determining a stay application are the subject of an issue estoppel, are res judicata or because the stay power contained in s 57 is spent. No detailed submissions were made about these issues, but it is not clear to me that the Radojevics might not be so affected. They seek to set aside the Magistrate's order refusing the stay and I see no basis on the ground of inutility to prevent them continuing this judicial review proceeding.

23 JDA Design's second ground contended that this judicial review proceeding is an abuse of process. It is well accepted that the maintenance of proceedings in different courts, and in appropriate cases tribunals, between the same parties in respect of the same subject matter is considered prima facie to be vexatious and an abuse of process. As the High Court stated in Henry v Henry:

It is prima facie vexatious and oppressive, in the strict sense of those terms, to commence a second or subsequent action in the courts of this country, if an action is already pending with respect to the matter in issue.[1]

24 Beach J in Burbank Australia Pty Ltd v Luzinat[2] said of this principle:

Where a party to a proceeding institutes a second proceeding in a different form in relation to the same subject matter as the first proceeding, prima facie the second proceeding is vexatious and will be stayed.

25 This Court has both inherent power and power under r 23.01(b) of the Supreme Court (General Civil Procedure) Rules 2015 to stay proceedings that are an abuse of process. Proceedings are an abuse of process when they are unjustifiably oppressive to a party or would bring the administration of justice into disrepute.[3]

26 By way of explanation of their stay application, the Radojevics' solicitor stated in an affidavit:

It is my view, and the view of Counsel in this matter, that the proper jurisdiction for this matter is and remains the Victorian Civil and Administrative Tribunal. The Plaintiffs have, since June 2017, sought that this matter be dealt with by the Victorian Civil and Administrative Tribunal. The Plaintiffs are entitled to have their matter heard in the correct jurisdiction and are entitled to have the decision of Magistrate Braun reviewed in accordance with the processes set out in the Magistrates' Court Act.

That, in accordance with the principles of res judicata, the Plaintiffs will not be entitled to make a subsequent application to the County Court for this matter to be transferred to the Victorian Civil and Administrative Tribunal, and as such, they require the Supreme Court to determine this judicial review.

27 The Radojevics' explanation for this judicial review proceeding was their concern about the effect of the doctrine of res judicata and their concern that a court might lack power to consider a further stay application. However, they accepted that the Magistrates' Court or the County Court had jurisdiction in respect of their claims, until, following an application by a party, a court found that a stay should be granted under s 57 (2) of the DCB Act. They contended that any prejudice caused by the stay application to JDA Design, which is a corporation, could be remedied by costs orders.

28 JDA Design submitted that this proceeding was an abuse of process because the Radojevics had commenced a proceeding in the Magistrates' Court and pursued it almost to the hearing and then sought to stay it. They had issued the proceeding without any intention of allowing it to be heard, but merely as a shield against an anticipated claim by the architect for its fees. It was a defensive action and it had caused JDA Design to incur significant costs. The Radojevics' action in delivering the further amended complaint and statement of claim had deprived the Magistrates' Court of jurisdiction. They had always been able to sue in VCAT and they had not explained why they had not discontinued their Magistrates' Court proceeding or indicated whether or when they would commence proceedings in VCAT. In fact, if the stay was granted, the Radojevics would not be obliged to commence an action in VCAT and JDA Design would have no means to seek its costs incurred in connection with the Magistrates' Court proceeding.

29 JDA Design's counterclaim still remains within the monetary jurisdiction of the Magistrates' Court.

30 JDA Design emphasised that the Radojevics' conduct breached the overarching purpose of the Civil Procedure Act and the civil procedure rules which is to:

facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.[4]

31 The Civil Procedure Act also contains the overarching obligation; to only take steps to resolve or determine the dispute: s19; to ensure costs are reasonable and proportionate: s 24 and to minimise delay: s 25. Section 28 states that the court may take contraventions of overarching obligations into account in exercising any power in relation to a civil proceeding.

32 The terms of s 57 of the DBC Act are clear and decisive of the abuse of process ground. Section 57(2) permits applications to stay court proceedings if the action 'could be heard by VCAT under this Subdivision' and 'the Court has not heard any oral evidence concerning the dispute itself'. That is the position of the Magistrates' Court proceeding. The terms of s 57 make it difficult to decide that a stay application made before the Court has heard oral evidence concerning the dispute or, the judicial review of a failure to grant a stay, are an abuse of process

33 Section 57(2) refers to 'the application of a party'. I see no basis to confine that phrase so that it means 'the application of a party other than the party who commenced the proceeding'. In Chartin Group Pty Ltd v LU Simon Builders Pty Ltd, Osborn J assumed that the party commencing the proceeding could seek a stay, although he did state:

However, unusual the plaintiff's application may be it can be seen that the critical question is whether the action is one 'one arising wholly or predominantly from a domestic building dispute'.[5]

34 Chernov JA stated in Swintons Pty Ltd v Age Old Builders Pty Ltd:

Moreover, s 57 relevantly provides that if a party brings an action in a court in respect of a domestic building dispute the court must stay the action if the other party seeks such an order. But it is apparent that s 57 does not treat the tribunal as the only forum where domestic building disputes may be resolved. Thus, if the parties agree, such a domestic building dispute may be determined by a court. Similarly, there is no prohibition in s 57 against parties seeking an expert determination in respect of such disputes, or having them resolved by mediation or like dispute resolution process.[6]

35 I do not read his Honour's statement as meaning that only the defendant to a proceeding can apply for a stay and the facts of that case did not require his Honour to decide that point. In any event, the Radojevics were a defendant to, or respondent to, JDA Design's counterclaim in the Magistrates' Court proceeding.

36 Once s 57(2) of the DBC Act is invoked and its preconditions established the court must stay the proceeding. It is not given a discretion to refuse to do so because of the extent of the preparation or procedural steps undertaken before the stay application was made. Section 57(4) and (5) have the effect that if an action is stayed under s 57(2), any party may apply to VCAT for an order with respect to the dispute on which the action is based. VCAT must then notify the Court and on such notification the Court must dismiss the action.

37 If a stay order is made, the costs of the Magistrates' Court proceeding, including JDA Design's costs, would remain within the discretion of the Court under s 131 of the Magistrates' Court Act 1989, as costs of and incidental to the proceeding commenced by the Radojevics.

38 I therefore cannot find that the judicial review proceeding is an abuse of process. Nor do I consider that the way in which the Radojevics have conducted the proceeding can support a finding that the proceeding is an abuse of process. The late application to stay their own proceeding might ordinarily support such a conclusion, but s 57(2) of the DBC Act permitted them to make a stay application at the time that they did. They were also entitled by law to commence this judicial review application to seek to quash the Magistrate's decision and to then seek a stay.

39 I would readily accept that in the absence of the clear terms of s 57(2) of the DBC Act, a stay application sought by a party of proceedings that they had commenced and taken to the point of trial would often be regarded as an abuse of process. This usual position is supported by the overarching purpose and obligations contained in the Civil Procedure Act which bring a new regime to the conduct of civil litigation. As Kyrou J stated in Kuek v Devflan Pty Ltd:

The Act must be taken seriously by litigants and their lawyers. In an appropriate case, the Court is entitled to - and will - say to a party seeking to enforce its rights in a manner that is antithetical to the overarching purpose and to that party's overarching obligations that 'enough is enough', and will act to curtail those rights in the interests of the administration of justice.[7]

40 This litigation, like many cases where jurisdictional issues are raised at a late point, will be delayed in completion and some costs spent may be wasted. I have decided that the Radojevics were entitled to make an application under s 57(2) of the DBC Act at the late point that they did and to seek to judicially review the Magistrate's refusal to grant the stay. The question whether the Magistrate made any judicially reviewable error now needs to be determined by a separate hearing. JDA Design must, until at least the completion of this judicial review proceeding, wait for the determination of its counterclaim for fees.

41 It is unclear why Parliament has allowed a stay application to be made up until oral evidence concerning the dispute is called. That provision is hardly consistent with the overarching purpose of the Civil Procedure Act. Nor is it consistent with the second object of the DBC Act contained in s 4(b) which is:

to enable disputes involving domestic building work to be resolved as quickly, as efficiently and as cheaply as is possible having regard to the needs of fairness.

42 The right of a party given by s 57(2) of the DCB Act, even the party who has commenced the proceeding, to apply for a stay at any time before the calling of oral evidence concerning the dispute is not conducive to the quick, efficient and cheap resolution of the dispute. Section 57 requires the attention of Parliament to determine if it should be amended to make it consistent with the objects of the DCB Act and the purposes of the Civil Procedure Act.

44 The Radojevics' judicial review proceeding in this Court will be fixed for hearing.

[1] [1996] HCA 51; (1996) 185 CLR 571 at 591 (Dawson, Gaudron, McHugh and Gummow JJ) (citations omitted).

[2] [2000] VSC 128 [28] (citations omitted).

[3] Rogers v The Queen [1994] HCA 42; (1994) 181 CLR 251, 286 and Batistatos v Road and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256, 265 [9].

[4] Civil Procedure Act s 7(1).

[5] [2004] VSC 531[5].

[6] [2005] VSCA 217; (2005) 13 VR 381, 387 [17].

[7] [2012] VSC 571 [79].