HIS HONOUR: The principal of the plaintiff company is Mr Tony Pagliuca of Caringbah. I infer that Mr Pagliuca is a bricklayer. The principal of the defendant company is Mr Tony Barbalace of the lower North Shore, Sydney. I know that when his company was active it was run from offices at Brookvale, although its registered office was with a firm of accountants at Mosman. The company also had a warehouse at Ryde.
There seems to be no dispute that in 2013 the plaintiff company undertook to provide bricklaying and masonry services to the defendant for premises under construction at 30 34 Waratah Street, Katoomba. The premises in question were a new Woolworths supermarket. There is also little dispute that in the same year the plaintiff undertook to construct for the defendant block walls along the side of the Great Western Highway at Hazelbrook. The two contracts may be referred to as the Katoomba job and the Hazelbrook job.
On 30 April 2014 the plaintiff company acting through Mr Tony Pagliuca commenced proceedings in this Court by way of a statement of claim. Paragraph 3 of that document is this:
"From on or about December 2012 the plaintiff provided materials and services for various projects."
Paragraph 4 claims the sum of $250,104. The statement of claim employs a common money account which is permitted under UCPR 14.12(1) which in par (c) provides for the pleading of "work done or materials provided by the plaintiff for the defendant at the defendant's request". It would appear from what I have subsequently read that plaintiff could also have sued under the common money count identified at par (h) of the subrule which provides for a pleading of money found to be due from the defendant to the plaintiff on accounts stated between them. If a party wishes a full statement of claim, the defendant may file a notice requiring the plaintiff to plead the facts upon which he, she or it relies in full, that is, by pleading the matter in tort or contract in full not using a common money count.
TP Projects Pty Limited v Lamio Masonry Services Pty Limited [2015] NSWDC 163 | Case summary | Zoe
The statement of claim was served upon the defendant at its registered office at suite 2, 20 Clifford Street, Mosman, on 6 May 2014 at 3.45pm. On 3 June 2014 the plaintiff moved the Court for default judgment. On 8 July 2014 the Principal Registrar gave judgment for the plaintiff against the defendant for $260,348.41 which was inclusive of the costs of the proceedings to that date.
On 23 July 2014 Messrs Morabito, lawyers, filed a notice of motion on behalf of the defendant stating that the defendant was the first defendant and nominating as a second defendant the Commonwealth Bank of Australia Ltd. That notice of motion was highly irregular as the Commonwealth Bank of Australia had not been joined and has never been joined in these proceedings. There were seven prayers for relief in the notice of motion. The first was for an order that the default judgment entered on 8 July 2014 be set aside pursuant to UCPR r 36.15 or 36.16. The second order sought was that the garnishee order entered on 9 July 2014 be set aside. The third order sought was this:
"An order that the second defendant pay the first defendant $29,350.15."
The fourth order sought the dismissal of the statement of claim on the basis that it did not disclose a reasonable cause of action and tended to cause prejudice, embarrassment or delay. The same might be said about any case pleading only a common money count. There was no substance in that prayer: it was merely necessary once default judgment had been set aside for the defendant to serve a notice complying with UCPR 14.12(2). The remaining prayers for relief I need not recite.
The defendant then filed an amended notice of motion, seeking firstly leave to rely on the amended notice of motion, secondly seeking an order setting aside the default judgment, a third order, again seeking to strike out the statement of claim on the same basis previously sought, and the remaining three orders sought were the same three orders that I have already stated I need not recite.
The notice of motion in both its unamended and amended forms came before the Court on 15 August 2014 when certain consent orders were made. The first four orders set aside the garnishee orders that had been issued to the Commonwealth Bank of Australia, the St George Bank and the Westpac Banking Group Ltd. The fourth order concerned a second garnishee order against the Commonwealth Bank of Australia. The fifth order made was granting leave to the plaintiff to rely on the amended notice of motion. The sixth order stayed until further order a writ of execution against property, the old Fieri Facias. The seventh order was one requiring the plaintiff to file and serve evidence in response to the defendant's motion by 5 September 2014. The eighth order was that the defendant was to file and serve evidence in reply by 19 September 2014. The ninth order was that the matter be listed for further hearing of the notice of motion on 10 October 2014. The tenth order was the reservation of costs.
Pursuant to those consent orders the matter came before McLoughlin DCJ on 10 October 2014. Again consent orders were made. The first set aside the default judgment entered on 8 July 2014. The second order was that the plaintiff was to serve a draft amended statement of claim by 7 November 2014. The third order was that, if the first defendant consented to the filing of the amended statement of claim, the defendant was to file and serve a defence by 14 November 2014. The matter was then listed for further directions on 18 November 2014. The fifth order again reserved costs.
On 23 October 2014 there was a notice of change of solicitor filed by the defendant. Mr James Patrick Doyle of Doyles Construction Lawyers now appeared for the defendant. Some time much earlier I am told, on 6 August 2014, Messrs WMD Law had commenced acting for the plaintiff.
On 18 November the following consent orders were made.
"1. The defendant to inform the solicitor for the plaintiff by 25 November 2014 of its intention to proceed with an application for security for costs.
2. The defendant to file and serve its notice of motion for security for costs and its evidence on the motion by 2 December 2014, the motion to be returnable on 19 December 2014.
3. Plaintiff to file and serve any evidence on the motion by 16 December 2014.
4. The proceedings stood over for further directions on 19 December 2014 at 9.30am.
5. If consent to the proposed amended statement of claim served on 17 November 2014 is given by 25 November 2014, an application to file and serve the amended statement of claim was to be filed by 2 December 2014 and such was to be returnable on 19 December 2014."
The final order made on that day I need not recite.
On 2 December 2014 the plaintiff filed a notice of motion seeking security for costs returnable on 19 December 2014. That application was heard and determined by my colleague, Robison DCJ, on 19 December 2014. His Honour ordered that the plaintiff give security for costs and ordered the plaintiff to pay the defendant's costs of the motion. In the meantime the plaintiff had filed a notice of motion seeking leave to file and serve an amended statement of claim. That was returnable on 19 December 2014, as previously arranged, and such order was also made by Robison DCJ on that day.
The matter came before the Judicial Registrar on 6 February 2015. The Judicial Registrar ordered the defendant to file and serve its defence to the amended statement of claim by 27 February 2014. Other orders were made to seek to prepare the matter for hearing. Those orders concern the service of lay and expert evidence by each party. A further directions hearing was appointed for 7 May 2015, yesterday. On 4 March 2015, four days out of time, the defendant filed its defence. However, there were other proceedings arising out of the same subject matter.
Before I go to those other proceedings I should briefly indicate what the amended statement of claim and the defence say. The plaintiff says that the Katoomba job had the value of $297,220. The plaintiff said that it had received from the defendant $120,000 on account of that work and claimed the balance of $177,220. The defendant said that the plaintiff had in fact billed work said to amount to $341,220, that the value of the work done was only $166,317.47 and that the defendant had paid $119,600 on account of that work. In other words, the defendant admitted that it had not paid to the plaintiff $46,717.47 in respect of the Katoomba job. In respect of the Hazelbrook job, the plaintiff said the value of its work was $102,473, that the defendant had paid to it $56,965 and its claim was for $45,507. The defendant said that the plaintiff had billed it $151,007, but the value of the work performed was only $71,238.40 and that it had paid to the plaintiff $81,965.80 meaning that it overpaid the plaintiff approximately $10,600. On what is contained in the pleadings the defendant in essence admitted that it had underpaid the plaintiff about $36,000. However, the plaintiff in the meantime had received pursuant to the garnishee order issued to the Commonwealth Bank of Australia, before it was set aside, the sum of $29,350.15. According to the defendant therefore the net value of the plaintiff's claim was somewhere in the vicinity of $7,000 and according to the defendant the net value of its claim was about $220,000. Unfortunately this action can never go to trial.
I turn now to the proceedings in other places. As I have mentioned, WMD Law commenced acting for the plaintiff on 6 August 2014. I assume that advice was given by that firm to the plaintiff. On 18 September 2014 the plaintiff applied for an adjudication of each of the two claims under the Building and Construction Industry Security of Payment Act 1999. The adjudicator appointed was Mr Max Tonkin of Adjudicate Today Pty Ltd. There was an adjudication conducted by Mr Tonkin on 8 October 2014 in each matter. On 23 October 2014 Mr Tonkin issued an adjudication certificate in respect of work done on the Hazelbrook job for $38,761.85. On the same day the Local Court at Sutherland gave judgment in accordance with the adjudication certificate for $39,933.85. The adjudicator issued an adjudication certificate in respect of the Katoomba job on 3 November 2014. That adjudication certificate was for the sum of $91,772.18. On 6 November 2014 the Local Court at Sutherland acting on the adjudication certificate gave judgment for the plaintiff against the defendant for $91,944.18, the discrepancy clearly being the costs of registering the adjudication certificate.
On the same day, Thursday 6 November 2014, WMD Law wrote to the defendant's solicitors making an offer of settlement "without prejudice save to costs". The offer was that if within 14 days the defendant paid the adjudicated amounts in respect of both the Hazelbrook and Katoomba jobs, which then totalled $130,878.03, the plaintiff would discontinue the current proceedings and each party would pay its own costs of these proceedings and would release the other party from all further claims. The offer was to remain open until 5pm on the following day, Friday 7 November 2014. The time within which the offer of settlement was open was extremely brief. However, the same offer was reiterated on Wednesday 12 November 2014 and that offer was to remain open for acceptance until 5pm on Friday 14 November 2014. If that offer had been accepted, the current application would have been unnecessary and indeed all that has happened since that time would have been unnecessary.
Rather than pay the judgments entered in the Local Court, the defendant went to the Supreme Court to challenge the adjudicator's determinations on two bases. Those proceedings were Lamio Masonry Services Pty Ltd v TP Projects Pty Ltd [2015] NSWSC 127. The present defendant, to whom I shall refer to hereafter merely as Lamio, had filed a summons in the Equity division and it was assigned to the Technology and Construction List. The matter was heard by Ball J on 25 November 2014 and his Honour gave judgment on 27 February 2015. The order recorded [34] of the written judgment is that, "the summons should be dismissed with costs". However, that clearly was not the only order made by his Honour on that day.
His Honour delivered an ex tempore judgment on 19 March 2015. Commencing at [3], his Honour said this:
"[3] In the normal course of events, on the giving of my judgment, the defendant would have been entitled to call on the bank guarantee or, given its form, to request that the registrar call on the guarantee. Instead, the plaintiff indicated at the time that it wished to make an application for a stay in the Local Court where the defendant had obtained judgments against the plaintiff based on the adjudication determinations.
[4] The plaintiff also indicated that it was prepared to substitute for the bank guarantee that had been lodged with the Court, that payment of a cash amount into Court representing the amount to which the defendant was entitled. On that basis, I made orders on the day that I gave judgment requiring the plaintiff to pay into Court the sum of $137,891.04 by 4pm on 6 March 2015 in exchange for the bank guarantee and I stood the matter over until today with the intention of giving the plaintiff time to make an application to the Local Court for a stay of the judgments giving effect to the adjudication determinations.
[5] On 6 March 2015, the plaintiff did pay into Court the amount the subject of my order. However, on the same day it went into voluntary administration. No application for a stay was made to the Local Court."
It can be seen that as a term of pursuing its application to the Supreme Court the current defendant, Lamio, was required to give a bank guarantee to the Court to cover the judgments that the plaintiff had obtained in the Local Court. On 27 February 2015 the defendant, Lamio, told the Court that it did not wish for the registrar to call on the bank guarantee but would pay to the registrar the cash amount of the outstanding sum of $137,891.04, including, of course, further interest accrued on the judgment entered in the Local Court.
On 6 March the plaintiff paid the money into Court but also went into voluntary administration. What Ball J was required to deal with on 19 March was the plaintiff's resisting an application that the amount paid into Court be paid out to the current plaintiff, because the current defendant had gone into voluntary administration. His Honour rejected the arguments put forward by Lamio that it was not liable to have the money paid out because it had gone into voluntary administration. For further reasons which his Honour gave he ordered the amount held in the Supreme Court be paid to the current plaintiff. That was done.
It is also to be noted that in the defence filed by the defendant in these proceedings the defendant pleaded as a set-off the amounts determined by the adjudicator, the amounts of the Local Court judgments and the amount eventually paid by the defendant pursuant to the order made by Ball J on 19 March 2015. Also pleaded as a set-off is the amount paid by the Commonwealth Bank of Australia to the plaintiff before the garnishee order directed to that Bank was set aside.
Mr Sule Arnautovic of Jirsch Sutherland of 55 Hunter Street, Sydney, was appointed administrator of the defendant. On 13 April 2015 the administrator made a report. He advised the options available to the creditors were that the company execute a deed of company arrangement, or that the company be wound-up, or that the administration of the company end and control of the company revert to Mr Barbalace. The administrator recommended to the creditors to vote in favour of the deed of company arrangement (DOCA). The majority of creditors accepted the recommendation of the administrator and voted in favour of the DOCA. The one creditor who did not vote for that arrangement was the current plaintiff.
According to the administrator's report, the difficulty in which the defendant had found itself was because it was:
"experiencing ongoing cash flow difficulties which culminated as a result of a Workers Compensation premium adjustment; insolvency of a number of clients/debtors of the Company; and legal proceedings being commenced against the Company".
The inference to be drawn is that the legal proceedings were the proceedings between the current plaintiff and the current defendant concerning the Katoomba and Hazelbrook jobs. The DOCA was executed on 24 April 2015. The DOCA was not executed by the current plaintiff and therefore at common law does not bind the current plaintiff. However, the plaintiff is bound by certain provisions of the Corporations Law which affect the operation of a DOCA. By operation of the DOCA and s 444E of the Corporations Act 2001, the plaintiff is prohibited from pursuing the balance of its claim against the defendant in these proceedings. It is common ground that the proceedings have to be discontinued. That is one of the prayers for relief sought by the plaintiff.
The other prayers for relief are these:
"(2) the defendant to pay the plaintiff's costs of this motion and the proceedings;
(3) all previous costs orders be vacated;
(4) all previous security for costs orders be vacated; and
(5) the funds paid into Court by the plaintiff pursuant to the security for costs order be refunded to the plaintiff."
There is no argument that it is appropriate that the Court order that the funds paid into Court by the plaintiff be returned to the plaintiff.
The substance of the current application concerns costs. For nearly 21 years now I have remarked that nothing excites the zeal, the ardour and the passion of the legal profession than an argument about costs. The plaintiff has submitted that the defendant has acted unreasonably. The plaintiff submits that it was unreasonable for the defendant to refuse to accept the offers made by the plaintiff on 6 and 12 November 2014, following upon the plaintiff's success in obtaining the adjudications that it obtained from Mr Tonkin, adjudications which the defendant unsuccessfully challenged in the Supreme Court and where an order for costs was made against the current defendant by the Supreme Court for the proceedings in that Court.
The simple fact is that these proceedings can never be determined on their merits. I have been referred by the solicitor for the plaintiff to Newcastle Wallsend Coal Co Pty Ltd v Industrial Relations Commission of NSW [2006] NSWCA 129. The facts of that case can be shortly stated. Staunton J, of the IRC, convicted a number of persons of offences arising from the death of four coal miners in an industrial accident which occurred on 14 November 1996. Some 52 charges had been laid, each by a summons issued out of the IRC on 21 August 2002. Each of four persons was found guilty of a number of charges by her Honour on 9 August 2004. In January 2005 those convicted commenced proceedings in the Court of Appeal seeking to have their convictions quashed. They relied upon a constitutional argument that the IRC could not be conferred criminal jurisdiction and on certain other grounds. However, the constitutional argument was determined adversely to the claimants in the Court of Appeal in another set of proceedings, Powercoal Pty Ltd v IRC of NSW [2005] NSWCA 345; (2005) 156 A Crim R 269. Those proceedings were determined by the Court of Appeal on 10 October 2005, that is after the commencement by the claimants of proceedings in the Court of Appeal but before the appeal could be heard, the appeal being scheduled to be heard in March 2006.
There were other claims for prerogative relief but in the meantime Parliament amended the Industrial Relations Act 1996 retrospectively to prevent any appeal from a single judge of the IRC to the Court of Appeal. Any such appeal had to be taken to the Full Bench of the IRC. Accordingly, by operation of the earlier decision of the Court of Appeal and by Parliamentary enactment which was retrospective, the claimants before the Court of Appeal were left without any remedy in that Court. The plaintiffs sought to discontinue the appeal but costs were sought by the prosecutor in the IRC. The majority, Mason P and Basten JA ordered the claimants to pay the costs of the prosecutor thrown away by the discontinuance, that is the prosecutor's costs of the proceedings in the Court of Appeal. Tobias JA dissented and would have ordered each party to pay that party's own costs. Tobias JA considered at some length the case law relating to costs following upon a discontinuance. His Honour considered the relevant law between [21] and [25]. I do not have time at 4.45 on a Friday before going on circuit to recite what his Honour said. Suffice it to say that the normal principle of law is that costs follow the event. A party discontinuing proceedings ought pay the costs of the defendant of the proceedings up until the time of discontinuation. The event is the discontinuation. A discontinuation absolves the defendant from the burden of the litigation and in that way the defendant can be seen to have been successful. However, there is a discretion.
In [25] his Honour quoted from the judgment of Burchett J in One Tel Ltd v Deputy Commissioner of Taxation [2000] FCA 270 in which his Honour said:
"It is accepted that, in a case which terminates before there has been a hearing, the Court should not resolve the issue of costs by engaging in something in the nature of a hypothetical trial...But this does not mean that the Court can never make an order for costs. Often, it will be unable to do so; but in other cases an examination of the reasonableness of the conduct of the parties, respectively, may provide the basis of an order, or 'a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried', as McHugh J put it in Ex Parte Lai Qin at 625."
Later his Honour quoted from a decision of Cooper J in Australian Securities Commission v Berona Investments Pty Ltd (1995) 18 ACSR 772 where his Honour said:
"...it is important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the Court's discretion otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs."
This is not a case in which the plaintiff surrendered to the defendant. This is really a case where the defendant surrendered to the plaintiff or was forced to surrender to the plaintiff by the decision of Ball J in the Supreme Court. The other reason for the cessation of these proceedings is the fact that the defendant went into voluntary administration, the result of which was the execution of the DOCA which makes the current proceedings not maintainable. The defendant says that there has been no hearing on the merits and therefore the Court does not know what would have occurred.
I do know merely from reading the pleadings that the plaintiff would have recovered at least approximately $7,000. I do know that the plaintiff's claim was much larger. In fact the plaintiff claimed a further $220,000. I do not know, because it was never put before me, whether the adjudication determinations by Mr Tonkin covered the whole of or only part of the jobs at both Katoomba and Hazelbrook. Often adjudications under the Building and Construction Industry Security of Payment Act 1999 cover only part of a contractor's claim against another person in a chain in the building industry.
Furthermore, everything that has occurred since 6 November 2014 would have been obviated by the acceptance by the defendant of the plaintiff's offer, at least insofar as the defendant's difficulties arose out of the plaintiff's claims. It may well be that the demand for workers compensation premium could have resulted in the defendant going into voluntary administration and also led of its own momentum to the DOCA, I do not know. However, when I consider all that has happened in these proceedings, I have come to the view that it was appropriate for the plaintiff to make the offer which it did on 6 November 2014 and remade on 12 November 2014, and it was highly appropriate that the defendant accept that offer merely to obviate further legal proceedings, obviate the running up of costs, and perhaps obviate the eventual passing of the defendant into voluntary administration. The defendant's behaviour since the plaintiff's offer has been in my view unreasonable and inconsistent with the duty that falls upon all litigants to participate in the process of the Court and to facilitate the just, quick and cheap resolution of the real issue in the proceedings.
That having been said however, normal cost principles indicate that the defendant is entitled to its costs up until the time when the proceedings ought to have been discontinued and I cannot see any reason to vacate the costs order made by my colleague, Robison DCJ, concerning security for costs. That is an application which the defendant was entitled to make and was made regularly and before the defendant went into voluntary administration. I also note that security for costs was being considered on 18 November 2014 when certain orders were made by the Judicial Registrar and that the notice of motion seeking security for costs was filed on 2 December 2014 and yet the first meeting between the director of the defendant and his accountant and the proposed administrator occurred on or around 8 December 2014. In other words the application for security for costs was being considered prior to that time. The second ground submitted by the plaintiff showing that the defendant acted unreasonably has not been made out. That second ground can be found in MFI 1, which we left with the papers.
The real question that engages me currently is whether it is appropriate to order the plaintiff to pay the defendant's costs up until 6 November 2014 when the plaintiff first made its offer. The plaintiff acting through its director commenced proceedings in this Court on a common money count, perhaps expecting a prompt surrender by the defendant. The defendant did not surrender and then the plaintiff decided to make an adjudication application under the legislation which I have cited. The plaintiff could have made the adjudication application before commencing proceedings in this Court and it would appear that there was no problem with the expiration of any limitation period. This was an action for damages for breach of contract with a six year limitation period, not the three year limitation period that one finds in actions for personal injury damages.
I have come to the view that it is appropriate to apply the normal rule up until the relevant time. The relevant time appears to me to be Monday, 17 November 2014 by which time the defendant had opportunities to consider the plaintiff's offer and to consider its position and could have by 5pm on Friday, 14 November accepted the defendant's offer.
For those reasons, I make the following orders:
(1) I grant leave to the plaintiff to discontinue proceedings pursuant to the Civil Procedure Act 2005 s 14. I dispense with the requirements of UCPR Pt 12, requiring the filing of a notice of discontinuance;
(2) I order the plaintiff to pay the defendant's costs up to 5pm on Friday, 14 November 2014;
(3) I order the defendant to pay the plaintiff's costs on the ordinary basis from Monday, 17 November 2014 including the costs of this motion;
(4) I refuse to set aside the order for costs made by Robison DCJ on 19 December 2014;
(5) I order that the registrar pay to the plaintiff the money paid into the Court by the plaintiff as security for the defendant's costs.
[2]
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Decision last updated: 14 August 2015