Designbuild Homes Qld Pty Ltd v Gala Homes Pty Ltd [2021] QDC 240

DISTRICT COURT OF QUEENSLAND CITATION: Designbuild Homes Qld Pty Ltd v Gala Homes Pty Ltd [2021] QDC 240 PARTIES: DESIGNBUILD HOMES QLD PTY LTD ACN 161 323 708 (Plaintiff/applicant/respondent) v GALA HOMES PTY LTD ACN 126 422 053 (Defendant/respondent/applicant) FILE NO: 4534/15 DIVISION: Civil PROCEEDING: Interlocutory applications ORIGINATING COURT: Brisbane District Court DELIVERED ON: 28 September 2021 DELIVERED AT: Brisbane HEARING DATE: 23 and 27 August 2021. JUDGE: Byrne QC DCJ ORDERS: 1. The plaintiff’s application for contribution to the setting down and hearing fees is granted. 2. Pursuant to regulation 4(2)(a) of the Uniform Civil Procedure (Fees) Regulation 2019, the plaintiff and defendant are each to pay one-half of both the setting down fee and the hearing fees for the trial of this proceeding. 3. The defendant’s application for security for costs is refused. 4. The defendant is to pay the plaintiff’s costs of both applications on the standard basis, to be agreed or assessed. 5. Liberty to apply in respect of the costs order within seven days. CATCHWORDS: PROCEDURE – COSTS – SETTING DOWN AND HEARING FEES – where a Notice of Request for Trial Date was signed by both parties – where the defendant contends the plaintiff is liable to pay the setting down and hearing fees for trial – where the plaintiff applies pursuant to regulation 4(2)(a) of the UCPFR for the Court to “order otherwise”– where the -- 1 of 9 -- 2 plaintiff contends the defendant’s case has added materially to the otherwise expected length of the trial – whether the defence is conducted in a manner which is consistent with and proportionate to an appropriate defence to the allegations made, including any counterclaim. PROCEDURE – COSTS – SECURITY FOR COSTS – where the defendant applies for an order that the plaintiff provide security for its trial costs – where between 26 February 2018 and 20 June 2018 the parties corresponded regarding a foreshadowed application by the defendant for security for costs – where during the original correspondence the plaintiff denied the application could succeed and such denial went unanswered by the defendant until the present application was brought – where the defendant’s application for security for costs is brought over three years after it was originally foreshadowed and almost three months after it signed a Request for Trial Date – where the plaintiff accepts that the threshold question under rule 761 UCPR is established but argues the application should be refused because of delay and the late stage at which the application is brought. LEGISLATION: Uniform Civil Procedure Rules 1999 (Qld) Uniform Civil Procedure (Fees) Regulation 2019 CASES: Covecorp Constructions P/L v Indigo Projects P/L [2007] QSC 262 Lanai Unit Holdings Pty Ltd v Mallesons Stephen Jaques [2016] QSC 2 Mallonland Pty Ltd & Anor v Advanta Seeds Pty Ltd (No 2) [2020] QSC 21 PPK Willoughby Pty Ltd v Baird [2019] NSWCA 48 COUNSEL: Mr. J. Sweeney for the plaintiff/applicant/respondent. Ms S. Armitage for the defendant/respondent/applicant. SOLICITORS: Clyde and Co for the plaintiff/applicant/respondent. McInnes Wilson for the defendant/respondent/applicant. Introduction [1] On 20 November 2015, the plaintiff filed a claim and statement of claim for money said to be owed by the defendant. It was met by a defence and counterclaim. [2] In the long course of the litigation that has followed, there has been filed an amended claim and statement of claim on 29 April 2016, a number of amended defences and counterclaims culminating in a fourth amended defence and counterclaim on 20 October 2020, an amended reply and answer filed 6 April 2021 and numerous expert reports from each party. There have been some contested interlocutory applications. -- 2 of 9 -- 3 One such application resulted in an order, in 2016, that $121,671.80 be held in trust by the defendant. [3] In addition, there have been broadly related proceedings in the Supreme Court concerning the setting aside of a statutory demand. Those proceedings resulted in an order in 2015 that the plaintiff pay the defendant’s costs, which were later assessed in the amount of $40,695.84. Those costs have not been paid. In addition, a separate order for costs was made against the plaintiff in favour of the defendant in 2016 fixed in the sum of $4,000. That too has not been satisfied, and also concerned another statutory demand. [4] It can thus be seen that the dispute between the parties, while no doubt complicated, has not been progressing quickly. Nonetheless, the litigation reached the stage that a notice for Request of Trial Date was signed by the plaintiff on 18 May 2021 and the defendant on 3 June 2021.1 [5] On 3 June 2021, the defendant’s solicitors attempted to file the notice under r. 467 of the UCPR but were informed that payment of the filing fee and hearing fee was required. The defendant contended that the plaintiff was required to pay these fees.2 There then followed a series of emails to and including 9 August 2021, when the plaintiff sought a contribution to those fees from the defendant, who denied responsibility for any such contribution.3 [6] The plaintiff now applies, in effect, for an order affecting a contribution by the defendant to those fees. I will deal with that as the first application. The second application is one brought by the defendant seeking security for its costs of the hearing. The plaintiff’s application concerning the setting down and hearing fees [7] Reg. 4 of the Uniform Civil Procedure (Fees) Regulation 2019 (“UCPFR”) relevantly provides: “4 Setting down fee and hearing fee (1) A setting down fee and hearing fee are payable for a hearing or trial of a proceeding under this section, unless— (a) the hearing or trial is set down for 1 day or less; or (b) the hearing relates to an interlocutory application. (2) Unless a court on application by a party to the proceeding orders otherwise, the fees are payable by— 1 Affidavit of Sean Michael Roberts dated 24 August 2021, exhibit SMR-23, pp 59-61. 2 Affidavit of Matthew Neil Pokarier dated 16 August 2021, exhibit MNP-1. 3 Affidavit of Matthew Neil Pokarier dated 16 August 2021, exhibits MNP-2 to MNP-5. -- 3 of 9 -- 4 (a) for a claim for which a request for trial date is filed under the Uniform Civil Procedure Rules 1999, rule 467—the plaintiff; or (b) … (c) … (d) … (3) However, another person may pay the fees without affecting the power of the court to make an order for costs in relation to the fees. (4) The fees must be paid— (a) for a proceeding mentioned in subsection (2)(a) or (d)— when the request for trial date or certificate of readiness is filed; or (b) … (5) …” [8] The setting down fee is $2,981 and the hearing fees for the expected 10 day hearing are $19,653; a total of $22,634. [9] The plaintiff asks this court to order otherwise, pursuant to reg.4(2)(a) of the UCPFR, by ordering the defendant pay half of each fee. [10] Broadly speaking, the plaintiff is claiming in the substantive action about $308,000 in fees it claims it is owned by the defendant, relying on an agreement between the defendant and a third party which the plaintiff asserts was validly assigned to it. Its claim is particularised by nine invoices across six separate contracts. That claim includes the sum of $121,671 which was ordered to be held by the defendant on trust. [11] The defendant, in effect, denies that the agreement was validly assigned to the plaintiff and hence denies the plaintiff’s ability to claim against it. Further, and in reliance on a separate agreement, it alleges by way of set-off and counterclaim that the plaintiff breached that separate agreement causing loss of about $313,000 (“the first set-off and counterclaim”) and further again sets-off and counterclaims that the defendant paid the plaintiff in excess of $872,000 as a result of illegal conduct by the defendant (“the second set-off and counterclaim”). That latter counterclaim is centred on an allegation that the plaintiff was not licensed to perform the building work which it did. The defendant abandons that latter amount insofar as it exceeds the jurisdiction of this Court. [12] The plaintiff signed the notice of Request for Trial Date indicating a trial estimate of 10 days, however in correspondence put in evidence before me it is clear that it contends that the defendant’s case has added about eight days to the overall trial -- 4 of 9 -- 5 length.4 Although the plaintiff initially contended in correspondence that the defendant should pay half of the setting down fee and 80% of the hearing fees, it softened its position such that it contended the defendant should pay 50% of each of the fees. The application is brought on the basis that a half share of the setting down fees and a 30/70 share of the hearing fees is appropriate, or alternatively that all fees be shared on a 50/50 basis. [13] The application was argued essentially on the basis of whether the defendant’s counterclaim in fact added materially to the otherwise expected length of the hearing. [14] There is no relevant authority on the topic of the exercise of this discretion5 and the Regulations provide no guidance as to how the discretion should be exercised. However, it is noted that insofar as the defendant has commenced a counterclaim, it too is a plaintiff, by definition, and may arguably be caught by the regulation.6 [15] It seems to me that a plaintiff, in the ordinary sense of that term and in the absence of particular relevant circumstances, cannot complain of an extension to the length of hearing where the defence is conducted in a manner which is consistent with and proportionate to an appropriate defence to the allegations made, including any counterclaim. Further, the mere fact that a counterclaim has been pleaded does not, in my view, automatically transfer responsibility to the plaintiff by counterclaim for payment of the fees the subject of this application for that portion of the hearing which will be occupied by resolution of the counterclaim. That the counterclaim may extend the initially expected length of trial is merely an incident of the plaintiff pursuing its initial claim, although a point will be reached where the nature of the counterclaim and the length extension of the hearing will materially change the nature of the hearing. In those circumstances it may be appropriate to make an order of the nature sought here. [16] In the present case I accept that, given the issues raised, between three and five days of hearing time would likely have been required to hear the plaintiff’s case and the matters in direct defence to it, including the first set-off and counterclaim. That first set-off and counterclaim alleges defects in work performed in 20 instances across eight building contracts, which includes some of the six contracts the subject of the plaintiff’s claim, and so it seems to me that it is directly related to the plaintiff’s allegations, and that the additional instances alleged by the defendant does not materially affect the nature of that hearing for present purposes. [17] The second set-off and counterclaim alleges that the plaintiff was not licensed to perform the work it did, and seeks to claw back 100% of monies paid under 57 contracts, including the six contracts the subject of the plaintiff’s claim. This counterclaim, although also pleaded as a set off, materially changes the nature of the 4 Affidavit of Matthew Neil Pokarier dated 16 August 2021, exhibit MNP-2. 5 The only suggested authority is a presently ongoing trial which was factually too different to be of assistance. 6 Schedule 3 UCPR, definition of plaintiff. -- 5 of 9 -- 6 hearing. Although it operates as a defence to the six contracts the subject of the plaintiffs’ claim, it is far more wide ranging and involves a far greater quantum, and it adds appreciably to the estimated trial length. [18] In my view this is an appropriate case in which the discretion should be exercised to “order otherwise”. Given, as a matter of impression, the second counterclaim will add about 5 days to the overall hearing, which is then estimated to occupy 10 days. An order that each party pay half of the setting down and hearing fees is appropriate. The security for costs application [19] By its amended application, the defendant applies for an order that the plaintiff provide security for its costs in the amount of $130,000 in a form suitable or acceptable to the Registrar.7 The stated quantum is calculated on the defendant’s expected costs through to the end of the trial.8 The consequential effect of such an order is that the plaintiff’s proceedings are stayed until the security is provided.9 [20] The defendant is not entitled to an order for security for its costs in its conduct of the counterclaims. Implicit in its future cost calculations is the submission that the length of trial would not substantially alter if both counterclaims were tried separately.10 I have already rejected that submission, and so the defendant’s calculation of quantum is called into question. I need not consider that further given my conclusions as to the exercise of my discretion concerning the granting of such an order. [21] The plaintiff concedes the so-called “threshold issue” at r 671(a) of the UCPR, without accepting an actual inability to meet the defendant’s costs if ordered. It opposes the application on discretionary bases concerned with the delay in bringing the application and the late stage of proceedings at which it has been brought. [22] Some further context is required to understand my decision. [23] Following the granting of the earlier mentioned costs orders in 2015 and 2016, the defendant’s solicitor sent a letter demanding payment in satisfaction of them.11 On 13 February 2017 the plaintiff’s solicitor received a letter seeking security for costs in the proceeding.12 The response to that letter, on 16 March 2017, enclosed a copy of the plaintiff’s balance sheet,13 although that document is not in the material before me it is not challenged that it was received. 7 Rule 670 of the UCPR. 8 Affidavit of Sean Michael Roberts dated 24 August 2021 at [34]-[35]; hearing transcript 1-5, ll 25- 28; 1-17, l 15 to 1-18, l 5. 9 Rule 674 of the UCPR. 10 Hearing transcript 1-7, ll 30-36. 11 Affidavit of Matthew Neal Pokarier dated 26 August 2021, exhibit MNP-01. 12 Affidavit of Matthew Neal Pokarier dated 26 August 2021, exhibit MNP-03 (incorrectly dated 13 February 2016). 13 Affidavit of Matthew Neal Pokarier dated 26 August 2021, exhibit MNP-04. -- 6 of 9 -- 7 [24] On 18 October 2017 one of the plaintiff’s directors was examined at an enforcement hearing.14 Then, between 26 February 2018 and 20 June 2018 there was correspondence between the parties concerning a foreshadowed application for security for costs.15 The last piece of correspondence was from the plaintiff’s solicitor outlining reasons why the plaintiff contended that a security for costs application could not succeed. [25] The evidence before me establishes that the defendant then made a decision “to pause its anticipated application for security for costs and instead focus its resources at that time on attempting to negotiate a resolution of the counterclaim and otherwise progress this proceeding to a final hearing”.16 [26] There was no further mention of an application for security of costs until an email sent at 3.50 pm on 20 August 2021,17 the Friday before the plaintiff’s application was listed for hearing before me on Monday, 23 August 2021. On that Monday the defendant’s application was filed and read by leave. The hearing was adjourned to 27 August 2021 on the defendant’s application, at which time its application was amended to seek the orders earlier referred to. [27] Thus it can be seen that the defendant’s application was brought over three years after the last correspondence about the possibility of such an order being sought, and almost three months after the defendant’s solicitor signed a notice of Request for Trial Date. It appears that at least part of the motivation for the defendant’s application was the plaintiff’s application for a contribution to the payment of the setting down and hearing fees.18 [28] Delay in the making of application of this nature is a discretionary factor, the weight of which will depend upon the particular circumstances.19 [29] The defendant acknowledges that delay is a relevant discretionary consideration but argues that it is of less significance when considering future costs as opposed to past costs.20 It also argues that there is no actual evidence of the plaintiff having been prejudiced by the delay in making the application. [30] Be that as it may, delay remains a relevant discretionary factor, including where the application concerns future costs.21 14 Affidavit of Sean Michael Roberts dated 24 August 2021 at [7(b)]. 15 Affidavit of Sean Michael Roberts dated 23 August 2021, exhibits SMR-9, SMR-11, SMR-12 and affidavit of Sean Michael Roberts dated 24 August 2021, exhibit SMR-16. 16 Affidavit of Sean Michael Roberts dated 24 August 2021 at [7]. 17 Affidavit of Sean Michael Roberts dated 23 August 2021, exhibit SMR-14. 18 Affidavit of Sean Michael Roberts dated 23 August 2021, exhibit SMR-14; hearing transcript 1-13, ll 29-32. 19 Mallonland Pty Ltd & Anor v Advanta Seeds Pty Ltd (No 2) [2020] QSC 21; Covecorp Constructions P/L v Indigo Projects P/L [2007] QSC 262, [27]-[28]. (“Covecorp”) 20 PPK Willoughby Pty Ltd v Baird [2019] NSWCA 48, [12]; hearing transcript 1-14, ll 13-19. 21 Lanai Unit Holdings Pty Ltd v Mallesons Stephen Jaques [2016] QSC 2, [24]. (“Lanai”) -- 7 of 9 -- 8 [31] Further, the evidence before me establishes that the plaintiff had expended about $170,000 in preparation costs up to October 2016.22 It would be naive to think that further considerable costs had not been incurred to get the matter to a state where the plaintiff was ready for a 10 day trial and had signed the Request for a Trial Date. That is especially so where the Court file reveals that, additionally, a number of expert reports have been both disclosed and received, all of which have no doubt been considered. The absence of direct evidence of prejudice is not fatal to the plaintiff’s opposition to the application.23 It is the loss of opportunity to consider its position, in light of an actual application for security for costs, before the expenditure of further costs which is the gravamen of the prejudice I accept it has suffered as a result of the delay in this matter.24 [32] In my view, given that the last word on the possibility of such an application was in 2018 and was a denial by the plaintiff that any such application could succeed, which denial went unanswered, the plaintiff was entitled in the following three years to consider that such an application would not be brought and has no doubt expended further resources based on that belief. That belief was no doubt reinforced by the defendant signing the Request for Trial Date, without any mention of security for costs. [33] That the defendant decided to concentrate on attempting a resolution or other finalisation of the proceedings may provide an explanation, of sorts, for why it did not pursue the proposed application, but it does not answer the issue of prejudice suffered by the defendant. [34] I accept that the plaintiff’s application for contribution to the setting down and hearing fees would have reasonably excited concerns about the financial position of the plaintiff, and so the bringing of this application was not unreasonable. [35] However, I consider it would now be unfair to make such an order at this late stage and when further significant expenditure has undoubtedly occurred in reliance on a belief that such an application would not be brought. [36] Although it is conceded there is reason to believe that the plaintiff could not satisfy a costs order, there is no positive evidence it actually cannot. As the plaintiff’s counsel conceded,25 the failure to pay the costs debts is “bad optics”, but given that the plaintiff has consistently asserted, rightly or wrongly, there to be valid reason for non- payment related to the defendant’s prospects on the substantive proceedings I accept it does not necessarily mean that the plaintiff cannot satisfy any costs order. [37] Further, it is relevant that the plaintiff’s claim and the defendant’s first counterclaim will traverse largely the same areas. The Court should be slow to countenance a 22 Affidavit of Matthew Neal Pokarier dated 26 August 2021 at [9]-[10]. 23 Lanai, supra at [23]. 24 Lanai, supra at [21]-[24]. 25 Hearing transcript 1-26, l 38. -- 8 of 9 -- 9 situation where, in the event of non-provision of security, the plaintiff’s action is stayed but the defendant’s counterclaim based on largely the same area can proceed.26 Orders [38] My orders are: 1. The plaintiff’s application for contribution to the setting down and hearing fees is granted. 2. Pursuant to regulation 4(2)(a) of the Uniform Civil Procedure (Fees) Regulation 2019, the plaintiff and defendant are each to pay one-half of both the setting down fee and the hearing fees for the trial of this proceeding. 3. The defendant’s application for security for costs is refused. 4. The defendant is to pay the plaintiff’s costs of both applications, on the standard basis to be agreed or assessed. 5. Liberty to apply in respect of the costs order within seven days. 26 Covecorp, supra at [32]. -- 9 of 9 --