IN THE DISTRICT COURT
OF NEW SOUTH WALES
CIVIL JURISDICTION
JUDGE OLSSON SC
MONDAY 23 OCTOBER 2023
2022/00168974 – VOULLA PARASKEVI LOULLI v BAYTEK CONSTRUCTIONS PTY LIMITED
JUDGMENT – re plaintiff suing on statement of claim; see transcript p 1 HER HONOUR: In this matter the plaintiff sues on a statement of claim filed on 10 June 2022 in which she claims damages for breach of contract.
On or about 26 November 2019 the plaintiff entered into a New South Wales Fair Trading Home Building standard form Contract to construct a residence for the price of $843,700 (inclusive of GST) (primary contract).
The statement of claim set out the various terms of the contract with respect to the standard of the work and the time in which the work was to be undertaken. I will not read out each of those clauses suffice to say that they repeat the statutory warranties implied by s 18B of the Home Building Act 1989 New South Wales, the provisions of which mirror the common law position.
One term of the contract provided that if the builder did not complete the works by the date stated in the contract then liquidated damages would be applied in the sum of $40.00 per day for every day thereafter.
The builder did not, at any stage, serve a formal notice of extension of time on the owner as required by cl 7 of the contract which provides:
“If the contractor wishes to claim an extension of time the contractor must notify the owner in writing the cause of estimated length of the delay within ten business days of the occurrence of the event or in the case of a variation from the date of agreement to the variation.”
The substantive work commenced on or about 19 May 2020.
In addition, on or about 20 December 2019, the parties entered into a separate agreement specifically for the preparation of the Application for a Construction Certificate, the cost of which was $10,000 (secondary contract).
CAMPBELL: Yes, $10,000 out of the 18 that was contractually–
HER HONOUR: Yes, so the contract figure for the construction certificate was $18,000.
CAMPBELL: That’s right.
HER HONOUR: And the owner has paid $10,000 of that?
CAMPBELL: Yes, and there was supposed to be a refund on payment of the deposit under the construction contract which did not occur.
HER HONOUR: The owner duly paid the 10% deposit of the contract sum of $843,700 on or about 10 March 2020 which was a 10% deposit of $84,370.
Statutory obligations
As the work was residential, the defendant was obliged to hold a contractor’s licence issued by the Department of Fair Trading pursuant to the Home Building Act (NSW) 1989.
It was a term of the contract that the builder “must effect and maintain public liability insurance for an amount not less than $5 million for property damage” plus the builder “must have in place insurance for workers compensation and employer’s liability insurance.”
It was a term of the contract that if the builder was unable or unwilling to complete the work, or abandoned the work prior to completion, or failed to proceed diligently with the work, failed to remedy defective work or remove faulty or unsuitable materials, or without reasonable cause failed to comply with an order or direction of a public authority with respect to defective or incomplete work which would substantially affect the quality and/or appropriateness of the work, the owner could notify the builder in writing and request its correction.
The owner was obliged to notify the contractor in writing that unless it is remedied within ten business days, or such longer period as specified by the owner, the owner is entitled to terminate the contract.
In the event that the contractor did not comply with the owner’s request within the time allowed or, if the default could was not capable of remedy, the owner was entitled to terminate the contract by giving written notice to that effect.
If it was terminated as above, the financial resolution between the parties was to be decided by taking the reasonable cost of completion of the work and setting it off against the amount which would have been otherwise due under the contract. In the event that such calculation resulted in the difference between the reasonable cost of completion of the work and that which would have been otherwise due under the contract, it became a debt payable by one to the other.
The time for completion in the contract was 52 weeks to approximately 19 January 2022.
CAMPBELL: Yes, or arguably March 2022.
HER HONOUR: All right, we will leave it at March 2022.
The builder did not complete the works by either January or March 2022 and by email dated 28 April 2022 the owner notified the contractor of what she saw as the defective and incomplete work and various other matters. The notice specified that unless the work was rectified by 16 May 2022, she would exercise her right to terminate the contract. There was no response or no effective response by the builder and the contract was terminated on 25 May 2022.
The Home Building Act requires the builder to hold a relevant licence and arrange a contract of home warranty insurance for the works. Under the Act, upon a complaint being made, an officer of the Department of Fair Trading may issue a Rectification Order on the builder requiring the builder to carry out certain rectification works within a particular period. The plaintiff made a complaint.
A Rectification Order was sent on 13 September 2021 ordering the defendant to complete certain building works under the contract by 30 November 2021; that order is in evidence.
The builder did not attend to the rectification work.
I said earlier that the builder did not claim a formal extension of time. It is fair to say that some extensions were agreed verbally by the parties, but nevertheless on any view of it, by March 2022, the builder was in significant breach of the contract. I am satisfied of that fact and so find.
It follows that the owner was entitled to terminate the contract on 26 May 2022.
In addition, the building works related to the construction of a duplex.
The plaintiff intended to live in one and rent the other. She gave evidence of the real estate valuation of the rental income that she could have expected to receive from that property and plainly she is out of pocket to that extent and that is also part of the claim.
In addition, as I said earlier, there was provision in the contract for liquidated damages for the period of the date of completion of the work of the contract of 9 April 2021 to the date of termination on 26 May 2022 that was in the amount of $40.00 a day. The total comes to $16,480.00.
Mr James noted that the total amount paid by the owner to the builder was $737,947 inclusive of GST. He broke that down by reference to each of the eight invoices provided by the builder.
Clause 12 provided for the payment schedule. I will read it out because it suggests that there is some discretion for the owner with respect to whether or not they were obliged to pay each progress claim at the time it was claimed.
Clause 3 of the contract at (b) provided: “The owner will pay the contract price specified in this contract”.
Clause 12 provides:
“The owner must pay the contract price by progress payments within five business days of the completion of the stages of the work nominated in the schedule of progress payments. The contractor must notify the owner in writing when a stage of the work has reached completion. A stage of work has reached completion when it has been finished in accordance with the contract documents and any variations agreed to and there are no omissions or defects that prevent that stage of work from being reasonably capable of being used for its intended purpose. Any deposit paid is to be deducted from the first progress payment.
Despite the preceding paragraph, if the owner’s lending authority (if applicable) is to make all or any progress payments then the contractor agrees to accept the usual payment terms (including the need for inspections and certifications required by the lending authority) in place of the requirement specified in the preceding paragraph.” [emphasis added]
Thereafter it sets out the schedule of progress payments of which there were ten. The first was 5% of the contract sum which was payable after demolition. The next provided for payment of the deposit. The plaintiff paid both invoices.
In fact, the owner has paid claims up to the stage of floor coverings which left the kitchens and a few other things yet to be completed. There were some relatively small variations for which invoices were issued.
Clause 12 continues:
“Payment of a progress payment is not to be regarded as acceptance by the owner that the work has been completed satisfactorily or in accordance with the contract documents.”
Pausing there, that clause simply provides that if the owner pays the full amount of the progress claim it is not precluded from arguing, at the end of the case, that the work was defective or incomplete. However, usually that caveat is expressed more succinctly than it is here because this contract seems to offer some provision for the owner to dispute, during the course of the works, that a particular contract stage had been completed. The contract provided:
“If there is any bona fide dispute in relation to the value or quality of work done the dispute must be dealt with in accordance with the dispute resolution procedure set out in clause 27. In those circumstances, the parties agree as follows: (a) the owner may withhold from the progress payment an amount estimated by the owner, acting reasonably, equal to the owner’s estimate of the value of the disputed item; (b) the contractor must continue to carry out its obligations under this contract pending resolution of the dispute.”
The latter did not apply because, as a matter of fact, the plaintiff paid each progress claim. The plaintiff’s observations about what she saw as defective work, and work arising from variations were cogent, appropriate, specific and polite in every respect.
The builder’s responses were not of the same standard. In fact the builder really did not respond in any other way other than to say the work would be done, or he had been delayed by something or other, or that he would work to “go through the concerns” outlined in the email and that the owner was impatient.
I will turn to the expert report of Mr Gregory James of Built Environment Building Consultants of 6 December 2022, which is found in vol 2 of the Court book.
Mr James is the principal of Jameson Investments Pty Ltd which traded as Built Environment Building Consultants. He has worked in the building and construction industry for 35 years and constructed or managed the construction of a large number of residential and commercial building projects. He holds a qualified supervisor’s certificate pursuant to the Home
Building Act and graduated from the University of Newcastle with a Bachelor of Construction Management with honours.
He confirmed that he understood the Experts’ Code of Conduct and agreed to be bound by it. He thereafter set out his instructions and provided an executive summary. The report contains a number of photographs and legislation and references to relevant Australian Standards and the contractual provisions.
It is thorough; it satisfies in every respect an expert report required by the Code of Conduct but also, on any view of it, s 79 of the Evidence Act. His ultimate assessment was that, in some instances, the builder did not perform the works with due care and skill and did not carry out the works in accordance with the contract.
In some instances the builder failed to supply materials that were good and suitable for the purposes for which they were intended, and carried out the works in an unsuitable manner. Mr James estimated the value of work required to rectify the defective works and contractual works by reference to
Cordells Construction Cost Guide.
He applied Cordells’ costs rates to his findings as to rectification as he regarded them as more appropriate than those of Rawlinsons. I should add that both Cordells and Rawlinsons are well-known construction cost guides in the building industry.
Mr James set out in great detail his observations, investigation, his methodology and the equipment he used in his investigations including its limitations. He included copies of plans, including the variations to the plans, the warranties as to residential building work, and then turned to each item of defective work or incomplete work, indicated the work needed to be performed to bring the contract to a satisfactory end and he prescribed a value to do that rectification work.
In essence, the claims related to face brickwork in which the horizontal joints varied in height and spaces in the horizontal heights of the bricks of more than 2 millimetres. I think from memory that used to be called a ‘pig in the brickwork’.
Then he set out an opinion as to why the face brickwork was defective. He set out recommendations as to how it should be rectified and he did the same with respect to each of the items. There were defects to the first floor balcony, defects to tiling, defects in the fall of surfaces, there was water damage, there were rooms that were a different size to those contracted and the list went on and on. The report set out the details of the relevant Australian Standard, the documents that he reviewed, the observations that he made, how materials should be stored on site to protect them from warping or the like.
He reviewed the works (and his findings) again most recently in June of this year and reiterated his earlier opinions. I should add that, at that stage, he had received the defendant’s expert report from a Mr Elie Farah of EBC Consultants and responded to it.
The defendant’s expert witness, and I make no criticism of him, did not participate in a conclave as ordered by the Court and in fact did not do any further work other than the preparation of the report on the basis that he had not been paid. As I say, I offer no criticism in respect of that.
Coming back to Mr James’ report he set out a detailed Scott Schedule, the items that were required to be rectified and the costs relating to the same. He came up with a figure of $839,997.64 for defective and incomplete work which is approximately the same amount as that of the contract.
At first blush that is troubling because it implies that the work that was performed has no value but there are two things that can be said about that. Firstly, as counsel pointed out, a lot of the defects required the demolition of part of the works and the reconstruction of, for example, the brickwork, so although the same bricks might be used, they will have to be taken down, cleaned and put back up again. The second aspect of that is that I think I can take judicial notice of the fact that building costs or all costs have increased significantly after COVID and these works were carried out in 2021 and we are now looking at 2023 prices, so they are likely to have increased.
Nevertheless, I am satisfied on the evidence of Mr James that that amount is an appropriate amount to allow for the rectification of defects and the completion of works. In addition, I am satisfied on the evidence of
Ms Loulli that liquidated damages should be applied at the rate of $40.00 a day which is, up to the date of termination, $16,480; loss of rent from one townhouse (of which there was evidence) of $66,085.67. Her calculations were provided. In addition, she claimed the cost of storage and mail redirection in the sum of $8,920 and repayment of the Construction Certificate amount.
The total $941,483.31 from which needs to be deducted the outstanding contract sum of $122,023.00 leaving a balance of $819,460.31.
Pausing there, the contract will provide for contractual interest won’t it, up to the date of termination, or it should do?
CAMPBELL: Yes, although none of the defect rectification and incomplete work costs will be future costs, so that wouldn’t be subject contractual interest. The amount of $16,040 probably would because that would’ve been as at the date of termination. The amounts of $63,000 for rent would be a damages claim, so I think that wouldn’t come in under or it possibly would come under the contract actually. Interest under cl 14 applies to payments under the contract, so I’m not sure that we have an interest rate for damages, and maybe we just go for prejudgment interest rate.
HER HONOUR: Yes, all right, so on top of that contract sum in respect of – so you say it should be in respect of the lost rent and clearly storage costs and things like that. Do you?
CAMPBELL: Yes.
HER HONOUR: I had better make that clear.
CAMPBELL: So liquidated damages, loss of rent and the storage costs, would be subject to interest.
HER HONOUR: Yes, that’s right, so liquidated damages $16,480.00 and loss of rent (at $66,085.60), storage costs of $8,920.00 and the $10,000.00 of the construction certificate. Can somebody can add that up?
CAMPBELL: Yes, we can provide the figure.
HER HONOUR: All right, so that should be on top of the figure I gave earlier for the total, so that should be up to the date of judgment should it not?
CAMPBELL: Yes.
HER HONOUR: And then I have to consider a question of costs. What did you want to say?
CAMPBELL: I might say this about costs, firstly, we apply for indemnity costs in these circumstances. The behaviour of the defendant and its conduct in this matter we say is reprehensible, it has caused a lot of these costs unnecessarily; today is an example of that. We have made applications in the past for the defence to be struck out, they resisted those applications, and then didn’t show up to the hearing. They didn’t attend the mediation. There has already been an order for indemnity costs in relation to those costs. They were late with their evidence and, as it turns out, their evidence has not even been considered by the Court.
Firstly, we would like to apply for indemnity costs for the matter as a whole. Secondly, if we could make an application tomorrow morning when we will supply the Court with all of the documentation required for a lump sum costs order that will, firstly, shortcut the process of coming to a figure on costs and will allow us to move forward with certainty, as I’ve mentioned, with a claim under insurance, et cetera.
HER HONOUR: I should formally find of course that the builder is in breach of contract and that, as I have set out, the work was defective and incomplete in many respects.
With respect to the defendant’s conduct an application has been made for indemnity costs. It is my view and I find that the builder at all material times had a contumelious disregard of the contractual terms and the court’s orders. He failed to engaged in any meaningful way with the questions and requests of the owner which were cogently and appropriately requested. He failed to attend to the Rectification Order, which was issued by a Statutory Authority.
He failed to attend to the Court ordered mediation, not only failed to attend, but obliged the plaintiff to reset a date for mediation again and again because of the builder’s alleged inability to attend on certain days and, as I say, ultimately he did not attend mediation in any event which was the subject of another Court order. All of the evidence of the builder was served late and in breach of the Court’s timetables. His expert did not participate in the conclave with the plaintiff’s expert. Two motions were brought to strike out its defence and there was no appearance today.
The builder, in my view, has done absolutely nothing to advance his case or advance his defence and his whole conduct throughout the carriage of the building works has been disgraceful. Ordinarily, the plaintiff might have argued that there was a case for exemplary or aggravated damages but she has not done so. The exercise of a discretion to award indemnity costs is something to be considered very carefully and it should only arise in exceptional circumstances.
On the basis of the foregoing and, in particular, the builder’s conduct throughout what must have been a rather tortuous 18 months for the owner, an indemnity costs order is warranted, and I include in that the fact that he ignored an order by a regulatory authority. The plaintiff has been put to extraordinary expense to get to this point.
Therefore, the builder shall pay the costs of the proceedings, except to the extent of extant costs orders, which related I think mainly to the mediation and the motions to strike out the defence. The builder shall pay the costs on an indemnity basis; I have made the order for interest.
Orders
Verdict and judgment for the plaintiff in the sum of $819,460.31.
I note the plaintiff has requested a short period of time in which to calculate and apply for a gross costs order.
I will stand the matter over until tomorrow morning to enable the plaintiff to do so, then at that point I will enter the final orders.
IN THE DISTRICT COURT
OF NEW SOUTH WALES
CIVIL JURISDICTION
JUDGE OLSSON SC
TUESDAY 24 OCTOBER 2023
2022/00168974 – VOULLA PARASKEVI LOULLI v BAYTEK CONSTRUCTIONS PTY LIMITED
JUDGMENT ON COSTS
HER HONOUR: Yesterday I indicated that formal orders would be entered today, that is, verdict and judgment for the plaintiff in the sum of $819,460.31 plus interest at the Court rate from the date of breach of contract up to the date of judgment. Interest is only to be applied to the liquidated damages, contract certificate or construction certificate and loss of rent.
I ordered that the defendant pay the plaintiff’s costs on an indemnity basis excluding any extant costs orders relating to mediation and notices of motion.
The plaintiff indicated yesterday (and this is the reason the matter went over to today) that they wished to make an application for a gross costs order. They have done so relying on an affidavit of Amanda Patricia Johnston sworn 24 October 2023. Ms Johnston is the solicitor for the plaintiff. She has deposed as to her hourly rates, the general sum for disbursements, and overall costs, and annexed to that are the various invoices from her firm to the plaintiff which are itemised, indeed each invoice is itemised and actual tax invoices are annexed. They contain significant detail which, in my view, would be adequate for the purposes of a costs assessment.
In addition, Ms Johnston has annexed the disbursements; that being counsel’s fees, the fees of the expert retained in the matter, Mr Greg James,
the costs of the invoices relating to ASIC searches and the like. It is extensive in detail and the affidavit and annexures run to 96 pages. Exhibited as well is a 12-page spreadsheet which makes the interest calculations in respect of the judgment sum. Each calculation is set out for each year, month by month, applying the various court rates, and it is thoroughly prepared, in my view, easily read and readily understandable.
The plaintiff relies on s 98 of the Civil Procedure Act which provides relevantly:
“Subject to the rules of court and to this or any other Act– (a) costs are in the discretion of the Court, and (b) the Court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the Court may order that costs are to be awarded on an ordinary basis or on an indemnity basis.”
Subsection (4) provides:
“In particular, at any time before costs are referred for assessment the Court may make an order to the effect that the party to whom costs are to be paid is entitled to (a) costs up to, or from, a specified stage of the proceedings, or (b) a specified proportion of the assessed costs, or (c) a specified gross sum instead of assessed costs, or (d) such proportion of the assessed costs as does not exceed a specified amount.”
The plaintiff in this case relies on subs (c), that is, a specified gross sum instead of assessed costs. Mr Campbell has made submissions to that effect and took the court to relevant authorities.
In principle, an order for a gross costs sum is appropriate where the costs have been incurred in lengthy or complex cases where it is desirable to avoid the expense, delay and aggravation likely to be involved in a contested or extensive costs assessment. The provision however confers a wide discretion the exercise of which is not confined to lengthy and complex matters. Indeed the comparative simplicity of the proceedings may also highlight the desirability of avoiding both controversy about and delay in resolving the costs of the proceedings; see Marlinspike Debt Acquisitions Pty Ltd v Undone Pty Ltd No 2 [2018] NSWSC 72.
There is authority for situations that might warrant a gross costs order or a limited or special costs order.
The first matter is the likely length and complexity of the assessment process. In the present case proceedings were not particularly protracted and the matter not particularly complex.
The second situation is the likelihood that the additional costs in a formal assessment would disadvantage the successful party because of the potential inability of the successful party to pay the costs in any event; see Harrison v Schipp [2002] 54 NSWLR 738.
In respect of that I make two observations. One is that the defendant is a proprietary limited company. It might be anticipated that the company may go into liquidation, in which case the cost to the plaintiff of going through the assessment process itself would be unfair and unreasonable. Thirdly, where a party’s conduct has unnecessarily contributed to the costs of proceedings, particularly where the costs incurred have been disproportionate to the result of the proceedings, a gross costs order may be appropriate.
In respect of that, for the removal of any doubt, I will just refer to the history of this matter.
The statement of claim was filed on 10 June 2022. A defence was filed more than 28 days later. It was drafted in such a way that the plaintiff felt confident enough to bring two notices of motion seeking to have the defence struck out both of which were unsuccessful. Costs orders were made and I will not refer further to those because they are extant orders and they are on an indemnity basis.
23 October was allocated for the hearing of the matter. There were directions made for the filing and service of written submissions which the defendant completely failed to do. The Court also, at some stage, directed the parties to attend mediation.
On 13 December 2002 the Court made orders in the proceedings including directions for the service of lay and expert evidence by February 2023. The defendant did not comply.
On 28 March the Court made further orders that the defendant serve lay and expert evidence by 7 April. The defendant did not comply.
On 31 March, as I have said, the Court listed the matter for hearing on 23 October with an estimate of four days. It made the standard orders for hearing and ordered the parties, pursuant to the Civil Procedure Act, to attend a mediation to be arranged by them and completed by 4 August 2023. On
31 March Ms Johnston sent an email to the defendant’s solicitor in relation to the standard orders for hearing suggesting that a joint expert report be prepared. The same day the defendant’s solicitor said, “We will revert back to you in relation to the joint expert report.”
On 4 April Ms Johnston asked the defendant’s solicitor whether he had further instructions with respect to the joint report. She did not receive a reply.
On 5 May she received an email from the defendant’s solicitor which relevantly said, “We are awaiting final instructions from our client to finalise the evidence and this is a factor outside of our control. Our client has made and cancelled several appointments with us.” Finally, the defendant served an expert report and an affidavit on 15 May 2023.
On 16 June Ms Johnston emailed the defendant’s solicitor and said:
“We suggest the experts meet and prepare a joint report by 14 July. Please let us know if you agree with this. The parties are required to attend mediation by 4 August 2023. Please let us know your available dates for mediation between 24 July and 4 August. Please also let us know if you would like to suggest any mediators.”
She did not receive a reply.
On 20 June she sent an email to the defendant’s solicitor suggesting a certain person as mediator and provided available dates for mediation. She did not receive a reply. On 23 June she sent another email to the defendant’s solicitor. She did not receive a reply.
On 28 June she sent another email to the defendant’s solicitor. On 3 July, whilst she was overseas, she received an email from the defendant’s solicitor informing her that the defendant’s expert would return from overseas on 17 August, and provided the defendant’s available dates for mediation.
On 14 July Ms Johnston sent an email to the defendant’s solicitor suggesting a different mediator. She did not receive a reply.
On 14 July she sent another email with respect to a date for mediation and she did not receive a reply.
On 17 July, after her return from leave, she sent an email to the defendant’s solicitor regarding mediation. She did not receive a reply.
On 18 July another solicitor in her office had a without prejudice conversation with the defendant’s solicitor to the effect that the mediation could be deferred until after a joint expert report had been prepared.
On 19 July Ms Johnston sent another email to the defendant’s solicitor regarding mediation and she did not receive a reply. On 21 July she sent another email regarding mediation and she did not receive a reply.
On 24 July she sent another email informing him of the plaintiff’s expert witness’s available dates to meet and prepare a joint report.
On 24 July she received an email from the defendant’s solicitor indicating the defendant was unavailable for mediation on 25 August.
On 24 July Ms Johnston sent an email to the defendant’s solicitor, “What dates is your client available for mediation?” She did not receive a reply.
On 28 July she sent another email to the same effect. She did not receive a reply.
On 4 August she sent a further email to the same effect. She did not receive a reply.
On 8 August she emailed the defendant’s solicitor (relevantly) saying, “We suggest a court annexed mediation. Please provide your available dates by 9am tomorrow. We intend to contact the Court tomorrow.” On 9 August she received an email from the defendant’s solicitor which said (inter alia), “Would you please provide me with your client’s available dates for mediation?” and that their expert had proposed 21 August.
On 9 August she sent a further email asking for the defendant’s available dates for mediation and she did not receive a reply.
On 11 August she sent another email confirming a date for the joint expert conference and requesting available dates for mediation. She did not receive a reply.
On 14 August she sent an email to the defendant’s solicitor regarding dates for mediation and she did not receive a reply.
On 15 August she sent an email to the Court requesting the matter be referred for court assisted mediation. On 16 August, Judicial Registrar Howard listed the proceedings for case management on 24 August.
On 17 August Ms Johnston emailed the defendant’s solicitor again requesting the defendant’s available dates for mediation. She did not receive a reply.
On 18 August she made an online court request for court assisted mediation and provided the plaintiff’s available dates.
Finally, on 21 August the parties’ experts met on site for the purpose of preparing a joint report.
On 21 August the defendant replied to the online court request and said for the first time that the defendant’s director was overseas and would not return until 28 August.
On 23 August the judicial registrar ordered that, pursuant to s 26 of the Civil Procedure Act, the parties were ordered to attend for mediation before an assistant registrar in the District Court on 18 September. Standard orders for mediation were made and costs of the rescheduled mediation were reserved.
On 4 September Ms Johnston emailed the defendant’s solicitor saying, “We have been informed by our expert that he provided his part of the joint report to your expert on 26 August. Please let us know when the joint report will be completed by your expert.” She did not receive a reply.
On 6 September she sent an email attaching a draft index to the mediation bundle. She did not receive a reply.
On 11 September she received an email from the defendant’s solicitor informing her that they no longer act for the defendant.
On 11 September she sent an email to the defendant attaching the plaintiff’s position paper for mediation and a link to the electronic mediation bundle. The following day she received an email from the defendant’s brother attaching a notice of removal of solicitor. On 14 September she sent an email to the defendant which said, “Please confirm you will be attending the mediation on Monday, 18 September.” She did not receive a reply.
On 15 September she rang the defendant’s brother and said, “Are you coming to the mediation on the 18th?” and he said, “My brother, Joe, will be there, what time and where is the mediation?” “10am at level 8, John Maddison Tower in Goulburn Street in the city. I will send you an email confirming the details,” said Ms Johnston. The defendant’s brother said, “I’ll check with my brother and ring you back in half an hour.” He did not ring back. On 15 September she sent an email to the defendant’s brother confirming the details of the mediation.
On 18 September at 7.46am she received a text message from the defendant’s brother that said, “Hi Amanda, can we please reschedule the mediation today. Joseph just called me saying he’s sick and has COVID, sorry for the inconvenience.” She replied, “I don’t think so. We will be seeking a costs order against Baytek. If you aren’t sick you need to come.” She sent another message asking for proof of the positive test and a medical certificate. On 18 September she emailed Assistant Registrar Fukuda Odi asking if it was possible for the defendant to attend the mediation via AVL.
The plaintiff attended Court on 18 September but the defendant did not attend. The matter was then relisted before Judicial Registrar Howard to make orders. Orders were made which Ms Johnston emailed to the defendant’s brother. On 20 September she spoke with Greg James, the plaintiff’s expert.
He said he had not received anything from the defendant’s expert. On 25 September 2023, she sent a text message to the defendant’s brother asking, “When will your expert finish the joint report?” She did not receive a reply. At the mediation she attempted to ring the brother’s mobile phone. He did not answer.
On 18 September she sent text messages requesting the phone numbers and email address of the defendant. She did not receive a reply therefore she was not able to send an audio visual link and she found herself unable to inform him that the Court was not able to conduct the mediation.
On 20 September Mr James advised that the defendant had not provided his part of the expert report.
On 25 September she did a search of the online court file and discovered the defendant had filed a notice of removal solicitor on 22 September. She had not been served with a sealed copy of that document. On 25 September the judicial registrar made further orders in the proceedings.
The matter came before his Honour Dicker J on 10 October 2023 at which time counsel appeared for the defendant. His Honour gave orders the defendant was to pay the plaintiff any costs thrown away as agreed or assessed on an indemnity basis relating to attempts to arrange a mediation between the parties and relating to the Court appointed mediation. He ordered that the defendant pay certain of the plaintiff’s costs of particular days as agreed or assessed on an indemnity basis.
He also ordered the defendant to serve any response to the expert report as part of the joint expert building report by 18 October and ordered that the defendant could not rely on further expert material without leave unless it was served consistently with this order. His Honour confirmed the hearing date and gave liberty to apply on two days’ notice. I think unless I am wrong that is where the matter stood. The matter came before me yesterday,
23 October. There was no attendance by the defendant.
Going back to one of the factors that relate to the applicability or the appropriateness of a gross costs sum is the point that I made earlier: that is when conduct of a party has unnecessarily contributed to the costs of the proceedings especially where the costs incurred have been disproportionate to the result of the proceedings. In my view this case could not be a better example. The defendant has unnecessarily caused most of the costs of the proceedings. They were clearly disproportionate to the result of the proceedings.
The prime consideration is an expectation based on prior experience that any further costs assessment is likely to be unduly protracted and add unnecessarily to the costs of the proceedings; that is clearly the case here, it is entirely appropriate for the plaintiff to apprehend that the defendant would drag out any assessment of costs.
Where a gross sum costs order is appropriate the Court takes a broad-brush approach in determining the lump sum; see
Harrison v Schipp. The justification for this kind of broad-brush approach is that to require the same or similar level of detail as in a formal costs assessment would defeat the purpose of the lump sum order; again, see Harrison v Schipp.
Consistent with that general approach, the observation has been that courts will typically apply a 10-30% discount in the assessment of any costs but it necessarily depends on the circumstances of the particular matter. It is entirely appropriate in my view, given the protracted conduct of these proceedings, which is completely at the door of the defendant, that a gross sum costs order be made. There are three reasons for doing so.
- the defendant largely contributed to the protracted proceedings and the costs of the proceedings to the expense of the plaintiff, and
- there is every reason to believe that if the defendant chose to defend an assessment of costs it may well lead to a protracted outcome, consistent with his behaviour to date; and
- the longsuffering plaintiff will incur significant costs in having the matter assessed with a real risk that they will not be able to recover their costs.
I propose to make a gross costs order. There is evidence with respect to the appropriate sum of the order. The plaintiff has handed up short minutes. I propose to make those orders.
There is a question of whether or not there should be a discount on assessment. On one view, a successful party invariably recovers something less than its actual costs where the assessment is on an indemnity basis and, on another view, the broad-brush approach of the Court to assessment on a lump sum basis inherently involves some risk that the sum includes costs that would not be recovered on assessment, coupled with the savings for the costs assessor in the costs of avoiding a detailed assessment.
However, where a gross sum is assessed on an indemnity basis, and there is no evidence of unreasonableness, it may be inappropriate to apply any discount; see, Hancock v Rinehart [2015] NSWSC 1640 at paras 56 and 58.There is no evidence of unreasonableness in the plaintiff’s camp. Ms Johnston forwarded a great number of emails to the defendant. It cannot be said that any of those were inappropriate; she was attempting to comply with the orders of the Court, and further the conduct of the matter.
The Court must be astute not to cause an injustice to the successful party by applying an arbitrary fail safe discount on the costs estimates given to the Court. If the Court can be confident that there is no risk that the sum includes costs that might be disallowed on assessment the case for discount is seriously undermined. I have referred to the detailed evidence provided by
Ms Johnston with respect to solicitor’s costs itemised in the invoices to the client, and I note all of those invoices have been paid bar a couple from the last few days.
She has also set out in detail the disbursements that were incurred including those of the building expert who was retained at the order of the Court and who went to the trouble of preparing his part of the joint expert report to no avail. All of these costs are at the feet of the defendant. I see no reason to discount the gross costs sum by 5% or anything else.
There will be verdict and judgment for the plaintiff in the sum of $819,460.31
The defendant is pay the plaintiff prejudgment interest in the sum of $7,273.70
The defendant is to pay the plaintiff’s costs of the proceedings on an indemnity basis including the indemnity costs orders made on 10 October in the sum of $146,407.24
Should the interest run on costs from 28 days from today’s date? CAMPBELL: I think that’s automatic.
HER HONOUR: It might be. All right, you might consider it appropriate depending on the result that you get that you notify the Department of Fair Trading and ASIC of the result.
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