Maxcon Constructions Pty Ltd v Vadasz & Ors [2019] HCATrans 210 (21 October 2019)

Last Updated: 5 November 2019

[2019] HCATrans 210

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Adelaide No A17 of 2017

B e t w e e n -

MAXCON CONSTRUCTIONS PTY LTD

Appellant

and

MICHAEL CHRISTOPHER VADASZ (TRADING AS AUSTRALASIAN PILING COMPANY)

First Respondent

ADJUDICATE TODAY PTY LTD

Second Respondent

CALLUM CAMPBELL

Third Respondent

KEANE J

TRANSCRIPT OF PROCEEDINGS

FROM BRISBANE BY VIDEO LINK TO SYDNEY AND MELBOURNE

ON MONDAY, 21 OCTOBER 2019, AT 9.30 AM

Copyright in the High Court of Australia

____________________

MR M. CHRISTIE, SC: May it please your Honour, I appear with my learned friend, MR D.P. HUME, for Mr Vadasz. (instructed by O’Loughlins Lawyers)

MR M.J. GALVIN, QC: May it please the Court, I appear for Maxcon. (instructed by Diakou Faigen)

HIS HONOUR: Yes, Mr Christie.

MR CHRISTIE: Your Honour, I move on the summons dated 24 July 2019.

HIS HONOUR: Gentleman, can I just mention I have read the summons filed 24 July. I have read the affidavit of Stephen Peter White also filed on 24 July. I have read the submissions of the appellant dated 29 August 2019 and the submissions of the first respondent dated 27 September 2019. So, you can go straight to your points, Mr Christie.

MR CHRISTIE: May it please the Court. Your Honour, we seek an order that the appellant, Maxcon, pay Mr Vadasz’s assessed costs of the High Court proceedings together with interest that has accrued since the date of the certificate of taxation. In effect, your Honour, the proposed order is an order requiring performance of the undertaking given to the High Court by Maxcon at the special leave application on 12 May 2017. We also seek an order for the costs of this application on an indemnity basis for reasons which I will come to.

I appreciate that your Honour has read Mr White’s affidavit so I will just make a couple of brief points about salient issues that arise in that affidavit, if your Honour does not mind. Your Honour will appreciate from that affidavit that for some time now Maxcon has foreshadowed that it has a claim against Mr Vadasz. I would only point out one instance amongst several in the evidence of that and if I could ask your Honour to go to page 82 of Mr White’s affidavit ‑ or should I say page 81. Your Honour will see a letter from Bridges Lawyers who state that they acted as the Sydney agent for Maxcon. When your Honour turns to the next page, which is page 82, your Honour will see at paragraph 5:

In addition, we are instructed that our client intends to imminently commence separate Court proceedings against your client ‑
Then, it refers to the two amounts claimed in paragraphs (a) and (b) which total about $69,000. The reason I draw this to your Honour’s attention is that this was communicated to my client well before the special leave application and it is those two claims in paragraphs 5 and (b) which to this day Maxcon claims that it will press against my client at some stage in the future.

I need not take your Honour to the transcript of the special leave application because your Honour is aware that the undertaking was given and your Honour will appreciate that once the notice of appeal was filed that was, effectively, giving the undertaking. The point we would emphasise, your Honour, is that the undertaking was in no sense qualified. There was no qualification that payment was only required if there was no arguable claim for moneys by Maxcon against my client.

Secondly, we would say, that at the time Maxcon gave its undertaking it had foreshadowed claims against my client but it did not seek any qualification on the undertaking that it gave. Thirdly, there is some suggestion that it is relevant that Mr Vadasz was an undischarged bankrupt. That, too, was a matter raised at the special leave application that was rejected as a point by your Honours. I should clarify that – an undischarged bankrupt at the time the construction contract was entered into.

Now, since that time, your Honour, Maxcon has had every opportunity to seek to vary the undertaking which it gave. In fact, following the judgment, the assessment of costs took place and I need not take your Honour to the documents other than to say that Maxcon did not pay the amount certified by the High Court. On 26 June this year, Mr Vadasz’s solicitor wrote to Maxcon seeking payment of the certified amount. Your Honour will find that at pages 73 to 75 and the particular on page 74 of Mr Vadasz’s affidavit, page 74, paragraph 15.

Then, in response to that ‑ and that is on 2 July this year – in response to that, Maxcon wrote a letter on 2 July – I withdraw that, that letter is 26 June – Maxcon’s solicitor replied on 2 July and your Honour will find that at page 77. Instead of paying the amount which it undertook to pay, this is what Maxcon’s solicitor has to say at page 77, third paragraph:

I expect my client’s application to vary the undertaking will be made to the High Court of Australia by Monday 8 July 2019.

No such application has been made and so, in our respectful submission, the undertaking remains in force. As I said, your Honour, Maxcon’s undertaking was not subject to any qualification that it did not need to pay the costs of what it describes as an offsetting claim. There is no evidence
that Maxcon was not aware of some relevant matter when it gave the undertaking and even if it were that would not mean that the undertaking ceased to have effect. As I said, Maxcon has not made any application to vary the undertaking and if it thought that it had such grounds it should have made that application promptly once it became aware of those grounds.

HIS HONOUR: Mr Christie, it might be helpful if I hear from Mr Galvin at this stage.

MR CHRISTIE: Yes, your Honour.

HIS HONOUR: Yes, Mr Galvin.

MR GALVIN: Your Honour, could I ask your Honour to turn to page 26 of the application book. There your Honour will find the order and undertakings in question. Two undertakings were given. The first one was that my client would not seek to disturb orders in the Court as to costs in the court below. I should say in relation to that, that that aspect of the undertaking is not an issue and my client has paid all of the costs that were ordered in those proceedings.

As to the second undertaking, which is the one in issue, the undertaking was given as the price for the grant of special leave, and as your Honour will recall ‑ I think it has been pointed out ‑ the Court determined that it did not need to make an order for costs upon the dismissal of the appeal because an undertaking had been given. The short point is, your Honour, that the undertaking is as good as, equal to or equivalent to an order for costs. My client accepts liability pursuant to the undertaking, does not resile from it in any way.

HIS HONOUR: It has not performed it and it has made a number of suggestions that it is going to do something about it and it has been making those suggestions for months.

MR GALVIN: Your Honour, it does not intend to make an application to vary the undertaking unless it has to. Can I leave that to one side?

HIS HONOUR: Well, can I say in relation to that, an application to vary the undertaking as to such an application, there is the difficulty that, as you say, the undertaking was the price of the grant of leave. Leave has been utilised by your client to make its application, so you really – an application to vary ought to – and somehow be relieved of the undertaking, would be to seek to be relieved of the price that was the price of the benefit that your client has had.

MR GALVIN: That would be, your Honour, in circumstances where there were matters which were not disclosed to us or the Court at the time of the hearing. But, your Honour, if I may, I would like to address the undertaking and how we say it is not a non‑compliance with it simply to not pay cash because the undertaking has the effect, as I say, is equivalent to an order for costs. It is always open, in my respectful submission, to a litigant to assert an offsetting entitlement as against a liability for costs, even if the costs are ordered to be paid.

Indeed, this matter has arisen out of the service of a statutory demand by the respondent and an application by my client under section 459G of the Corporations Act to set aside the statutory demand on the grounds of these offsetting claims. In other words, your Honour, the position is no different to one in which the High Court had ordered that my client paid Mr Vadasz’s costs.

We would always be entitled – of course, we are liable for those costs but we would always be entitled, or my client would always be entitled, to assert any offsetting claim that is genuine. The issue is, as I apprehend from your Honour’s question, is that we have not yet taken a step to have those rights determined. At the moment we are the subject of a section 459G application. We anticipate ‑ ‑ ‑

HIS HONOUR: I notice that that was to be mentioned in the Supreme Court on 2 October. What has happened about that?

MR GALVIN: I was not there but I understand it was adjourned because of this hearing. That is as I understand it, your Honour.

HIS HONOUR: Very well.

MR GALVIN: So, Associate Justice Gardiner, as I understand it, had said well ‑ he was querying how it could be that Mr Vadasz could serve a statutory demand and at the same time make an application for an order. I am not suggesting that is an issue that your Honour need deal with but that is how it came about that there was an adjournment of that application until after today’s hearing.

So, your Honour, at the risk of repeating myself, our point is simply that what we have is something that is equivalent to an order for costs. The undertaking was not given and never expressly given, never contemplated to be given or sought by the members of the Court on the basis that it would be complied with without any fair deduction. That was never contemplated by his Honour Justice Nettle when he mentioned ‑ ‑ ‑

HIS HONOUR: Can I put a contrary view to you, which is that the undertaking was categorical in its terms, that it related to costs that would be incurred by Mr Vadasz only because of your client’s application and his involvement in the appeal which your client sought to bring, in circumstances where it would be actually remarkable if it were thought that Mr Vadasz might not be entitled to recover the costs that he would be specially put to by your application and by the appeal or that he would be left to some sort of future accounting – some future balancing of accounts in circumstances where these costs would not have been incurred had it not been for the appeal.

MR GALVIN: I understand the way your Honour puts it and I understand that is the position, no doubt, of Mr Vadasz’s counsel. But notwithstanding that, your Honour, if an order for costs had been made regardless of the outcome of the appeal, we would be in the same position. We would, with respect, be entitled to assert a set‑off claim. As I say, there was no question at the time of the hearing before their Honours that we would be denied any right of offset that we might have as a matter of law. That was never put to us. Had it been put to us we might have said something about it.

In circumstances where Mr Vadasz was at the time ‑ the opposite view or the opposite circumstances, if I might put these to your Honour, are that Mr Vadasz was at the time of the hearing of the special leave application an undischarged bankrupt. He was, although it was not disclosed at the time, the subject of a criminal conviction for not disclosing that he was an undischarged bankrupt. I do not seek merely to attack his credit in any sense, but what I point out is that had we known at that time that that was what we were dealing with we might have said to the Court, well, if we are to give an undertaking we would seek that it not be denied to us ‑ that no right of set‑off be denied to us.

We did not say that and there is nothing in the transcript or the orders which would suggest that that would even occur to us. Why would we in the circumstances say that we have an offsetting claim, we want to reserve our right to offset because the response we would expect to receive would be, well, you always have a right of set‑off, that is what the law provides for when it comes to enforcement. For example, in connection with section 459G in the service of a statutory demand, the statute provides for asserting rights of set‑off but that is all we have done. If your Honour pleases ‑ ‑ ‑

HIS HONOUR: I think I understand your point.

MR GALVIN: Thank you, your Honour.

HIS HONOUR: Mr Galvin, if I were to be against you on that, the other side seek an order for costs of this hearing – of this proceeding and they seek it on an indemnity basis, do you have anything to say about that?

MR GALVIN: That the other side has not explained why an indemnity basis is appropriate in these circumstances, in my submission ‑ ‑ ‑

HIS HONOUR: I think the basis of which they would claim it would be that your client’s failure to pay and the position that it has adopted was an unreasonable one.

MR GALVIN: Your Honour, we say that it is not unreasonable to have asserted the position which I have attempted to assert this morning is not unreasonable, it is indeed arguable and reasonable. It would be quite different if there were circumstances which made it plain that the undertaking to pay costs was an undertaking to pay costs free of deduction, legitimate deduction. That is how I would respond, your Honour.

HIS HONOUR: Thank you, Mr Galvin. Mr Christie, anything in reply?

MR CHRISTIE: Yes, first I would like to correct something my learned friend had to say. Mr Vadasz was not an undischarged bankrupt at the date of the special leave application, his bankruptcy was discharged in 2016, and I think my friend would acknowledge there is no evidence to support the proposition put to your Honour.

Secondly, one can put aside the statutory demand process. That is not an exercise in debt collection, as the courts have said on many occasions; that is an issue concerning solvency. In relation to costs, your Honour, my client has been put to costs in recovering costs which should have been paid pursuant to a solemn undertaking given to this Court. That is all I wish to say, your Honour. May it please the Court.

HIS HONOUR: Thank you, Mr Christie.

MR GALVIN: Your Honour, I do apologise for the mistaken fact about the bankruptcy. It was my understanding and I withdraw the suggestion that Mr Vadasz was bankrupt at the time of the special leave application.

HIS HONOUR: Thanks, Mr Galvin. Thank you.

The first respondent, Mr Vadasz, applies for an order that the appellant, Maxcon, pay the costs fixed by the Certificate of Taxation dated 27 May 2019. The costs so certified were incurred by Mr Vadasz in successfully resisting Maxcon’s appeal to this Court from the Full Court of the Supreme Court of South Australia.

The Full Court of this Court dismissed Maxcon’s appeal on 14 February 2018. It was unnecessary for this Court on that occasion to make any order in relation to the costs of the appeal because it was a condition of the grant of special leave to appeal that Maxcon would pay Mr Vadasz’s costs of the appeal (see Maxcon Constructions Pty Ltd v Vadasz (2018) 264 CLR 46 at 58, paragraph 30).

Maxcon resists Mr Vadasz’s application on the basis that the undertaking to pay Mr Vadasz’s costs of the appeal to the High Court does not prevent it from offsetting against the amount of the certified costs other sums said to be owing to Maxcon by Mr Vadasz the subject of other proceedings pending in the Supreme Court of Victoria.

It was only by reason of the appeal consequent upon the grant of special leave that Mr Vadasz incurred the costs the subject of the Certificate of Taxation. The undertaking on the basis of which Maxcon was granted special leave to appeal to this Court was categorical in its acceptance of the obligation to bear the expense associated with Mr Vadasz’s participation in the appeal. The undertaking was plainly intended to protect Mr Vadasz against the expenses of his participation in Maxcon’s appeal to this Court.

It is not to be doubted that it was, or at least reasonably should have been, well understood that the expenses specially incurred by Mr Vadasz at Maxcon’s insistence were not to be treated as if they were merely an item in some ultimate taking of accounts that might or might not occur as between the parties at some indeterminate time in the future. There can be no doubt that the effect of the undertaking was, or should have reasonably been understood to be, that Maxcon, and not Mr Vadasz, would meet the burden of those costs as the price of the grant of special leave to appeal.

Maxcon also foreshadowed that it would seek to have the undertaking varied. Maxcon took advantage of the grant of special leave which was conditioned upon the giving of the undertaking. That Maxcon’s appeal was, in the event, unsuccessful, is no reason to alter the basis upon which leave was granted. Maxcon, having taken the benefit of the grant of special leave to appeal, cannot now hope to be freed of the condition which, as I say, was categorical in its terms on the basis of which the grant was made.

No good reason has been shown why the order sought by Mr Vadasz should not be made. Accordingly, I order that Maxcon pay Mr Vadasz the sum of $183,717.07 within seven days, together with interest pursuant to rule 8.06.2 of the High Court Rules 2004 (Cth) from 27 May 2019 until the date of payment.

Maxcon must also pay Mr Vadasz’s costs of this application.

Mr Vadasz sought an order that these costs be assessed on an indemnity basis. Given the circumstances which necessitated this application, and in particular the unreasonable position adopted by Maxcon in an attempt to justify its evasion of its obligations, I accede to Mr Vadasz’s application. The costs should be assessed on an indemnity basis.

MR GALVIN: May it please the Court.

MR CHRISTIE: May it please the Court.

HIS HONOUR: Adjourn the Court please.

AT 9.51 AM THE MATTER WAS CONCLUDED