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Owners Corporation & Ors v Shangri-La Construction & Anor (No 2) [2023] VCC 655 (28 April 2023)

Last Updated: 4 May 2023

IN THE COUNTY COURT OF VICTORIA
AT MELBOURNE
COMMERCIAL DIVISION
Revised
Not Restricted
Suitable for Publication

BUILDING CASES LIST

Case No. CI-22-05416

Owners Corporation 1 Plan No. PS707553K and Ors

Plaintiffs


v


Shangri-La Construction Pty Ltd and Anor
Defendants




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JUDGE:
HIS HONOUR JUDGE ANDERSON
WHERE HELD:
Melbourne
DATE OF HEARING:
12, 14 and 21 April 2023
DATE OF JUDGMENT:
28 April 2023
CASE MAY BE CITED AS:
Owners Corporation & Ors v Shangri-La Construction & Anor (No 2)
MEDIUM NEUTRAL CITATION:
[2023] VCC 655

REASONS FOR JUDGMENT

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Catchwords: Practice and procedure - Defendant’s application to adjourn trial – Delays by defendant not satisfactorily explained – Whether trial should await issue of third party proceedings – No adequate draft third party claims produced.

Charter of Human Rights - Application to refer question to the Court of Appeal – s33 Charter of Human Rights and Responsibilities Act 2006 (Vic) – Question hypothetical and premature – Preferable for the referring court to first find facts and make a determination - De Simone v. Bevnol Constructions and Developments Pty Ltd [2010] VSCA 231 applied.

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APPEARANCES:
Counsel
Solicitors
For the 13th Plaintiff
Mr N Pane KC and
Mr R Chaile of Counsel
Corrs Chambers Westgarth



For the 2nd Defendant
Dr M Wolff
Prior Law


HIS HONOUR:

  1. Shangri-La Construction Pty Ltd (“Shangri-La”) was the builder of an apartment block in Caulfield that was completed in 2015. The apartments were sold by the developer. Later, it was found that the apartments had been constructed with flammable external cladding. This led to the present litigation, commenced in VCAT in 2019 and that was referred to the Court by order of to the Tribunal made on 15 December 2022.
  2. The trial of the proceeding was fixed for March 2023 and this date was later extended, at the request of the parties, to 17 April 2023. After many years of interlocutory proceedings both in the Tribunal and the Court, the trial was to involve:
    1. claims by the owners corporation and individual apartment owners against Shangri-La for the cost of rectifying defects (other than the combustible cladding);
    2. claims by the State of Victoria against Shangri-La and its sole director, Obaid Naqebullah, for the cost of replacing the combustible cladding.
  3. On 31 March 2023, Shangri-La went into voluntary liquidation. As a consequence, the claims against Shangri-La could not proceed without the leave of a superior court.
  4. On 11 April 2023, Mr Naqebullah issued a summons seeking orders that the trial “be adjourned sine die, or in the alternative, to a date not before 1 November 2023”.
  5. On 20 April 2023, Mr Naqebullah gave notice that he “intends to make an application for referral of a question of law in this proceeding to the Court of Appeal pursuant to section 33 of the Charter of Human Rights and Responsibilities Act 2006 (Vic)”.

Application for referral of question to the Court of Appeal

  1. At the hearing on 21 April 2023, after hearing argument on the referral issue, I determined that the application for referral should be refused. I now give reasons for my decision.
  2. The “question” for referral was “whether section 137F of the Building Act 1993 (Vic) (Building Act) as applied and to be applied in this proceeding violates sections 8, 20 and 24 of the Charter of Human Rights and Responsibilities”.
  3. The notice of the application for referral stated that, “Section 137F discriminates without proper basis between people who were officers at relevant times of an entity engaged in the installation or use of non-compliant or non-conforming external wall cladding product on one hand, and others on the other hand, including:
    1. Persons or officers of entities producing non-compliant or non-conforming external wall cladding products;
    2. Persons or officers of entities distributing non-compliant or non-conforming external wall cladding products;
    3. Persons in a position of authority of an entity engaged in the installation or use of non-compliant or non-conforming external wall cladding products that are not officers;
    4. Officers of entities producing, distributing, installing, or otherwise commercially dealing with other potentially dangerous building materials.

Finally, section 137F of the Building Act does not state explicitly that it has retrospective, not retroactive, application”.

  1. In De Simone v. Bevnol Constructions and Developments Pty Ltd [2010] VSCA 231, the Court of Appeal discussed the matters which should be taken into account by a referring court or tribunal in its consideration under s33(1)(b) of the Charter as to whether “the question is appropriate for determination”, in this case, by the Court of Appeal.
  2. The matters, to which the Court of Appeal referred, included:
    1. “the [referring] court ... has an overriding discretion whether to refer the question” [at 35];
    2. the discretion is “unfettered” although “it is to be exercised in light of the relevant facts and circumstances including such considerations as may be contained in and drawn from the Charter” [at 35];
    3. the “nature and scope of the question and the circumstances in which it arose for consideration” should be taken into account [at 37];
    4. whether the court should, before referral, make a “judgment on the issues arising for determination” before the court so that the question for referral might be “conditioned on any facts found or assessed or conclusions of law reached by a primary judge” [at 38 and 40];
    5. to avoid a reference that involves a referred question of an “abstract nature” [34], a question that is “raised in the air” [37] or where the question “bypasses any facts and asks a purely hypothetical question” [40].
  3. In my view, the question proposed for referral by Mr Naqebullah is inappropriate, not simply because its wording might be “improved”, as counsel suggested, but because it offends the principles the Court of Appeal has determined are to be considered.
  4. I have refused the application primarily for the following reasons:
    1. the notice was given prematurely, without a determination of the adjournment application and upon the assumption that Mr Naqebullah’s application for an adjournment of the trial would be refused;
    2. the notice was based on issues not presently before the Court. The Charter issues were first raised in Mr Naqebullah’s affidavit sworn 11 April 2023 and only formalised in a draft Proposed Amended Defence filed on 20 April 2023, in respect of which no leave to deliver had been given;
    3. whilst the determination of the question of whether s137F of the Building Act has retrospective operation might, if decided in the negative, be a successful defence for Mr Naqebullah to the State of Victoria’s claim and other potential claims involving Shangri-La, the question is primarily one of statutory construction that is unlikely to be assisted by reference to the Charter provisions;
    4. the issues relating to Mr Naqebullah’s position as the sole director of Shangri-La and the defence of lack of “knowledge or consent” provided by s137F(4) of the Building Act, are issues that, whilst they may depend on the relevant construction of the sub-section, will primarily depend on evidence and findings of fact;
    5. Mr Naqebullah has not presently filed a witness statement on matters relating to the claim against him, as he was required to do by 14 March 2023. Further, his counsel anticipates that Mr Naqebullah may wish to lead expert evidence on the issue of what a “reasonable person in the position of Mr Naqebullah” should have known in 2014 when decisions were made about the appropriate cladding to be used on the project;
    6. the evidence given and the findings of fact by the referring court on these matters would be a desirable, and no doubt a necessary, pre-condition to any determination by the Court of Appeal. An adequate agreed statement of facts could not satisfactorily be prepared in advance of a trial.

Adjournment of the trial

  1. The application by Mr Naqebullah was made by summons dated 11 April 2023 supported by an affidavit of Mr Naqebullah and extensive written submissions by his counsel, Dr Wolff. In correspondence, the solicitors for the State of Victoria highlighted what were alleged to be deficiencies in Mr Naqebullah’s material supporting his application.
  2. At directions hearings on 12 and 14 April, these alleged deficiencies were discussed. As a consequence, further affidavits from Mr Naqebullah and his solicitor Daniel Prior were later filed together with a Proposed Amended Defence. This further material helpfully narrowed and clarified the matters in dispute. Answering material was also filed on behalf of the State of Victoria.
  3. The principal reasons advanced for an adjournment of the trial were:
    1. the time since the joinder of Mr Naqebullah as a defendant in the proceeding on 15 December 2022, and his service with papers on 13 January 2023, was too short for him to adequately prepare for a trial on 14 March (or the refixed date of 17 April 2023);
    2. the defence filed by Mr Naqebullah on 21 February 2023 was filed “in order to avoid default judgment”, and Mr Naqebullah wished to file an amended defence;
    3. Mr Naqebullah was facing a “novel” claim based on recent legislation that had not been the subject of any consideration by the courts;
    4. Mr Naqebullah had had many matters to deal with during this period, including:
      1. determining whether there was a conflict of interest between the interests of Shangri-La and his own and whether this necessitated his engagement of separate legal representation. This matter was on-going from at least mid-December 2022 until it was resolved on about 15 February 2023;
      2. the work involved in the liquidation of Shangri-La occupied him during 2023 culminating in the appointment of a liquidator and the actual liquidation on 31 March 2023. The “landscape” of the proceeding, and therefore the trial, was significantly affected by the liquidation of Shangri-La. The imperative of an “early” trial was removed as the apartment owners’ claims could not proceed;
      3. there were delays in instructing appropriate expert witnesses and formulating third party claims for contribution and indemnity;
      4. there was a substantial body of material filed by the State of Victoria in advance of the trial;
    5. Mr Naqebullah had been “frozen” by the demands of the litigation;
    6. Mr Naqebullah would potentially suffer substantial financial losses if he were unsuccessful in the proceeding, as the case might be a precedent for a number of similar actions he was likely to face. The possible claims against him may bankrupt him;
    7. the legislation which gave the State of Victoria the right to claim against him personally was new and complex;
    8. there would be minimal prejudice to the State of Victoria if the adjournment were granted.
  4. I propose to discuss the application by Mr Naqebullah under the following headings:
    1. Mr Naqebullah’s explanation for delays;
    2. the proposed amended defence;
    3. expert evidence;
    4. third party proceedings;
    5. prejudice to the parties;
    6. adjournment options;
    7. the liquidation of Shangri-La.

Explanations for delays

  1. The proceeding has a long and tortuous history. The proceeding was referred by VCAT to the County Court as part of a tranche of cases which had not been able to be heard during COVID. The tranche of about 80 cases was referred to the Court in early 2022. It was intended that the Shangri-La proceeding would be heard by a VCAT Vice President on the date listed by VCAT of 16 May 2022.
  2. Since that time there have been a series of interlocutory hearings heard by me. These hearings have mostly been related to the inadequacy of Shangri-La’s pleadings against 3 “building surveying parties” and 2 “fire engineer parties”. The most recent of these matters was determined by me with written reasons for decision delivered on 22 February 2023 ([2023] VCC 222). In those reasons I referred to the history of the proceeding and previous reasons for decision.
  3. The most relevant dates for present purposes are as follows:
  4. There are some general comments which might be made about the conduct of the proceeding by the respondents/defendants during this period:
    1. there has been no indication that any person, other than Mr Naqebullah, has provided instructions to Shangri-La’s lawyers;
    2. Mr Naqebullah’s solicitors and counsel are presently the same as those who acted for Shangri-La in the proceeding until its liquidation;
    3. Shangri-La repeatedly failed to comply with the requirements of Tribunal and Court orders which put at risk the trial commencement dates that had been fixed
    4. matters alleged in affidavits or argument during the interlocutory applications have often been misleading or exaggerated. This has also been reflected in the present applications.
  5. In these circumstances, it has been necessary to carefully examine the material filed in support of Mr Naqebullah’s adjournment application. There have been statements made concerning the problems faced by Mr Naqebullah, in the preparation for trial of his defence in the State of Victoria’s action against him, which have been problematic.
  6. I will briefly examine, both shortly and later in these reasons, certain specific matters, including:
    1. the available time Mr Naqebullah has had information about the claim by the State of Victoria;
    2. the time required by Mr Naqebullah to clarify whether there was a conflict of interest between him and Shangri-La which necessitated him having separate representation;
    3. the delay by Mr Naqebullah in finalising a proper defence to the State’s claim;
    4. delays in obtaining expert evidence;
    5. delays in formulating third party claims;
    6. the liquidation of Shangri-La.
  7. It is correct that Mr Naqebullah was served with the papers in the proceeding on 13 January 2023. He was, however, in attendance at the Zoom hearing on 15 December 2022 when he was joined as a party to the proceeding and matters were discussed about the action against him. Mr Naqebullah said that he attended the hearing in his “personal capacity as an observer”.
  8. In addition, the State of Victoria had apparently provided his solicitors with a draft of the statement of claim concerning him in October 2022. At the hearing on 3 November 2022, Mr Prior in an affidavit deposed to what Mr Naqebullah had informed him would be Mr Naqebullah’s attitude to certain matters if he were personally joined as a party. Shangri-La’s counsel, Dr Wolff, referred to these matters in his written submissions and stated “the joinder of Mr. Naqebullah will make it improbable that the hearing date in March 2023 can be maintained”.
  9. Notwithstanding these matters, Mr Naqebullah has deposed that, the question of separate representation for himself was not resolved until about 15 February 2023. Mr Naqebullah was represented by separate counsel (Mr Moon) and solicitors at the directions hearings on 1, 9, 10 and 28 February 2023. At those hearings, Mr Moon did not inform the Court that Mr Naqebullah would not be able to meet the trial date of 17 April 2023 or would be unable to comply with the orders proposed for interlocutory steps.
  10. Mr Prior’s firm apparently commenced acting for Mr Naqebullah shortly after 15 February 2023. On 21 February 2023, Prior Law gave notice to the Court that it was acting on behalf of Mr Naqebullah and filed his defence to the State of Victoria’s statement of claim. On 28 February 2023, Mr Prior swore an affidavit stating that the affidavit was filed on behalf of both Shangri-La and Mr Naqebulah. It referred to delays in engaging experts and Mr Prior stated that this would be finalised by “the end of this week” (by 3 March 2023). I will return to this matter shortly.
  11. In a letter from Prior Law to the solicitors for the State of Victoria dated 10 March 2023, an adjournment of the hearing was sought until “October 2023”. The letter commenced, “I refer to the above matter and confirm that my office now acts on behalf of Mr Obaid Naqebullah in his personal capacity”. The letter made the following further comments:

Proposed amended defence

  1. When Prior Law filed Mr Naqebullah’s defence on 21 February 2023, there was no indication that the time provided in the Court orders was inadequate. In counsel’s written submissions dated 12 April 2023, it was stated that “Obaid Naqebullah filed a defence in order to avoid default judgment”.
  2. In those written submissions, it was stated that Mr Naqebullah wished to raise a number of defences that had not been raised in the defence that had been filed in February. The further defences included:
  3. Further, it was claimed that the State of Victoria’s statement of claim was inadequate because it did not contain adequate particulars of matters such as the identification and location of the alleged combustible cladding installed at the project.
  4. Following discussion about these matters at the hearings on 12 and 14 April 2023, Dr Wolff agreed to file and serve a draft proposed amended defence. The draft, when delivered on 19 April 2023, contained references to the following matters:
  5. Senior Counsel for the State of Victoria, Mr Pane KC, submitted that there was little basis for any of these defences and that, accordingly, Mr Naqebullah should not be permitted to raise defences in this form. He submitted further that, if the amended defence were permitted, it essentially raised matters of law, with little need for further evidence, and accordingly the amended defence should not delay the early commencement of the trial.
  6. In my view, there was little to be gained by a further interlocutory dispute over the proposed amended defence, and that it should be permitted to be filed, without further argument, provided no further changes were made without leave of the Court.

Expert evidence

  1. The issue of expert evidence has been a troubling issue over the last 12 months of the proceeding. In March 2022, upon the hearing of an application by two of the building surveying parties to strike out Shangri-La’s statement of claim against them for lack of proper particulars, Shangri-La requested a lengthy period to replead, as its chosen building surveying expert was not then available and, when the expert would become available, he would need further time to prepare a report. As a consequence, Shangri-La was given a further period of about 4 months to 5 August 2022 to replead. In fact, the chosen expert did not prepare a report and a replacement expert was not engaged until about 26 July 2022. The amended pleading was essentially prepared without expert input and remained inadequate.
  2. This pattern of behaviour was repeated in relation to Shangri-La’s attempt to claim against a third building surveyor, Mr Kromidellis, and it became apparent that the third party claim against the fire engineering parties suffered from the same problem. On 2 March 2023, I made orders striking out Shangri-La’s claims against the building surveying parties and the fire engineering parties. My reason was that Shangri-La had neglected over many months to properly particularise its third party claims and it was only by striking out those claims and by limiting the trial fixed for 17 April 2023 to the claims by the owners corporation, the apartment owners and the State of Victoria against Shangri-La and Mr Naqebullah, that the trial date could be maintained.
  3. This situation arose basically as a result of Shangri-La’s failure to engage experts in a timely manner so that it was able to prosecute its third party claims. These were also the principal matters debated at the hearings in early February 2023.
  4. It is in this context that Mr Prior swore an affidavit on 28 February 2023 in which Mr Prior, “on behalf of both Shangri-La and Mr Naqebullah”, informed the Court that there had been further contact with Mr Shafto (a building surveying expert who had been engaged by Shangri-La on 26 July 2022 and 4 August 2022 and had prepared two reports on 1 and 4 August 2022) and also with Mr Salomonsson, a fire engineering expert, who had not been previously consulted.
  5. Although Mr Prior stated in the affidavit sworn 28 February 2023 that letters of engagement would be sent to both experts “by the end of the week”, this was not done for a further 5 weeks, on 6 April 2023. This was after the liquidation of Shangri-La and was pursued by the solicitors on Mr Naqebullah’s behalf. The matters that each of the experts was asked to advise on were related to the potential liability of the building surveying parties and the fire engineering parties for the use of the combustible cladding on the project.
  6. Although I indicated to Dr Wolff at the hearings on 11 and 21 April 2023 that Mr Prior should provide some explanation for the delay in engaging the experts, this was not referred to in Mr Prior’s affidavit sworn 19 April 2023. After I repeated the request at the hearing on 21 April 2023, Dr Wolff obtained instructions that Mr Shafto would not be available to deliver a report until 9 June 2023 when he returned from leave and it was not clear when Mr Salomonsson, would be able to report.
  7. The issue of expert’s reports, until the submissions on behalf of Mr Naqebullah at the hearing on 21 April 2023, was primarily related to the possible third party claims and to the “building” matters forming part of Mr Naqebullah’s defence of the State of Victoria’s claim.
  8. In Mr Prior’s affidavit sworn 19 April 2023, he expressed the view that the witness statement served by the State of Victoria on 14 March 2023 would oblige Mr Naqebullah to “to consider various new issues pertaining to expert and lay evidence including in relation to:
    (a) Whether expert evidence is required to assess whether the tender was normal/standard;

    (b) Whether expert evidence is required to assess whether the prices/costs were fair and reasonable;

    (c) Whether expert evidence is required to assess whether the scope of works was accurate and reasonable;

    (d) Whether expert evidence is required to assess whether the tender process was rigorous”.

  9. These matters were not pursued by Dr Wolff in his submissions on 21 April 2023.
  10. At the hearing on 21 April 2023, Dr Wolff informed the Court that the principal matter of expert evidence that would be pursued would relate to the question of Mr Naqebullah’s “knowledge” concerning combustible cladding in 2014, when it was specified as a material for the project. Dr Wolff said that it was contemplated that evidence might be led from an expert (of unnamed expertise) as to what a reasonable director of a building company who was also himself a registered builder would be expected to know in 2014 about the use of external cladding materials and their combustibility.

Proposed third party claims

  1. Until this possibility was raised, the central issue for determination in relation to the adjournment application related to the proposed third party claims. Although Dr Wolff conceded in argument on 21 April 2023 that Mr Naqebullah’s amended defence could not raise the issue of apportionment, he still pressed the appropriateness of adjourning the trial until third party claims could be pursued by Mr Naqebullah. Dr Wolff, however, agreed that any such claims would be limited to the building surveying parties and the fire engineering parties, and would not include the manufacturer/supplier of the cladding or the Victorian Building Authority.
  2. There were a number of concerns I raised with Dr Wolff:
  3. Dr Wolff submitted that I should be very reluctant to “lift the corporate veil” and that Mr Naqebullah was a separate person to Shangri-La. I should disregard Mr Naqebullah’s past actions as Shangri-La’s sole director and judge him only by his conduct as a litigant in his own right.
  4. In Lumbers v W Cook Builders Pty Ltd (in liquidation) [2008] HCA 27; (2008) 232 CLR 635 (“Lumbers”), a critical issue was whether the contracting party with the owners (the Lumbers) was the plaintiff, W Cook Builders Pty Ltd (“Builders”) or a related company W Cook & Sons Pty Ltd (“Sons”), the company with whom the Lumbers thought they were dealing, and who had orally agreed to construct their house.
  5. The plurality, Gummow, Hayne, Crennan and Kiefel JJ, at paragraph 96, stated that, “To say that ‘Builders did the work, and Sons did not’, elides a number of different ideas. Neither Builders nor Sons ‘did’ any work. Each is a corporation. The work that was done in the construction of the house, whether it was done at the building site or in an office, was done by individuals. Before deciding which company ‘did’ the work it would be necessary to identify for which company the relevant individuals were working”.
  6. In my view, there is no issue of going behind the corporate veil but simply of recognising the guiding hand behind the actions of Shangri-La since Mr Naqebullah became the sole director on 28 June 2013.
  7. It is necessary and appropriate to consider whether Mr Naqebullah has demonstrated that he might possibly have third party claims against the building surveying parties or the fire engineering parties, and if so, whether the trial of any third party proceedings should be heard at the same time as the trial of the proceeding between the State of Victoria and Mr Naqebullah.
  8. Dr Wolff submitted that this course was both necessary and desirable. Generally, this course is followed in order to avoid the duplication of hearings and the possibility of inconsistent findings and decisions. Further, if Mr Naqebullah were not permitted to raise third party claims in the present proceeding, it was suggested he may be met with an Anshun estoppel argument if he sought to raise the claims in a subsequent proceeding or proceedings.
  9. It is necessary to examine Mr Naqebullah’s counsel’s draft pleadings against the building surveying parties and the fire engineering parties.
  10. There are three building surveying parties, CODEHQ Pty Ltd (formerly Nicholson Wright Pty Ltd) (“Nicholson Wright”), the company retained by the developer to provide building surveying services, Jim Tsaganas, the building surveyor employee of Nicholson Wright who was appointed as a building surveyor for the project and who carried out early site inspections, and Mr Kromidelis, the building surveyor employee of Nicholson Wright who was appointed as a building surveyor for the works and who carried out later site inspections, issued amended building permits and issued the certificate of occupancy.
  11. It is alleged in the draft pleading against the building surveying parties that:
  12. As a result of these matters, it was alleged against Nicholson Wright, Mr Tsaganis and Mr Kromidelis that each of them owed a duty of care and a statutory duty to the original owner (the developer) and subsequent owners (the owners corporation and the apartment owners), which each of the third parties had breached (paras. 26 – 41).
  13. In the draft pleading, the following highlighted notes follow paras. 37 and 38:

“[NOTE: in the FASOC against Kromidellis, we allege that a duty of care was owed to Shangri-La as well. We did not allege that a duty of care was owed to Shangri- La by Nicholson Wright and/or Tsaganas. Please confirm whether we wish to maintain that Kromidellis owed Shangri-La (or Obaid) a duty of care]” (follows para. 37).

“[NOTE: same comment/question as above re duty of care – applies equally to

statutory duty.]” (follows para. 38).

  1. In para. 42ff, the draft pleading alleges that:
  2. The draft pleading against the fire engineering parties follows a similar format. The factual matters include:
  3. The draft pleading alleges that these matters give rise to the following causes of action by Mr Naqebullah against the fire engineering parties, as follows:

a. as against Integrated Fire Services:

i. in misleading and deceptive conduct;

ii. in negligence;

iii. for contribution and indemnity pursuant to s23B of the Wrongs Act;

b. as against Mr Verheijden:

i. involvement in misleading and deceptive conduct;

ii. in negligence;

iii. for contribution and indemnity pursuant to s23B of the Wrongs Act.

  1. The claim by Mr Naqebullah against Integrated Fire Services pursuant to the ACL is pleaded as follows:
  2. In the claim by Mr Naqebullah against Integrated Fire Services in negligence, paragraphs 28 to 31 of the draft pleading are highlighted and contain counsel’s comments about the relevance of the decision of Pullen v Gutteridge Haskins & Davey Pty Ltd [1993] VicRp 4; [1993] 1 VR 27 to a claim that a duty of care was owed to Mr Naqebullah personally to “inform” or “warn” him of the non-compliance of the cladding material.
  3. In the pleading of the claims by Mr Naqebullah against Mr Verheijden for his alleged involvement in misleading and deceptive conduct (paras. 32 to 35) and for negligent acts or omissions (paras. 36 to 38), there was a similar comment by counsel in the draft pleading. The question is asked, “[C]an we say that he [Mr Verheijden] knew or ought to have known that they [the cladding representation and non-disclosure] were false?”
  4. The draft pleading of the allegation of the claim in negligence by Mr Naqebullah against Mr Verheijden (paras. 36 to 38) is followed by the comment, “see comments above re duty of care”.
  5. The pleading of the claim for contribution and indemnity by Mr Naqebullah against each of the fire engineering parties pursuant to s23B of the Wrongs Act relies upon the following matters:
  6. It is clear that the proposed third party notices require further work and explanation from Mr Naqebullah as the reasons for variations from earlier drafts. This is particularly the case where the pleadings allege the “substance” of critical conversations in 2014. It would be appropriate for Mr Naqebullah to provide his best recollection of the conversations and any documents recently located by him which are relevant to the specific matters alleged.
  7. Dr Wolff also submitted that, if the State of Victoria’s claim against Mr Naqebullah proceeded separate to the third party claims, Mr Naqebullah may face a plea of Anshun estoppel if he were to later pursue the third parties with a claim for damages or seeking contribution and indemnity.
  8. In Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCA 28; (2015) 323 ALR 1, at paragraph 22, in the judgment of four of the five judges, (French CJ, Bell, Gageler and Keane JJ), the three forms of estoppel “recognised by the common law of Australia as having the potential to result from the rendering of a final judgment in an adversarial proceeding”, were discussed.
  9. The plurality at [22] stated that “...The third form of estoppel is now most often referred to as "Anshun estoppel" [after Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; [1981] HCA 45] ... That third form of estoppel is an extension of the first [cause of action estoppel] and of the second [issue estoppel]. Estoppel in that extended form operates to preclude the assertion of a claim, or the raising of an issue of fact or law, if that claim or issue was so connected with the subject matter of the first proceeding as to have made it unreasonable in the context of that first proceeding for the claim not to have been made or the issue not to have been raised in that proceeding. The extended form has been treated in Australia as a "true estoppel" and not as a form of res judicata in the strict sense. Considerations similar to those which underpin this form of estoppel may support a preclusive abuse of process argument”.
  10. The judgment, at [24], sought “to explain the relationship between the doctrine of estoppel and the doctrine of abuse of process as it has since come to be recognised and applied in Australia”. The judges stated that, “The doctrine of abuse of process is informed in part by similar considerations of finality and fairness. Applied to the assertion of rights or obligations, or to the raising of issues in successive proceedings, it overlaps with the doctrine of estoppel. Thus, the assertion of a right or obligation, or the raising of an issue of fact or law, in a subsequent proceeding can be simultaneously: (1) the subject of an estoppel which has resulted from a final judgment in an earlier proceeding; and (2) conduct which constitutes an abuse of process in the subsequent proceeding”.
  11. At [25], the judgment continued: “Abuse of process, which may be invoked in areas in which estoppels also apply, is inherently broader and more flexible than estoppel. Although insusceptible of a formulation which comprises closed categories, abuse of process is capable of application in any circumstances in which the use of a court’s procedures would be unjustifiably oppressive to a party or would bring the administration of justice into disrepute. It can for that reason be available to relieve against injustice to a party or impairment to the system of administration of justice which might otherwise be occasioned in circumstances where a party to a subsequent proceeding is not bound by estoppel”.
  12. I am not persuaded that any future claim by Mr Naqebullah against third parties would be barred. If there is such a risk, it essentially would arise as a result of the conduct of Shangri-La in the proceeding against it, and more recently after Mr Naqebullah was joined as a party. I do not, therefore, consider that the trial of the proceeding by the State of Victoria against Mr Naqabullah should be delayed further because of this matter.
  13. At present, the pleadings against the building surveying parties and the fire engineering parties are in draft form only. Shangri-La first filed points of claim against Nicolson Wright and Mr Tsaganis in the Tribunal on 22 December 2021 and that pleading, and subsequent pleadings by Shangri-La against those parties, and later against Mr Kromidelis and the fire engineering parties, have been the subject of a number of interlocutory hearings between March 2022 and February 2023.
  14. In written reasons for decision on 13 April 2022 ([2022] VCAT 400), 4 October 2022 ([2022] VCAT 1140), 3 November 2022 ([2022] VCAT 1247) and 22 February 2023 ([2023] VCC 222), I have discussed at length the inadequacies of those pleadings. On 22 February 2023, at paragraphs 72 to 73 the reasons, I set out matters I suggested should be satisfied in draft pleadings and affidavit material if there were to be a further application by Shangri-La to join those parties as third parties. Those comments are equally applicable to any future application by Mr Naqebullah.

Prejudice to the parties

  1. Mr Naqebullah is obviously not ready to defend the claim by the State of Victoria against him. That is due in large part to the approach Mr Naqebullah has taken to the litigation, both as the sole director of Shangri-La and on his own behalf. The proceeding is undoubtedly a serious matter for him as the litigation concerns novel legislation and a relatively large sum of money.
  2. With the liquidation of Shangri-La, the Court can do no more to bring the litigation by the owners corporation and the apartment owners closer to resolution or to otherwise address the prejudice they have suffered as a result of the past delays. However, the liquidation does mean that the proceeding is now focused solely on Mr Naqebullah and no longer on Shangri-La.
  3. The State of Victoria will suffer the inconvenience and expense of any claimant in the Court. However, it is better placed than most litigants to deal with that. Nevertheless, it is appropriate that this proceeding should be brought to trial within a reasonable time.
  4. The building surveying parties and the fire engineering parties have been previously involved in the litigation over a considerable period. They have received a number of costs orders made in their favour and against Shangri-La which they will have difficulty recouping. I consider that the Court should make appropriate orders to ensure that a similar position does not result from the proceeding involving Mr Naqebullah.
  5. In reaching my decision, I have applied the directions provided by the Court of Appeal in Northern Health v Kuipers [2015] VSCA 172 particularly at the parts of the judgment I referred to at paragraphs 93 to 94 of my reasons for decision dated 22 February 2023.

Adjournment options

  1. The options open to the Court in refixing the trial of the proceeding between the State of Victoria and Mr Naqebullah are as follows:
    1. commence the hearing in early May 2023, as a special fixture;
    2. refix the hearing on 31 July 2023; the next available date available through Listings;
    3. delay refixing the hearing until Mr Naqebullah has completed all the interlocutory steps he wishes to take, including joining third parties.
  2. The State of Victoria would prefer the first option and Mr Naqebullah the last option. In my view, the matter requires a fixed hearing date, and the trial of the proceeding between the State of Victoria and Mr Naqebullah should, if necessary, be heard and determined before any possible third party claims. The 31 July hearing date will allow a reasonable time for Mr Naqebullah to obtain appropriate expert evidence.

Liquidation of Shangri-La

  1. An issue arose concerning the liquidation of Shangri-La. Ultimately, I consider that the matters raised might go to the credibility of Mr Naqebullah. Invariably these matters are difficult to determine upon an interlocutory examination. In reaching my decision on the adjournment application, I have not found it necessary to reach any concluded views. I propose to briefly record how the issues were raised during the course of the application.
  2. In summary, the relevant matters were as follows:

Proposed orders

  1. In the circumstances, the following orders should be made:
    1. The trial of the proceeding between the thirteenth plaintiff, the State of Victoria, and the second defendant, Obaid Naqebullah, is refixed to commence on 31 July 2023 with an estimate of 5-10 hearing days.
    2. Leave to the parties, pursuant to the liberty to apply hereby reserved, to make application for the commencement of the hearing to be deferred by no more than 5 sitting days if the estimate of time for the hearing is reduced to no more than and the application is made in a timely manner and the Court listings can accommodate the deferral to commence the trial on 7 August 2023.
    3. On or before 4:00 pm on XX May 2023, leave to the second defendant to file and serve an Amended Defence in the form of the document dated 20 April 2023. If the second defendant wishes to file an amended pleading which differs from the numbered paragraphs of the draft document, he must first obtain the written consent of the thirteenth plaintiff, or failing that, the leave of the Court.
    4. On or before 4:00 pm on XX May 2023, leave to the thirteenth plaintiff to file and serve a reply.
    5. On or before 4:00 pm on XX May 2023, the second defendant must file and serve any expert reports upon which he intends to rely.
    6. On or before 4:00 pm on XX June 2023, the thirteenth plaintiff must file and serve any responsive expert reports.
    7. No third party notice shall be filed or served by the second defendant without the leave of the Court.
    8. Any application by the second defendant to file and serve a third party notice must be served on the proposed third parties and be supported by affidavit material that, as well as matters which would ordinarily be required, must include:
      1. a draft proposed fully particularised statement of claim;
      2. an affidavit by the second defendant, or if the second defendant does not have direct personal knowledge of a particular matter, an affidavit by another person who does have that knowledge, or if the matter involves expert opinion, by reference to the relevant expert report;
      3. any supporting affidavit must:
        1. provide full details of any contract, retainer, engagement or other arrangement alleged in the draft statement of claim as involving the party proposed to be joined, and
        2. must exhibit all documents referred to in the proposed pleadings or documents that are directly related to those referred to documents.
    9. [the exchange of witness statements].
    10. [the usual pre-trial directions].
    11. Reserve liberty to apply.
    12. [Costs].
    13. The second defendant’s application for the referral of a question of law in this proceeding to the Court of Appeal pursuant to section 33 of the Charter of Human Rights and Responsibilities Act 2006 (Vic) is refused.
    14. By 4:00 pm on 3 May 2023, each party must file and serve written submissions on the proposed orders, the costs of the second defendant’s applications and the thirteenth plaintiff’s costs thrown away by reason of the adjournment of the trial and advise whether the party wishes to be heard further on these matters.
  2. I propose to publish these reasons and seek the views of the parties as to the appropriate form of the orders proposed, and on the question of costs.

- - -
Certificate

I certify that these 26 pages are a true copy of the judgment of His Honour Judge Anderson delivered on 28 April 2023.

Dated: 28 April 2023

Nikki Thomson
Associate to His Honour Judge Anderson

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