203 Castlereagh Street Pty Limited v Skybloo Holdings Pty Limited

Reconstitution of the Appeal Panel

1. After the Appeal Panel delivered its decision on the substantive appeal, but before the application for costs was determined, Senior Member Molony became unavailable. In these circumstances, it was necessary to reconstitute the Tribunal to determine the costs application. As required by s 52 of the NCAT Act, the Tribunal afforded the parties the opportunity to make submissions concerning the reconstitution proposed by the President. Having taken those submissions into account, the President decided to reconstitute the Appeal Panel for the purposes of determining the costs application in the appeal with me sitting alone.

Background

1. The parties to this dispute have been engaged in proceedings arising out of the disputed termination of a retail lease. The dispute involved a claim, by the former tenant (Castlereagh), that the landlord (Skybloo) engaged in unconscionable conduct relating to the sale of a business that Castlereagh had formally conducted in Skybloo's retail premises. At a certain stage in the proceedings, the Tribunal at first instance directed that the final determination of the proceedings be made on the papers, that is, without any further oral hearing. As has been found in the substantive decision on appeal, Castlereagh was not provided with an appropriate opportunity to make submissions upon the question of whether the proceedings should be determined in the absence of a hearing. The Appeal Panel, as previously constituted, found that there was a failure to accord procedural fairness arising out of the direction that the matter be determined solely on the papers, in circumstances where such course was opposed by Castlereagh. We made the following orders: (1) The decisions under appeal are set aside. (2) The proceedings be remitted to the Tribunal for hearing by Senior Member Bluth. (3) Costs reserved.
2. An application in respect of the costs of the appeal has now been made and it is this application which is the subject of this decision.

Issues

1. The principal issues arising on this application for costs are: 1. What is the relevant provision under which a costs order should be made? 2. What, if any, costs order should be made? 3. If Skybloo is ordered to pay the appellant's costs, should a fixed sum costs order be made?

What is the relevant provision under which a costs order should be made?

1. The general provisions concerning costs in the Tribunal are found in s 60 of the NCAT Act, which provides: "60 Costs (1) Each party to proceedings in the Tribunal is to pay the party's own costs. (2) The Tribunal may award costs in relation to proceedings before it only if it is satisfied that there are special circumstances warranting an award of costs. (3) In determining whether there are special circumstances warranting an award of costs, the Tribunal may have regard to the following: (a) whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings, (b) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings, (c) the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law, (d) the nature and complexity of the proceedings, (e) whether the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance, (f) whether a party has refused or failed to comply with the duty imposed by section 36 (3), (g) any other matter that the Tribunal considers relevant. (4) If costs are to be awarded by the Tribunal, the Tribunal may: (a) determine by whom and to what extent costs are to be paid, and (b) order costs to be assessed on the basis set out in the legal costs legislation (as defined in section 3A of the Legal Profession Uniform Law Application Act 2014) or on any other basis. (5) In this section: costs includes: (a) the costs of, or incidental to, proceedings in the Tribunal, and (b) the costs of, or incidental to, the proceedings giving rise to the application or appeal, as well as the costs of or incidental to the application or appeal."
2. Under s 60, as a general rule, costs can only be ordered if the Tribunal is satisfied that there are "special circumstances" warranting such an award, within the meaning of s 60(2).
3. Section 60 is not, however, the only relevant provision concerning costs. Section 60 is found in Pt 4 of the NCAT Act and the operation of each section in that Part is subject to other certain other legislative provisions, as a result of s 35 of the NCAT Act. Section 35 provides: "35 Application of Part Each of the provisions of this Part [Pt 4] is subject to enabling legislation and the procedural rules."
4. The "procedural rules" are defined in s 4(1) of the NCAT Act as meaning each of: "(a) the Tribunal rules, (b) the regulations in their application to the practice and procedure of the Tribunal."
5. The "Tribunal rules" are defined in s 4(1) of the NCAT Act as meaning: "the rules of the Tribunal made by the Rule Committee."
6. The Rule Committee of the Tribunal has made the Civil and Administrative Tribunal Rules 2014 (the NCAT Rules). The relevant rules relating to costs are rr 38 and 38A.
7. Rule 38 provides: "38 Costs in Consumer and Commercial Division of the Tribunal (1) This rule applies to proceedings for the exercise of functions of the Tribunal that are allocated to the Consumer and Commercial Division of the Tribunal. (2) Despite section 60 of the Act, the Tribunal may award costs in proceedings to which this rule applies even in the absence of special circumstances warranting such an award if: (a) the amount claimed or in dispute in the proceedings is more than $10,000 but not more than $30,000 and the Tribunal has made an order under clause 10 (2) of Schedule 4 to the Act in relation to the proceedings, or (b) the amount claimed or in dispute in the proceedings is more than $30,000.
8. Rule 38A provides: 38A Costs in internal appeals (1) This rule applies to an internal appeal lodged on or after 1 January 2016 if the provisions that applied to the determination of costs in the proceedings of the Tribunal at first instance (the first instance costs provisions) differed from those set out in section 60 of the Act because of the operation of: (a) enabling legislation, or (b) the Division Schedule for the Division of the Tribunal concerned, or (c) the procedural rules. (2) Despite section 60 of the Act, the Appeal Panel for an internal appeal to which this rule applies must apply the first instance costs provisions when deciding whether to award costs in relation to the internal appeal.
9. Rule 38A applies to the present appeal because: 1. It was lodged after 1 January 2016; and 2. In this appeal, the first instance cost provisions differed from those set out in s 60 because of the operation of the "procedural rules" in that: 1. the proceedings at first instance were for the exercise of functions under the Retail Leases Act 1994 (NSW) (the RL Act); 2. Schedule 4, cl 3(1) of the NCAT Act allocates such proceedings to the Consumer and Commercial Division; 3. thus, in those proceedings "the first instance costs provisions" included r 38 of the NCAT Rules, which modifies the operation of s 60.
10. In the present appeal, r 38A(2) requires the Appeal Panel to apply the first instance costs provisions, which is s 60 as relevantly modified by r 38(2), when deciding whether to award costs of the appeal.
11. Rule 38(2) allows the Appeal Panel to award costs in the absence of special circumstances warranting such an award if the requirement in par (b) of that subrule is satisfied. In other words, if "the amount claimed or in dispute in the proceedings is more than $30,000", the Appeal Panel may award costs of the appeal even if it is satisfied that there are no special circumstances.
12. It was not in dispute between the parties that the amount claimed or in dispute in the appeal relevantly exceeded $30,000.
13. Thus, r 38A(2) requires the Appeal Panel to apply r 38(2)(b) in the circumstances under consideration. Consequently, the power to award costs in this appeal is not confined by s 60(1) or (2). Rather I have an unfettered discretion in relation to costs, although that discretion must be exercised judicially.

What, if any, costs order should be made?

1. In Lam v Steve Jarvin Motors Pty Ltd [2016] NSWCATAP 186, the Appeal Panel held, at [206] - [207], that in circumstances where r 38(2)(b) is applicable, the principle stated by McHugh J in the High Court in Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59 should be applied in the Tribunal. His Honour stated at 568: "even when the discretion [to award costs] is uncontrolled, civil courts act on the basis that a successful party has a reasonable expectation of obtaining an order for costs and that the discretion to refuse to award costs should not be exercised against a successful party except for reason connected with the case".
2. Thus, on this appeal, it is appropriate that I should apply the general rule that costs follow the event, unless there are circumstances connected with the appeal which would justify a different order: Lam v Steve Jarvin Motors Pty Ltd [2016] NSWCATAP 186 at [212].
3. Castlereagh contended, in effect, that there was nothing connected with this appeal that would justify denying Castlereagh a costs order in its favour, as it had been successful on the appeal.
4. Skybloo submitted, as follows, that there were circumstances that justified an order other than that costs follow the event: "12. The circumstances, and the order, are: (a) [Skybloo] relies on the findings in the Appeal Decision at [48] - [62] and says that in making a decision on costs, the Appeal Panel should give weight to the error of Law, as affecting both parties. (b) Reflecting the error of Law affecting both parties in the situation in this appeal, there is general Law authority that the appropriate order is that the costs below and the costs of the appeal are costs in the rehearing: Knudsen v Kara Kar Holdings (No 2) (2000) 52 NSWLR 254. That order is an order which could be made in this appeal, except it is not sought by [Castlereagh]. (c) It is pointed out that in applying the general Law, the Court is entitled to take matters of conduct which might be viewed as justifying a different order to the position that the costs are in the cause or costs in the rehearing: Brittain v The Commonwealth of Australia (No 2) [2004] NSWCA 427. To the extent that [Castlereagh] has raised such matters they are addressed below. (d) A significant factor in respect of [Skybloo] in the situation in this appeal, is even if conduct matters are taken into account against the type of order in Knudsen no application is available to the parties under the Suitors Fund Act 1951. The Tribunal cannot make a recommendation in respect of an application: Fathullah v Varma (RLD) [2013] NSWADTAP 39 at [ 173]. That decision was in relation to the Appeal Panel's predecessor tribunal the ADT Appeal Panel, and [Skybloo] invites the Appeal Panel to explore whether the Suitors Fund Act might apply to the Appeal Panel 13. [Skybloo] submits that having regard to the above submissions the appropriate order for the Appeal Panel to make, are:- (a) An order that the costs below and the costs of the appeal are the costs in the rehearing; or (b) alternatively, there should be no orders as to costs." [footnotes omitted]
5. In its submissions in reply, Castlereagh relevantly contended that: 1. The error of law at first instance only affected Castlereagh because Skybloo consented to the hearing being on the papers and contacted the registry to ensure that the oral hearing date was vacated. 2. Knudsen is not authority for the proposition for which Skybloo contends in par 12(b) of its submissions. Further, the circumstances in the present case are different from Knudsen in that Skybloo made no concession in this appeal and made various submissions opposing the upholding of the appeal which were rejected by the Appeal Panel. 3. Unavailability of the Suitors Fund Act in appeals within NCAT does not justify departure from the usual order that costs follow the event.
6. The error of law as found by the Appeal Panel can be seen as affecting Castlereagh as a result of its opposing a hearing on the papers and the Tribunal denying its right to make submissions on that issue. Skybloo was not similarly affected. I am not satisfied that the nature and effect of the error made by the Tribunal below provides a sound basis for denying Castlereagh its costs in the circumstances of this present appeal, as contended by Skybloo.
7. I am also of the view that the decision of Austin J in Knudsen v Kara Kar Holdings (No 2) (2000) 52 NSWLR 254 does not require or justify my departing from the usual order, in this appeal. That matter had what was described as "a tangled history" (at 255). There were a number of hearings at first instance and eventually an appeal to the Court of Appeal, which found that the proceedings before the trial Judge had miscarried. The miscarriage principally occurred because the defendants had, in fact, taken a certain point in the hearing at first instance, which the Judge had not properly considered. Although there was some confusion concerning the orders actually made by the Court of Appeal, those orders were found to have included an order that: "the costs of the notices of motion for leave to appeal and extension of time to appeal and the appeals be costs in the rehearing."
8. Austin J's judgment mainly concerned what it meant to say that the costs of the appeal "be costs in the rehearing".
9. In these circumstances, it does not appear to me that Knudsen is authority for the proposition that where the tribunal at first instance makes an error of law, whether affecting both or only one party, the appropriate order is that the costs below and the costs of the appeal are costs in the rehearing. No doubt this is a type of order that may be made where a decision is set aside on appeal. Nonetheless, Austin J's decision does not establish that such an order is required or appropriate in the present appeal.
10. Finally, it is correct that s 6 of the Suitors Fund Act does not enable the Appeal Panel of the Tribunal to grant an indemnity certificate in respect of any appeal before it. This consideration applies, however, to every appeal heard in the Appeal Panel. It does not, in my view, constitute a proper basis for refusing to make the usual order that costs should follow the event in a case such as the present.
11. For these reasons, in my view, the proper approach is for Skybloo to be ordered to pay Castlereagh's costs of the appeal.

Should a fixed sum costs order be made?

1. On the basis that it obtained a costs order in its favour, Castlereagh submitted that the Appeal Panel should make a fixed sum costs order rather than ordering that costs be as agreed or assessed.

Parties' Submissions

1. Castlereagh submitted that a fixed sum costs order would give effect to the objectives and guiding principle found in s 36 of the NCAT Act. It also relied upon a number of earlier decisions of the Appeal Panel of the former Administrative Decisions Tribunal (ADT). These decisions concerned similar costs provisions in the ADT legislation and supported the proposition that it is desirable and encouraged to bring finality to proceedings "by ordering costs to be fixed rather than left floating by the formula 'as agreed or assessed'", see for example: Fathullah v Varma (RLD) [2013] NSWADTAP 39 at [148]. Castlereagh also put certain information before the Tribunal in order to demonstrate the reasonableness of the amounts claimed by way of costs.
2. Skybloo opposed the making of a fixed costs order. Among other things, it challenged the charge out rates submitted by Castlereagh for Mr Soltan's work on various bases. In addition, Skybloo effectively submitted that there was insufficient material on which the Appeal Panel could properly assess what a proper fixed sum costs order should be in the present appeal and that the appropriate course was for costs to be assessed by a costs assessor.

Consideration

1. In s 60(4)(a) of the NCAT Act, the Tribunal is given discretion to determine "to what extent costs are to be paid". In my view, this empowers the Tribunal to make a fixed sum costs order, if that is an appropriate course.
2. Similar wording is found in the Civil Procedure Act 2005 (NSW) (the CP Act). New South Wales Courts are empowered to make gross sum orders by s 98 of the CP Act, which relevantly provides: "(1) Subject to 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 … (4) 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 to be entitled to: … (c) a specified gross sum instead of assessed costs, or … …"
3. As the introductory words of subs (4), "[i]n particular", make clear, the Courts' power to determine "to what extent costs are to be paid" include the power to make a gross sum, or fixed sum, costs order. The fact that s 60(4) of the NCAT Act does not include any particularisation equivalent to that found in s 98(4) of the CP Act should not be taken as indicating that the Tribunal does not have power to make a fixed sum costs order when determining "to what extent costs are to be paid".
4. Given the similarity in wording between s 60(4)(a) of the NCAT Act and s 98(1)(b) of the CP Act, the Courts' decisions concerning gross sum costs orders provide helpful guidance for the Tribunal when determining whether to make a fixed sum costs order, as sought in this case.
5. The principles concerning when a Court might make a gross sum costs order are set out in a number of recent Court of Appeal decisions, including: Hamod v State of New South Wales [2011] NSWCA 375 at [813]ff; eInduct Systems Pty Ltd v 3D Safety Services Pty Ltd (No 2) [2015] NSWCA 422 at [8]ff and [30]; and Kostov v Zhang (No 2) [2016] NSWCA 279 at [19]ff.
6. These principles, relevantly adapted to the circumstances of the Tribunal, include: 1. A fixed sum costs order involves a departure from the usual process by which costs are assessed in accordance with the statutory procedures now relevantly found in the Legal Profession Uniform Law Application Act 2014 (NSW) (especially Pt 7 dealing with "ordered costs") and the Legal Profession Uniform Law (NSW), eInduct Systems at [8]; 2. A fixed sum costs order may be appropriate where: 1. the sum of costs in question is relatively modest, eInduct Systems at [30]; 2. a party obliged to pay the costs would not be able to meet a liability of the order likely to result from the assessment, Hamod at [813], [816] and [817], eInduct Systems at [30]; 3. the assessment of costs would be protracted and expensive, Hamod at [813] and [817]; and/or 4. the case was complex, Hamod at [815]-[817]; 1. Sections 36(1) and (4) of the NCAT Act (which can be seen as equivalent to those in ss 56(1), 57(1)(d) and 60 of the CP Act) suggest that the following factors merit particular consideration: 1. the relative responsibility of the parties for the costs incurred; 2. the degree of any disproportion between the issue litigated and the costs claimed; 3. the complexity of the proceedings in relation to their cost; and 4. the capacity of the unsuccessful party to satisfy any costs liabiltity, Hamod at [816], Kostov at [22]. 1. An order for fixed sum costs should be based on an informed assessment of the actual costs, having regard to the information before the Tribunal. Furthermore, the approach taken to estimate the costs must be logical, fair and reasonable. This may involve an impressionistic discount of the costs actually incurred in order to take into account the contingencies that would be relevant in any formal costs assessment, Hamod at [820]; 2. The power to make a fixed sum costs order should only be exercised when the Tribunal considers that it can do so fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available, Hamod at [813], Kostov at [23];
7. Examples of the type of material that should be available if a fixed sum costs order is to be made can be found in the decisions in Colquhoun v District Court of New South Wales (No 2) [2015] NSWCA 54 at [7] and SAB Closed 1 Pty Ltd v Bees & Honey Pty Ltd; Bees & Honey Pty Ltd v SAB Closed 1 Pty Ltd [2015] NSWSC 1162 at [10]. The types of supporting material usually required include: 1. the timing and nature of costs incurred, including details of the work done, the hours worked, the hourly rates actually charged and, in the case of counsel's fees, similar details concerning the work done by counsel; 2. the rates at which counsel, other lawyers and other professional advocates, if relevant, charge; and 3. the amount likely to be recoverable on assessment in the event that that took place, which may be established by "objective arm's length evidence from a costs assessor" (to use the language of Stevenson J in SAB Closed 1 at [10].
8. Some decisions of the former ADT should also be considered. In B & L Linings Pty Ltd v Chief Commissioner of State Revenue (No 6) (RD) [2012] NSWADTAP 26, the Appeal Panel of the ADT decided in a retail lease matter that the appropriate course was to order that costs be as agreed or assessed and not to make a fixed sum costs order. Nonetheless, at [115] the Appeal Panel said: "Our view on assessment by the Tribunal is as follows. We recognise that the Tribunal may and in practice does determine the amounts payable pursuant to costs orders made under section 88 of the ADT Act. But it only takes this step when the determination is comparatively simple. In proceedings that have been as lengthy and as complex as these proceedings, it does not purport to have the necessary expertise."
9. This approach is consistent with the approach referred to by the Court of Appeal in eInduct Systems at [30], mentioned above. As to other aspects of the decision in B & L Linings, I would reserve those questions for proceedings in which it is necessary to decide them. Accordingly, my decision should not be taken as adopting all of the views expressed by the Appeal Panel of the ADT in that decision.
10. In Fathullah v Varma (RLD) [2013] NSWADTAP 39 at [148], the Appeal Panel of the ADT held: "The present proceedings, in our opinion, are akin to those described by the Appeal Panel at paragraph [115] [of B & L Linings]. As Mr Soltan submitted, a costs order stipulating a fixed amount is preferable to an order for the payment of costs 'as agreed or assessed'. As he pointed out, the Appeal Panel, hearing an appeal from the Retail Leases Division, said this in Trowbridge v Morris (RLD) [2010] NSWADTAP 70 at [33]:- '33 We would encourage Tribunal members to make fixed sum costs orders in cases where neither party is legally represented as is the case here. We think that orders using the 'as agreed or assessed' formula are best confined to cases with lawyers on both sides.'"
11. In the light of the principles set out above, I do not think this statement on fixed sum costs, if it is intended to be generally applicable, is correct. Tribunal Members should not generally be encouraged to carry out the work of costs assessors by making fixed sum costs orders. The circumstances most likely to arise in the Tribunal where it might be appropriate for the Tribunal itself to assess costs will usually be where the costs are very modest and the assessment is simple. This might be the case, for example, where the parties are self-represented and not entitled to recover work done in preparing their case, and the only recoverable costs are the filing fee and other small, non-contentious out of pocket expenses, see generally: Gino Dal Pont, Law of Costs (3rd ed, 2013) at 171-174.
12. Finally, in my view there are no sufficient reasons why orders using the "as agreed or assessed" formula should be confined to cases with lawyers on both sides. It is not appropriate for the Tribunal to apply such a general rule.
13. The present appeal is not one in which it can be said that the costs claimed are small or modest, especially in the context of the type of matters that usually come before the Tribunal. There is no suggestion that Skybloo would not be able to meet a liability of the order likely to result from the assessment of any ordered costs. Nor is it likely that the assessment of costs in a matter such as the present would be protracted and expensive. The appeal was not particularly complex.
14. The just, quick and cheap resolution of the real issues in these proceedings does not require me to make a fixed sum costs order rather than ordering that the costs be as agreed or assessed. Similarly, the obligation in s 36(4) to implement the practice and procedure of the Tribunal in such a way as to facilitate the resolution of the issues between the parties in such a way that the cost to the parties and the Tribunal is proportionate to the importance and complexity of the subject-matter of the proceedings does not require or support the making of a fixed sum costs order. The "real issues" in the context of guiding principles in s 36(1) and the "subject matter of the proceedings" in s 36(4) should not be taken to refer to the question of costs, see: eInduct Systems Pty Ltd v 3D Safety Services Pty Ltd (No 2) [2015] NSWCA 422 at [3].
15. Considerations based upon s 36(1) and (4) of the NCAT Act may support the making of a fixed sum costs order as explained above. In the present appeal, however, the relative responsibility of the parties for the costs incurred does not weigh heavily either way. There is no obvious disproportion between the issue litigated and the costs claimed. The proceedings were not particularly complex in relation to their costs. As has already been noted, Skybloo has not been shown to lack capacity to satisfy any costs liability.
16. Consequently, ss 36(1) and (4) do not, in the present appeal, require or support the making of a fixed sum costs order, as sought by Castlereagh.
17. I also bear in mind that the power to make a fixed sum costs order should only be exercised if I can do so fairly between the parties. On the material presently before me and in the light of the specific submissions made by Skybloo as to the inadequacy of that material, I do not have sufficient confidence that I could arrive at an appropriate sum that would be fair to both parties.
18. In addition, assuming that costs awarded in favour of Castlereagh would include the amounts charged in respect of Mr Soltan's work (which I am not called upon to decide in this matter), I am unable to assess with confidence what charges would be "a fair and reasonable amount of costs for [his] work" (to use the expression found in s 76 of the Legal Profession Uniform Law Application Act) from the materials before me. It is not obvious to me that the hourly rates charged by a senior associate or another solicitor in a solicitor's firm provide an appropriate comparator or basis upon which to assess the fairness and reasonableness of the rates charged for work done by a non-lawyer advocate. I am also not confident as to how the training, experience, qualifications, insurance position and professional and ethical duties of an advocate such as Mr Soltan compare with those of a senior associate or any other lawyer or non-lawyer advocate. Nor am I confident as to the impact this should have on any assessment of fair and reasonable hourly rates for Mr Soltan's work. These matters are appropriately left to a costs assessor, in a matter such as the present.
19. For all of these reasons, I am not prepared to make a fixed sum costs order involving, as it would, a departure from the usual process by which costs are assessed in accordance with the statutory procedures now relevantly found in the legal costs legislation (as defined in s 3A of the Legal Profession Uniform Law Application Act).

Conclusion

1. In summary, I am of the view that Skybloo should be ordered to pay Castlereagh's costs but I should not make a fixed sum costs order. Accordingly, the order of the Appeal Panel is: 1. The respondent is to pay the appellant's costs of this appeal as agreed or assessed on the basis set out in the legal costs legislation (as defined in section 3A of the Legal Profession Uniform Law Application Act 2014). I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 13 February 2017