Actol Pty Ltd v Pro9 Systems Pty Ltd

NCAT Appeal Panel|2022-06-14

Introduction

This appeal concerns home building proceedings HB 20/35836 (original proceedings). In those proceedings the appellant (Actol) was the applicant who claimed damages against the respondents, Pro9 Systems Pty Limited (Pro9) and one of its Directors, Mr Jukic.
The original proceedings were heard in 2021 and the Tribunal made the following orders on 27 January 2022: 1 Pro9 Systems Pty Ltd is to pay Actol Pty Ltd $92,297.86 immediately. 2 As against Daniel Jukic, the application is dismissed. 3 Any submissions the respondent wishes to make in relation to costs are to be filed and served by 10 February 2022. 4 Any submissions for the applicant in response are to be filed and served by 24 February 2022. 5 Any such submissions are to indicate whether it is agreed that the Tribunal should dispense with a hearing on the question of costs.
The Tribunal published reasons for its decision (primary decision).
Following the primary decision various parties made applications for costs. On 28 February 2022 the Tribunal made the following costs orders in connection with the costs applications: 1. The Tribunal dispenses with a hearing on the question of costs, pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013. 2. The first respondent is to pay two-thirds of the applicant's costs of its case against the first respondent, on the ordinary basis, as agreed or assessed. 3. The applicant is to pay the second respondent's costs, on the ordinary basis, as agreed or assessed.
The Tribunal published reasons for its decision on costs (costs reasons).
Actol appeals order 3 made 28 February 2022, namely that it pays the costs of Mr Jukic on an ordinary basis as agreed or assessed.

Notice of Appeal

The Notice of Appeal was filed on 28 March 3022. The appeal was filed in time.
As stated above, the appeal was in respect of order 3, namely, that Actol pay Mr Jukic's costs on an ordinary basis as agreed or addressed.
The orders sought in the appeal are as follows: 1. Leave to Appeal is granted. 2. The Appeal is upheld in respect to Order 2 made on 28 February 2022 in the Tribunal Proceedings constituted by File Number HB 20/35836 (the First Instance Proceedings) 3. Order 3 in the First Instance Proceedings be set aside. 4. Order 3 in the First Instance Proceedings is replaced with an order that the First Respondent is to pay the Legal Costs of the Second Respondent on the ordinary basis, as agreed or assessed in the First Instance Proceedings. 5. In the alternative to the Proposed Order 4 of the Appeal Panel above, that order 3 of the First Instance Proceedings is replaced with an Order that the Second Respondent is to bear its own costs of the First Instance Proceedings. 6. Costs of the appeal to be reserved, pending any challenge by the Second Respondent in the First Instance Proceedings.
The grounds of appeal are as follows: 1. Order 3 of the Tribunal dated 28 February 2022 was not fair and equitable (Jukic Cost Order). 2. The Tribunal failed to provide proper reasons when [it] ordered Actol to pay the Jukic Cost Order when the Tribunal had not determined 2 of the 3 claims for alleged breach of Section 4 and 18 of the Australian Consumer Law against Pro9, 3. The Tribunal took into account an irrelevant consideration, when it ordered Actol to pay the Jukic Cost Order in circumstances where the Tribunal had not determined 2 of the 3 claims for alleged breach of Section 4 and 18 of the Australian Consumer Law against Pro9 and then the accessorial liability (or not) of Jukic. 4. The Tribunal's decision to make the Jukic Cost Order in circumstances where the Tribunal did not determine 2 of the 3 claims for alleges breach of Section 4 and 18 of the Australian Consumer Law because of the success of Actol against Pro9 in the proceedings based upon claims in Contract was so unreasonable [no] decision maker would have made it. 5. The Tribunal's decision to make the Jukic Cost Order when it had not [determined] the accessorial liability of Jukic was so unreasonable that no reasonable decision maker would have made it. 6. The manner in which the Tribunal went about the fact-finding process and failed to make a proper determination of Actol's claim against Jukic was so unorthodox, that it provided such an unfair result such that it is in the interests of justice for the Jukic Costs Order to be reviewed.
In seeking leave, Actol said that the decision was not fair and equitable for the following reasons: 1. The Applicant was successful in its Primary Contractual/Delay Claim against the First Respondent at First Instance. 2. In the Alternative the Applicant made a claim for Misleading Conduct against both the First and Second Respondent at First Instance. 3. The Tribunal found it was not necessary to determine the Applicant's Misleading Conduct claims where it had already been successful in the Contractual/Delay Claim. 4. Despite not determining liability in respect of the Misleading Conduct Claims, the Tribunal proceeded to dismiss the accessorial liability claim (in respect of the Misleading Conduct) against the second respondent. 5. The Tribunal awarded costs to the Second Respondent, despite the Applicant's success against the First Respondent. 6. The Tribunal declined to order the First Respondent be liable to pay the Second Respondent's Costs.
The appeal was heard on 14 June 2022. Actol and Mr Jukic were represented by counsel. Pro9 did not appear and did not make submissions in the appeal.
Prior to the appeal Actol and Mr Jukic had provided written submissions in support of their respective positions. We will refer to those submissions as necessary. No written submissions were provided by Pro9.
In addition to the grounds of appeal set out above, Actol indicated that it was also challenging the Jukic costs decision on the basis that there was an error in the exercise of a cost discretion of a type considered by the High Court in House v The King [1936] HCA 40; (1936) 55 CLR 499.
In making this appeal Actol did not appeal the primary decision.

Primary decision

It is convenient to set out the disputes in the original proceedings and what the Tribunal decided in respect of the claims against Mr Jukic.
Actol had filed points of claim in the original proceedings.
Against Pro9, various claims were made in contract, for breaches of the consumer guarantees under the Australian Consumer Law (NSW) ('ACL') and in respect of misrepresentation said to have been made by Pro9 to Actol. The proceedings concerned a building contract and the supply of goods and services relating to the work which included the supply and installation of prefabricated walling systems.
There were three representations described as the performance representations, timing and cost representations and delivery representations. These were identified in paragraph 5 of Actol's points of claim dated 3 August 2020 found at appellant's bundle [AB] 67.
In respect of the misrepresentation claims Actol alleged that Pro9 had engaged in conduct that was misleading and deceptive or likely to mislead or deceive in contravention of s 18 of the ACL.
In addition, and relevant to this appeal, Actol alleged that Mr Jukic was also liable in respect of these representations. The claim made against Mr Jukic was set out in paragraphs 35 and 36 of the points of claim [AB] 75 as follows: 35 Mr Daniel Jukic: a. Was the voice and alter ego of Pro 9 as its director; b. Was knowingly concerned and had actual knowledge of the essential matters which made up Pro 9's contravention and their falsity, as Pro 9's representations were made by Daniel Jukic or at his request. c. Is a person involved in that contravention within the meaning of Section 236 of the Australian Consumer Law. Particulars Various emails exchanged with Jukic 36 Actol is entitled to recover the loss and damage referred to in paragraphs 25 - 34 above, from Pro 9 and Daniel Jukic pursuant to section 236 of the Australian Consumer Law.
The Tribunal dealt with the claim for misleading or deceptive conduct in the primary decision at [126]-[151]. The liability of Mr Jukic was dealt with at [143]-[151].
In relation to the misleading or deceptive conduct claim against Pro9 the Tribunal determined at [140] of the primary decision that any damage suffered in respect of the delivery representation was the same amount as that which the Tribunal had already decided to award as damages for late supply of panels which arose from problems with deficient steel from China.
In relation to the other representations, the Tribunal similarly determined that the damages that might be payable by Pro9 in respect of that conduct was the same as that been awarded against Pro9 in respect of the breach of contract claims. Consequently, the Tribunal said at [141] it was not necessary to consider the remaining claims of Actol under the heading of misleading or deceptive conduct.
In connection with the misleading or deceptive conduct claim made against Mr Jukic, having outlined relevant legislation concerning what was referred to as accessorial liability and having referred to various case law, the Tribunal said at [146]-[151]: 146 The Points of Claim, the outline submissions (MFI 1) and the closing submissions (MFI 6) did not set out the specific basis upon which it was alleged Mr Jukic should be held liable under the ACL in relation to the allegations of misleading or deceptive conduct. Instead, the submissions of Pro9 (MFI 7) referred to matters to which Actol responded in its submissions in reply (MFI 8). 147 First, matters going to the time within which delivery would be achieved do not need to be considered as the delivery time was covered by the contract between Pro9 and Actol, not by a representation by Pro9 to Actol. 148 Secondly, the fact that an email was sent by Mr Vidovic is not sufficient to warrant visiting personal liability on Mr Jukic in the absence of evidence that he sent, directed, or authorised such an email. 149 Thirdly, as to the documents which were referred to or provided with those emails, such as the Pro9 Systems Presentation, the evidence that Mr Jukic was familiar with those documents is not considered sufficient. 150 Fourthly, the Points of Claim alleged that Mr Jukic "Was the voice and alter ego of Pro9 as its director". However, being a director is not, of itself, sufficient: Millenium at [18]. It is noted that Mr Jukic appears to have been only one of four directors of Pro9 and the fact that he may have been the originator of the Pro9 system does not persuade the Tribunal that he should be held responsible for the alleged misleading or deceptive conduct. 151 It is telling that Actol's submissions in reply, after referring to Mr Jukic's roles as the inventor and as a director, suggested: "It is more probable than not, and an inference may be drawn that Mr Jukic knew and was involved in the representations made to Actol". Bearing in mind what was said in Nguyen v Cosmopolitan Homes [2008] NSWCA 246 at [55] in relation to discharging the burden of proof in civil cases, the Tribunal is not satisfied that Actol has established a basis for accessorial liability against Mr Jukic.
It is apparent that the Tribunal was not satisfied that Mr Jukic was relevantly "involved" in the alleged contravening conduct as that expression is defined in the ACL.

Appellant's submissions

Actol made submissions in support of this appeal under two headings, namely, "grounds 2, 3, 4 and 6, failure to show necessary involvement" and "grounds 2,3, 5 & 6 Jukic is entitled to recover costs".
In relation to the first matter, Actol's submissions can be summarised as follows: 1. The Tribunal confirmed at [38] of the costs decision that accessorial liability on the part of Mr Jukic could not have been made without a primary liability on the part of Pro 9. 2. The Tribunal did not make a primary finding on liability as confirmed by [141] of the primary decision where the Tribunal stated it was not "necessary to consider the remaining claims of Actol under the heading of misleading or deceptive conduct:" 3. It is not clear how the Tribunal arrived at its decision as at [151] of the primary decision and [30]-[43] of the costs decision "when it found that there was an 'failure to show necessary involvement' of Mr Jukic when it had not made a finding on whether Pro9 contravened s 4 and 18 in respect of the 3 claims advanced by Actol". 4. Accordingly: 1. the Tribunal reasoning was inadequate when taking into consideration the principles in John Prendergast & Vanessa Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 at [13(1)]; 2. The Tribunal took into account an irrelevant consideration when not all of the ACL claims against Pro9 had been determined at first instance; and 3. The Tribunal's decision was unreasonable and unorthodox insofar as it resulted in an unfair result. In this regard the ACL claims were not determined in full because Actol had essentially been awarded damages in its contractual claim. The two remaining misleading or deceptive conduct claims being determined at first instance, it would have followed that Mr Jukic would have been held liable.
As to the second matter, Actol said: 1. the Tribunal's reasons that Actol's claim against Mr Jukic was "devoid of merit" were inadequate and an error of law; 2. the Tribunal erroneously took account of this finding in its costs decision and failed to consider the fact that two of three misleading or deceptive conduct claims were not determined against Pro9 and that Mr Jukic made a number of concessions in cross examination that would have resulted in him being held liable in respect of those alleged misrepresentations; 3. in refusing to make a Sanderson order in the circumstances the approach of the Tribunal was unreasonable and unorthodox. Actol's claims against Mr Jukic were interdependent with the ACL claim against Pro 9. In this regard both respondents prepared joint pleadings and evidence and had the same legal representation.
In making these submissions Actol accepted that the general principle and usual order, as stated by the Tribunal at [44] of the costs reasons, is that costs should follow the event. However, Actol submitted that if a controversy is not determined then the event has not crystallised. Despite authority that cost orders may be made where there is no hearing on the merits, with reference to Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin [1997] HCA 6; [1997] 186 CLR 622 at 624-5, Actol said this was not the case factually in this instance as the evidence revealed.
Actol accepted the Tribunal may make an order against a party who has invited the litigation by its unreasonable behaviour or has unreasonably pursued litigation. Reference was made to the Appeal Panel decision in D Constructions Pty Ltd v Walsh [2020] NSWCATAP 91 at [14]. However, Actol said that this principle did not warrant the making of an order for costs against Actol in the present case. This was because there had been no determination on the merits on two of the representation claims that would otherwise have justified a finding that Actol had acted in an unreasonable way.

Consideration

There is a right of appeal on a question of law. Otherwise leave to appeal is required: s 80(2)(b) of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act).
In this regard, a decision on costs following a determination of the proceedings is an ancillary decision to which s 80(2)(b) applies; see definition of ancillary decision in s 4 of the NCAT Act. Insofar as leave is required, Sch 4 cl 12(1) of the NCAT Act applies so that Actol must show that it may have suffered a substantial miscarriage of justice because the decision was not fair and equitable: Collins v Urban [2014] NSWCATAP 17 sets out the principles applicable to the grant of leave.

Relevant legal principles

It is convenient to set out the legal principles relevant to the disposition of this appeal: 1. As set out in House v The King at pages 504-505, an error of law in the exercise of a discretion will arise only if it is shown that a decision maker acts on a wrong principle, has regard to extraneous or irrelevant matters in the exercise of discretion, mistakes the facts or does not take into account some material consideration. Further, even if the error cannot be precisely identified, "if upon the facts it is unreasonable or plainly unjust" an appellate body may infer there has been a relevant failure to properly exercise the discretion because "a substantial wrong has in fact occurred". 2. Whether the reasons of the Tribunal are inadequate is to be assessed against the principles set out by Bell P (as he then was) in NSW Land and Housing Corporation v Orr [2019] NSWCA 231 at [65] and following. 3. A Sanderson order (which refers to the decision of Sanderson v Blyth Theatre Co [1903] 2 KB 533) is an order made directly against an unsuccessful defendant to pay the costs of a successful defendant. As accepted by the parties in this appeal, in determining whether it is fair to make an order in the nature of a Sanderson order two matters are usually considered as relevant. First, it must be reasonable for the plaintiff to have brought the proceedings against the successful defendant. Secondly, there must be some conduct on the part of the unsuccessful defendant which would make it fair to impose liability on it for the costs of the unsuccessful defendant: Council v The City of Liverpool and Turano [No 2] [2009] NSWCA 176 at [15].

Disposition of this appeal

As noted above, no appeal was made in respect of the primary decision. The only challenge is to the decision on costs.
Relevant to the appeal against the cost decision are the following matters: 1. In determining the claim against Mr Jukic the Tribunal identified the claim for damages as being made under s 236 of the ACL. This permits a claim "against any person involved" in a contravention, in this case the contravention being s 18 of the ACL: primary reasons at [143]; 2. The Tribunal identified what the expression "involved" means when used in the context of 236 of the ACL: primary treasons at [144]. At [145] the Tribunal identified submissions concerning relevant authorities made by the parties about the level of participation required in order to establish accessorial liability of Mr Jukic. 3. At [147]-[150] of the primary decision the Tribunal made findings concerning relevant factual matters as to the involvement of Mr Jukic. 4. At [151] the Tribunal concluded that accessorial liability against Mr Jukic had not been established: 151 It is telling that Actol's submissions in reply, after referring to Mr Jukic's roles as the inventor and as a director, suggested: "It is more probable than not, and an inference may be drawn that Mr Jukic knew and was involved in the representations made to Actol". Bearing in mind what was said in Nguyen v Cosmopolitan Homes [2008] NSWCA 246 at [55] in relation to discharging the burden of proof in civil cases, the Tribunal is not satisfied that Actol has established a basis for accessorial liability against Mr Jukic."
Consequently, the Tribunal dismissed the application against Mr.
Actol attempts to challenge this conclusion and the conclusion at [30] of the costs decision.
In our view this challenge must fail.
It is clear from the language that, at [151] of the primary decision when dealing with the accessorial liability claim against Mr Jukic, the Tribunal was considering all representations made to Actol, not just what Actol described as the timing representation.
The appellant referred to [141] of the primary decision where the Tribunal said it "was not necessary to consider the remaining claims of Actol under the heading of 'misleading or deceptive conduct'". There the Tribunal was referring to the delivery representations and the performance representations. Actol says that, without determining the claims made against Pro9 in respect of these representations, the Tribunal was not in a position to determine accessorial liability of Mr Jukic.
In effect, Actol submitted that this conclusion meant the Tribunal indicated in the primary decision that the claims against Mr Jukic for misleading or deceptive conduct were also not resolved.
We disagree with this submission.
There are two aspects of accessorial liability. One is that a contravention has been made by a relevant party which causes loss and damage. The second is that the accessory, in this case Mr Jukic, has been relevantly "involved" as that expression is used in the legislation to which we have referred above.
It seems clear to us that the finding at [151] of the primary decision is a finding on the second aspect, namely, that the involvement of Mr Jukic did not, as a matter of fact, establish a basis of accessorial liability for any of the claims, irrespective of whether any of the misrepresentation claims made against Pro9 could be made good.
While the reasons of the Tribunal might be better expressed, the earlier conclusions in the primary decision concerning the lack of need to determine all the misleading or deceptive conduct claims against Pro9 do not support a conclusion that the Tribunal erred in in dismissing the claims against Mr Jukic due to his lack of relevant involvement. Nor can they lead to a view that the decision concerning accessorial liability was wrong.
In any event, the primary decision to dismiss the claim against Mr Jukic was not the subject of appeal. As such, Actol is bound by that decision which cannot be attacked collaterally in this appeal in respect of the costs decision.
As to the adequacy of reasons in the cost decision, because the Tribunal found Mr Jukic was not, as a matter of fact, an accessory as that term is used in the ACL in respect of any representations, any failure to take account of its decision concerning liability of Pro9 for damages for misleading or deceptive conduct was irrelevant. This is because the claim against Mr Jukic would have failed even if the alleged misrepresentations had been established against Pro9. The Tribunal's reasons about the absence of involvement of Mr Jukic is made clear at [30] of the costs reasons .
While accessorial liability requires liability of the primary contravener to be established, and in that sense the claims against Pro9 and Mr Jukic were interdependent, a finding that Mr Jukic was not involved whatever the outcome on the claims against Pro9 is fatal to Actol's claim against him.
The final matter to deal with is the challenge to the Tribunal's finding at [43] of the costs decision. There the Tribunal said: Turning to the case against the second respondent, there are two aspects of the claim against the second respondent which cannot be denied. First, the claim against the second respondent caused some costs to be incurred by both parties. Secondly, the second respondent is entitled to recover an appropriate amount in respect of his costs. In addition, the Tribunal considers that, in the circumstances of this case, the claim against the second respondent was so devoid of merit that the applicant's costs of that aspect of the proceeding should be borne by it and not by the first respondent.
The expression "so devoid of merit" should be seen as a summary of the Tribunal's reasons for rejecting Actol's claim against Mr Jukic recorded in the paragraphs of the primary decision we have referred to above. However, it seems to us that, whether the claims against Mr Jukic can properly described as "devoid of merit", the short fact is that Actol was unsuccessful in this claim. Consequently, consistent with ordinary principles, costs should follow the event and no error in the exercise of the discretion to award costs is established.
Actol chose to pursue a claim against Mr Jukic as an accessory. No conduct of Pro9 has been identified which necessitated the joinder of Mr Jukic. This is not a case where the proper respondent was uncertain.
In these circumstances, no error of law has been established and there is no reason to grant leave to appeal on other grounds. Leave to appeal should be refused and the appeal dismissed.

Costs of the appeal

It would appear, by reason of r 38A of the Civil and Administrative Tribunal Rules 2014 (NSW) (Rules), that r 38 applies to this appeal. Rule 38(2) relevantly provides: (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 - … (b) the amount claimed or in dispute in the proceedings is more than $30,000.
As there appears no amount in dispute, the issue being one of whether a costs order was properly made (see The Owners Corporation Strata Plan No. 63341 v Malachite Holdings Pty Ltd [2018] NSWCATAP 256), any party seeking costs would need to establish special circumstances.
Hopefully, having regard to the nature of this appeal, parties can resolve any questions of costs.
We will permit the parties to make any application and submissions on this issue if they consider it is necessary and appropriate to do so.

Orders

The Appeal Panel makes the following orders: 1. Leave to appeal is refused and the appeal is dismissed. 2. In the event either party seeks an order for costs in its favour, the following directions apply: 1. Any application for costs and evidence and submissions in support (costs application) is to be filed and served within 14 days from the date of this decision. 2. Any evidence and submissions in response to the costs application are to be filed and served within 28 days from the date of this decision. 3. Any submissions in reply are to be filed and served within 35 days from the date this decision. 4. Submissions are to include submissions about whether an order should be made dispensing with a hearing pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW).

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: 04 August 2022

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