Arambewela v Castle Projects Pty Ltd

Determination of the costs application

1. Each party consented to the costs application made by the Builder being determined "on the papers". Being satisfied that the issues for determination can be adequately determined in the absence of the parties by considering their written submissions, I decided to exercise the power to dispense with a hearing: s 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW) (the NCAT Act).

Which cost rule applies?

1. Section 60 of the NCAT Act provides that each party to proceedings in the Tribunal is to pay its own costs. The Tribunal has a discretion to award costs but only if it is satisfied that there are special circumstances warranting such an award: s 60(2) of the NCAT Act.
2. Section 60 of the NCAT Act is subject to the Civil and Administrative Tribunal Rules 2014 (the NCAT Rules): s 35 of the NCAT Act. The NCAT Rules provide that where, as in this matter, the proceedings are brought in the Consumer and Commercial Division of NCAT and the amount claimed, or in dispute, in those proceedings is more than $30,000, the Tribunal may award costs even in the absence of special circumstances: r 38(2) of the NCAT Rules.
3. Where an internal appeal is lodged after 1 January 2016, the cost provision applicable at first instance applies in respect of the appeal: r 38A(2) of the NCAT Rules. Where the applicable rule at first instance is r38(2), it does not necessarily follow that that sub-rule will apply in the appeal. Whether that r 38(2) applies turns on whether the requirements of para. (a) or (b) of r 38(2) are satisfied. In relation to this matter, therefore, the question is whether the amount claimed, or in dispute in the appeal is more than $30,000: Allen v TriCare (Hastings) Ltd [2017] NSWCATAP 25 at [26], [57].
4. In written submissions the Builder asserted that the amount in dispute in the appeal may be inferred to be greater than $30,000 given that "the proceedings went to full contested final hearing". The proceedings at first instance had a long and protracted history; both parties were legally represented since the first directions hearing in April 2016. A number of interlocutory disputes arose throughout the proceedings. In addition, each party filed a large number of documents, including expert reports. While the two-day hearing was largely devoted to settlement discussions, each party was nonetheless represented by counsel.
5. Having regard to that history, and given that the Homeowner did not challenge the Builder's assertion about the amount in dispute in the Appeal, I accept that an inference can be drawn that the costs in dispute at first instance are probably in excess of $30,000. Accordingly, the applicable costs provision is r 38(2) of the NCAT Rules.

History of the appeal

1. A notice of appeal was lodged by the Homeowners on 19 June 2017. The Builder filed a Reply. At a callover on 5 July 2017, at which both parties were represented, I directed the parties to file and serve submissions and listed the appeal for hearing.
2. On 11 August 2017, the solicitors for the Homeowners wrote to NCAT advising they had decided to withdraw the appeal. The Solicitors wrote: [N]otwithstanding the Appeal has its prospects, that even if successful, the Builder would be unlikely to have the funds to pay the costs. Accordingly the appeal had limited value to the Appellants.
3. On 16 August 2017, the Appeal Panel dismissed the appeal under s 55(1)(a) of the NCAT Act and, at the request of the Builder, invited the parties to make submissions in relation to the costs of the appeal.

Should the Homeowners be ordered to pay the costs of the appeal?

1. Citing in support Fordham v Fordyce [2007] NSWCA 129 and Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365, the Builder asserts that where, as in this case, the appellant discontinues proceedings, the "usual rule" is that the discontinuing party should pay the costs of the proceedings. While acknowledging that the Tribunal has a discretion to "otherwise order", the Builder asserts that none of the recognised circumstances in which that discretion can be exercised exist in this case. The Builder asserts that it has not engaged in any disentitling conduct or otherwise acted unreasonably.
2. Fordham v Fordyce and Australiawide Airlines Ltd v Aspirion Pty Ltd, each concerned costs provisions arising in different statutory contexts.
3. In Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365, the Court of Appeal considered the costs provisions in the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) applied, which was in the following terms: 42.1 General rule that costs follow the event Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs. 42.19 Proceedings discontinued (1) This rule applies to proceedings that are discontinued by a plaintiff by means of a notice of discontinuance, as referred to in rule 12.1, in relation to a particular defendant. (2) Unless the court order otherwise or the notice referred to in rule 12.1(2) otherwise provides, the plaintiff must pay such of the defendant's been incurred by the defendant in relation to the claim. (emphasis added)
4. In Fordham v Fordyce, the relevant cost provision was contained in the Access to Neighbouring Land Act 2000 (NSW), which provided that the costs of an application for an access order are payable at the Local Court's discretion: 27(1). Section 27(2) of that Act set out a non-exhaustive list of factors the Court may consider in exercising that discretion.
5. Neither the NCAT Act, nor the NCAT Rules made under that Act, contains a specific provision dealing with costs when the applicant/appellant elects to discontinue proceedings. The relevant provision is simply that the Tribunal may award costs even in the absence of special circumstances: r 38(2) of the NCAT Rules. The principles guiding the exercise of the discretion to award costs are well-established. The purpose of making a costs order is to provide compensation to the party in whose favour the order is made for the expense the party has been put to in prosecuting or defending legal proceedings. In general terms, this means that the successful party is entitled to an order for costs in its favour: Latoudis v Casey [1990] 170 CLR 534, [1990] HCA 59; Oshlak v Richmond River Council [1998] 193 CLR 72; [1998] HCA 11. While there is a general discretion for costs there is no absolute rule that, absent disentitling conduct, a successful party is to be compensated by the unsuccessful party, and nor is there any rule that a successful party might not be ordered to bear the costs of an unsuccessful party: Thomson v Chapman [2016] NSWCATAP 6 at [71]. The proper exercise of the discretion requires the Tribunal to do justice between the parties and to exercise the discretion having regard to relevant considerations and in a manner which is not arbitrary or capricious: Oshlak v Richmond River Council at [22].
6. Where an application or appeal is discontinued there is of course no "successful party". Nonetheless, I accept that in the ordinary course, absent some compelling reason, the discontinuing party should pay the costs of the discontinued proceedings.
7. Where the initiating application has been determined, the discretion to depart from the "usual rule" will generally only be exercised where there has been some disentitling conduct on the part of the successful party: Oshlak v Richmond River Council at [40], [69]. The decision-maker is not confined to considering the party's conduct in the actual litigation itself, but can take into consideration matters which led up to and were the occasion of litigation: Furber v Stacey & Anor [2005] NSWCA 242 at [24]. In my view, these principles should be applied in the exercise of the discretion to award costs where the proceedings have been discontinued.
8. For the following reasons I have decided to exercise the discretion not to order the discontinuing party to pay the costs of the proceedings. First, while there is no claim that the Builder engaged in disentitling conduct in the course of the appeal, in my opinion its failure to comply with the consent orders entered by the Tribunal is a relevant factor to the exercise of the discretion. Made in March 2017, the orders required the Builder to pay the Homeowners the sum of $123,235. That sum has not been paid, nor has any arrangement for payment been made. It is against that background that the Homeowners' decision to discontinue the appeal was made, having concluded that the appeal lacked utility because, even if successful, they would be unlikely to recover. On the limited evidence available, that assessment seems a reasonable one.
9. Second, the appeal was discontinued at a relatively early stage of the appeal and before the date the parties were required to file submissions.
10. Third, the appeal could not be said to be hopeless or instigated for vexatious purposes.

Orders 1. The application for costs is refused. 2. Each party is to pay their own costs.

I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Principal Registrar

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: 08 January 2018