BCA Constructions Pty Ltd v Arsovski

What Orders Were Being Sought by the Owners?

1. The application filed in the Tribunal by the owners (who, at that stage, were not legally represented) identified the order sought as: Complete the building work contracted.
2. The total value of the claim was identified as $86,800.
3. No orders were clearly sought in the application that the owners were seeking that the builder rectify defective work; or that it pay damages for the cost of rectifying defects. Nor was it identified that the owners asserted the contract had been repudiated by the builder and the owners accepted the repudiation. From the substance of the application, it appears that the owners were arguing the contract remained on foot and had not been lawfully terminated by either party.
4. However, the application also referred to "unsatisfactory completion of agreed to work, please see attached documentation" as the reasons for requesting the orders.
5. Furthermore, in an affidavit of the female owner dated 15 November 2021 (prepared in circumstances where the owners were now legally represented), the female owner stated at [63]; [70]; and [72]: We have been severely impacted by the actions of the Builder including the use and enjoyment of or property. We claim the liquidated damages from the Builder as set out in the Contract due to the delay in completing the works. … Notwithstanding the above, we just want the Builder to return to the property and complete the contracted works as soon as possible in accordance with an agreed design for the garage, driveway and OSD Control Pit that has the little (sic) impact on us, the aesthetics of the property and the value of the property. We have communicated this to the Builder on several occasions. … We request this Tribunal to put us in the position we should have been had the Builder completed the works in accordance with the contract and the approved plans.
6. Those statements clearly foreshadow a claim for damages for delay in completion of the work.
7. In the female owner's affidavit in reply dated 29 March 2022, it is also made clear, at [19], [23] and [28], that a central part of the owners' complaint was that the builder had not complied with the "approved plans" and that the "only solution" offered by the builder was to raise the height of the levels of the garage, driveway and OSD, which was not acceptable to the owners. The owners wanted the builder to "carry out the construction as per the approved plans so we can obtain an occupation certificate and move on with our lives."
8. No Points of Claim or Points of Defence were filed by the parties.

Events After the Commencement of Tribunal Proceedings

1. In July 2021, the builder made an application for payment under the Building and Construction Industry Security of Payment Act 1999 (NSW) against the owners.
2. On 23 July 2021 there was an adjudication determination in favour of the builder in the amount of $56,837.49. The builder registered the determination as a judgment in the Local Court.
3. According to the owners, they did not dispute this claim because they thought it was part of their complaint to NSW Fair Trading and would be dealt with as part of their Tribunal proceedings against the builder.
4. As of November 2021, the builder had garnisheed $20,331 from the owners' bank account. In her affidavit of 15 November 2021, the female owner stated that the owners were taking proceedings in the Local Court "to have the adjudication determination set aside". The setting aside of the Local Court order is dealt with in the consent orders that the parties entered into on 4 October 2022.
5. Both parties were legally represented for most of the Tribunal proceedings. Both parties had engaged building consultant experts (Mr Moore for the owners; and Mr Capaldi for the builder).
6. Despite the fact that the owners did not appear to be seeking an award of damages for the cost of rectifying defective work or completing incomplete work, both parties' experts addressed the costs of rectifying existing defects and the costs of completing incomplete work in their respective reports.
7. Prior to conferring and completing a joint expert report, the experts were significantly divergent on whether or not the works were defective (or incomplete); the method of rectification (or completion); and the costs of rectification (or completion). Mr Moore had identified the cost as $255,733.34 (unless the dwelling was to be demolished and rebuilt). Mr Capaldi had identified the cost as $93,935.79.
8. In respect of existing works that were defective, Mr Moore identified 20 items.
9. The floor levels of the dwelling and the site location of the dwelling (Items 1 and 2) were the major items in terms of costs of rectification. Mr Moore asserted that there were two methods of rectification in respect of the defects in items 1 and 2.
10. The first was demolition and rebuilding of the dwelling at a cost of $527,959.90. That amount (if the claim was amended to seek damages; and damages were awarded rather than an order that work be performed) was above the jurisdictional limit of the Tribunal under s 48K(1) of the Home Building Act 1989 (NSW) (HB Act) ($500,000).
11. The alternative (option 2) was the erection of retaining walls and drainage works at a cost of approximately $17,188.90.
12. Mr Moore identified various other defects including failure to adequately install termite barrier; failure to adequately install concrete slab vapour barrier; rainwater tank installed in a different location to the position identified in the plans; brickwork that failed to comply with Australian Standards; plasterboard damage to garage ceiling; windows and sliding doors requiring modification; and inadequate floor tile falls in bathroom and laundry.
13. Mr Capaldi accepted that some existing works were defective, but assessed the total cost of rectifying existing defects as $2,763.55.
14. Mr Moore did not provide a sub-total for the existing works which he asserted were defective, but his method of rectification and cost of rectification constituted a significantly greater scope of works to rectify (and cost of rectification) than Mr Capaldi. For example, Mr Moore identified the cost of bathroom rectification works to be $8,054.18.
15. Mr Moore's total for the cost of rectification of existing defects and completion of incomplete work in the total amount of $255,733.34 was based upon "option 2" in Items 1 and 2 being accepted as the appropriate scope of works to rectify the issues involving floor levels and location of the dwelling.
16. Mr Moore identified 28 items of incomplete work under the scope of works contained in the contract in addition to the existing defective work. Mr Capaldi agreed that the items were incomplete. However, Mr Capaldi did not agree with the cost of completing the incomplete items, and gave a significantly lower estimate of the cost of completing the work than Mr Moore. There was also an additional item regarding damage to fences that the experts did not agree about.
17. On 29 August 2022, the builder sent the owners an offer of settlement headed "Without prejudice save as to costs" and expressed to be made in accordance with the principles enunciated in Calderbank v Calderbank [1975] 3 All ER 333. The offer was open for 15 business days. The offer was in the following terms: 1. The builder pay the owners "a one off payment of $30,000 in full satisfaction of their claims made in the NCAT proceeding. Such payment is to be offset from the balance of the judgment debt owed by the Applicants to the Respondent in Local Court proceeding number 2021/00220852". 2. The builder pay the owners' costs to date on a party/party basis as agreed or assessed.
18. The letter contains an explanation as to why the builder maintained it would be unreasonable to refuse the offer. In essence, the reasons given are that the Tribunal would be likely to accept the evidence of Mr Capaldi that the cost of rectifying existing defects is less than $3,000. It is asserted that the owners would be likely to obtain an award of damages of less than $10,000, constituted by the cost of rectifying existing defects (approximately $3,000) and the "potential costs" of obtaining "a Building Information Certificate" and the builder making a "contribution" to the cost of repairing fences. The builder asserted that it would succeed on all other issues, and the owner would fail to prove that the dwelling should be demolished and rebuilt.
19. The experts conferred on 30 September 2022, a very short period of time prior to the scheduled hearing of the proceedings, and prepared a Joint Expert Report. The joint expert report was completed on 3 October 2022.

Content of the Joint Report

1. Of the incomplete works to the property (28 items) Mr Moore and Mr Capaldi agreed that the works were incomplete and agreed to the method of completion and the cost of completion.
2. In respect of the damage to the fences, the experts agreed "this was a matter for lay evidence and expert reports."
3. The experts agreed as to the percentage amount for builders margin to engage a new builder to perform work (15%).
4. In respect of existing work that was defective, there was some agreement between the experts. The issues of agreement and disagreement are summarised as follows: Item Defect Opinion 3 Termite Management No agreement as to defect. If defect found, Capaldi agreed with Moore's opinion regarding cost of rectification 4 Concrete Vapour Slab Barrier No agreement as to defect. If defect found, Capaldi agreed with Moore's opinion regarding cost of rectification.
5. Patio Tiling No agreement as to defect. If defect found, Capaldi agreed with Moore's opinion regarding cost of rectification.
6. Alfresco covered patio construction No agreement as to defect or cost of rectification
7. Rainwater Tank Experts agreed location was not in accordance with plans. Experts agree Davron Engineering should "provide comments" that location is suitable. Mr Moore asserted the location requires modified Development Consent approval from the local council
8. Brickwork Articulation Joints Experts agree sealant has not been installed and the cost of doing so. Moore states the work is defective, Capaldi states it is incomplete. Experts agree as to cost.
9. Missing downpipes Same issues as with item 8. 10 Power point to garage ceiling Experts agree as to defect and cost of rectification. 11 Plasterboard damage to garage ceiling Same issues as with item 8. 12 Bedroom 2 window No agreement as to defect or cost of rectification.
10. Garage slab step down Same issues as with item 8.
11. Laundry and front entry doorway flashing/waterproofing No agreement as to defect. If defect found, Capaldi agrees with Moore's estimate of the cost of rectification.
12. Living room sliding door installation Experts agree work is either defective or incomplete (or both). Only disagreement is whether door requires replacement. Moore asserts door requires replacement; Capaldi says it can be rectified. Experts agree if found door requires replacement, cost is $2,082.62 and if found does not require replacement cost of rectification is $300.
13. Laundry floor tiling No agreement work is defective. If found to be defective, Capaldi agrees with Moore's cost of rectification.
14. Bathroom waterproofing No agreement work is defective. If found to be defective, Capaldi disagrees with Moore's cost of rectification (Moore-$8,054.18; Capaldi $6,333.35)
15. Stormwater OSD Pit Experts agree as to defect and cost of rectification.
16. Stormwater Pipe Cover Same issues as with Item 8.
17. Gas Supply to Dwelling Experts agree as to defect and cost of rectification.

1. The proceeding was listed before the Tribunal on 4 October 2022 for a multiple day hearing.

Consent Orders Entered Into By the Parties

1. On 4 October 2022, the parties settled the proceedings, other than the issue of the costs of the proceedings. The Tribunal made the following orders and notations by consent: 1. The Applicants will within 28 days provide the Respondent with amended plans prepared by the architect to reflect the as built works. 2. The Respondent (or its nominee) by 30 November 2022 is to lodge, at its own cost, to the relevant Authority, any and all applications and supporting documents required to obtain development approval for the as built works and for the completion of the works. 3. The Respondent is to complete the building works with due care and skill and in accordance with the plans and specifications approved by Order 2 including any supporting documents, any conditions of consent and the building contract within ninety (90) days of the development being approved and the issue of the Construction Certificate plans by the relevant Authority. 4. The Respondent is to rectify the following defects referred to in the joint expert report dated 3 October 2022 in a proper and workmanlike manner: A. Item 4-concrete slab vapour barrier. B. Item 5-patio tiling (as per method of the Respondent expert in the Joint Report). C. Item 7-Concrete hardstand to RWT. D. Item 10-Power point to garage ceiling. E. Item 11-Plasterboard damage to garage ceiling. F. Item 18-OSD pit. G. Item 20-Gas supply. 5. Within fourteen (14) days of the Respondent complying with orders 1, 2, 3, and 4 of this order and completing the works in a proper and workmanlike manner, the Applicants will pay the Respondents the sum of $70,000. 6. Within 14 days of the date of these orders, the Applicants is (sic) to file submissions with the Tribunal as to any order for costs. Within 14 days thereafter, the Respondent is to file any submissions in response. Within 7 days thereafter the Applicants is (sic) to file any submissions in reply. The Tribunal is to determine the issue of costs on the papers. 7. Notations A. The height of the garage is not to be raised as part of any modified development consent and the gradient of the driveway is to be designed by Davron Engineering in accordance with instructions given by the Applicants. B. The Applicants will be responsible for bearing the costs of the Architect to amend the plans required by order 1. C. Upon the Applicants making the payment in accordance with order 5, the parties agree to file consent orders in the local court (sic) case number 2021/00220852 to the effect that the judgement is set aside and the proceedings are dismissed with no order as to costs. The parties agree the judgement will be stayed until the payment in order 5 is due and payable. D. The Applicants will provide any consent required by the Respondent to lodge the applications contemplated by order 2 of these orders. E. The parties note that the Respondent is not responsible for any work carried out by the Applicants (and their contractors) at the Property. F. The parties agree that these orders do not include items 14, 16 & 17 of the alleged defects in the Joint Expert Report such that the Applicants will not be estopped from bringing proceedings.

Costs Submissions to the Tribunal

1. Both parties made extensive written costs submissions to the Tribunal.
2. The decision was made on the papers and without an oral hearing on the issue of costs under s 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act). Neither party sought an oral hearing on the issue of costs in their costs submissions and the order made to dispense with an oral hearing on the issue of costs by the Tribunal in the decision under appeal is not a matter of controversy.
3. The costs submissions of the owners to the Tribunal refer to the owners' case being based on the builder having breached the statutory warranties under s 18B of the HB Act. The builder's written costs submissions refer to the position of the owners being that the dwelling would need to be demolished and reconstructed because it was not located where it should have been under the plans.
4. On 28 February 2023, the Tribunal published its costs decision.
5. Relevantly, the Tribunal ordered that the builder pay the owners' costs of the proceedings on the ordinary basis as agreed or assessed.

Decision of the Tribunal

1. The Tribunal found at [37] that r 38 of the Civil and Administrative Tribunal Rules 2014 (NSW) (NCAT Rules) applied to the proceedings, as the amount claimed or in dispute in the proceedings exceeded $30,000, and the Tribunal could make a costs order without reference to whether 'special circumstances' had been established under s 60(2) of the NCAT Act.
2. At [11]-[18] the Tribunal summarised the costs submissions of the owners as follows: 1. The owners sought that the builder pay their costs of the proceedings as agreed or assessed. 2. The owners relied upon the principles set out in Re: Minister for Immigration and Ethnic Affairs: Ex Parte Lai Qin (1997) 186 CLR 622 and Sunrise Pools Australia Pty Ltd v Gregory [2018] NSWCATAP 232 (Gregory) that a Court or Tribunal can make a costs order in favour of a party where there has been no hearing on the merits in circumstances that include: (a) A party acted so unreasonably that the other party should obtain costs of the proceedings; or (b) One party was almost certain to have succeeded if the proceedings had been fully tried. 3. The Tribunal did not have to find that the builder acted unreasonably. It was sufficient that the Tribunal was satisfied on the evidence before the Tribunal and the consent orders that the owners were "almost certain" to have succeeded to an extent that a costs order would necessarily have followed. Making such a finding does not involve determining a "hypothetical action between the parties." 4. The owners relied, in particular, on the Appeal Panel decision in Gregory. 5. The owners would have inevitably succeeded in their claims under s 18B of the HB Act because: 1. The parties' experts agreed that the finished floor levels were not constructed in accordance with the plans, and the builder had admitted this. 2. The parties' experts agreed that the location of the dwelling was inconsistent with the plans, and a survey report supported this conclusion. 3. The parties' experts agreed the rainwater tank had not been installed according to the plans. 4. Mr Slack, an engineer jointly engaged by the parties, identified that the onsite drainage detention pit had not been installed according to the plans. 5. Order 4 of the consent orders acknowledged 7 items of agreed defects identified in the joint report that the builder had agreed to rectify. 6. Order 4 of the consent orders included works the builder agreed were incomplete and had agreed to complete.
3. At [19]-[25] the Tribunal summarised the costs submissions of the builder as follows: 1. The Tribunal should order that the owners pay the builder's costs of the proceedings. 2. The owners capitulated. In May 2021, the owners asserted the garage floor was too high. The owners now accept that the dwelling will be completed with the garage floor at its currently constructed level. 3. The owners acted unreasonably in seeking the demolition of the building; raising numerous defect claims which were abandoned; claiming the building was constructed in the wrong location; and claiming compensation for incomplete work when they had stopped the builder from completing work. 4. In response to the submissions of the owners, the builder submitted: 1. If proceedings are not determined on the merits, only in limited circumstances can a court or Tribunal order one party pay the other party's costs. Those circumstances include where a party has capitulated; or a party has acted unreasonably in bringing or defending proceedings. Further, a Calderbank offer may affect the discretion on costs. 2. The location of the dwelling arose from inconsistencies in the plans. 3. The owners agreed with the builder that the rear set-back in relation to the secondary dwelling being constructed should be 3m from the rear boundary. 4. In December 2020, the builder discovered that, if the dwelling was built in accordance with the plans in respect of the difference in floor levels between the garage floor and the main dwelling, the garage would be too narrow to allow steps from the garage to the house and would not comply with Australian Standards. When this was raised with the female owner, she gave "oral instructions" to raise the garage floor. The female owner denies the conversation took place. Mr Slack agreed with the raising of the garage floor. 5. The parties fell into dispute in May 2021 because the owners complained that a driveway to the garage and carport was too steep. The builder had performed preparatory earthworks and was about to pour concrete. The builder suspended work. 6. The Calderbank offer dated 29 August 2022 was a compromise and the owners had acted unreasonably in rejecting the Calderbank offer. The owners' settlement was not a better outcome than the Calderbank offer. The owners should pay the builder's costs on an indemnity basis from the date of the Calderbank offer. 7. The Tribunal should have "caution" in relying on the authority of Gregory; and it was distinguishable on the facts. The builder referred to consideration of Gregory by the Appeal Panel in Bulloch v Linden Building Services Pty Ltd t/as Linden Constructions [2019] NSWCATAP 42. 8. The builder disputed the owners' submissions that the owners would have inevitably succeeded in proving defective work. The builder's submissions set out in detail its arguments as to why the owners would have failed on the issue of defective work, other than the items that Mr Capaldi accepted were defective. The builder's arguments referred extensively to the lay evidence of the parties as why, if the proceedings were litigated to finality, the owner would have substantially failed to establish its case.
4. At [26] the Tribunal summarised the owners' submissions in reply as follows: 1. It is the builder who is attempting to articulate a hypothetical case. The only question the Tribunal should consider is whether an order would have been made for the builder to rectify the breach. The Joint Expert Report supports the conclusion that the owners would have succeeded in the proceedings. Consent orders 1, 2 and 3 gave the owners "compliant and approved building works" completed by the builder, which is what they sought in the proceedings. Further, there was "insurmountable evidence" that the floor levels were not in compliance with the approved plans. 2. The Calderbank offer was not better than what the owners achieved in the consent orders. The owners "would have had about $100,000 to complete the works"; and the owners' expert Mr Moore had estimated an amount to complete significantly above that amount. It would have cost the owners "more to engage another builder to complete the works." Consent order 2 contemplates the making of an application to the Council to approve the works and there is no assurance that such approval will be given.
5. At para [27]-[43] the Tribunal set out legal principles involving costs where proceedings have not been determined on the merits and r 38 of the NCAT Rules is applicable. The Tribunal stated that the Appeal Panel in Gregory had stated: "that it is sufficient for the Tribunal to be satisfied that a party 'would succeed in an order in some form' and '[the other party] would be required to perform some work' in reaching a finding that a party were almost certain to have succeeded to an extent that a costs order would follow."
6. At [45] the Tribunal found that it was necessary for the owners to have commenced proceedings in the Tribunal.
7. It is implicit in the finding at [45] that the Tribunal was not satisfied the owners had acted unreasonably in the bringing or continuation of proceedings such as to warrant a costs order being made against them.
8. At [47]-[48] the Tribunal dealt with the issue as to whether it had been unreasonable for the owners not to have accepted the Calderbank offer. The Tribunal found at [48] that the Calderbank offer "was not better than the result achieved in the consent orders" because: 1. The Tribunal accepted the submission of the owners that it would have cost about $100,000 to complete the works, relying on the expert evidence of Mr Moore, whose estimate was $255,000. 2. If the builder had not agreed to do the works, the cost of engaging another builder to perform the works would have exceeded the cost of the builder doing the works. 3. The original works were not carried out in accordance with the plans approved by the local Council. 4. The expert evidence of Mr Moore and Mr Capaldi implies that the builders work was not in accordance with the plans and specifications under the contract.
9. The Tribunal then found, at [52]-[53], that the owners would have been almost certain to succeed had the matter proceeded to hearing. The Tribunal stated: The applicants brought these proceedings in relation to their situation with the builder that had reached an impasse. The issues canvassed in these reasons for decision were the defective works, the incomplete works ,the as built works being non-compliant with the approved plans. Although the expert's evidence differed as to the potential quantum of the loss suffered by the applicants as a result of the respondent's works, the experts reached agreement as to the rectification of the works, agreeing as to the scope of the defective work to be rectified. The Tribunal is satisfied that the applicant would almost certainly have been successful on its claim had the matter been fully tried (Lai Qin). The Tribunal is satisfied that on the material before it including the consent orders and the expert evidence it is more than likely it would have made the orders against the respondent in some form requiring it to perform some work (Gregory). That discretion under rule 38 has been exercised judicially. The Tribunal finds that there is no disentitling conduct by the applicants. The Tribunal's right to make an award of costs is not fettered by the objects of the Act, it is merely another factor to considered in the exercise of discretion. It was necessary for the applicants to commence and undertake the proceedings to enforce their right to the statutory warranties under the HBA. The resolution of the claim was not achieved before the commencement of the proceedings, and notwithstanding the Calderbank offer by the respondent, it was not until the day of the hearing that the respondent accepted the claim should be settled.
10. On 28 March 2023, the builder filed a Notice of Appeal.
11. The appeal has been filed within the applicable time period under r 25(4)(c) of the NCAT Rules.

SCOPE AND NATURE OF APPEALS

1. A costs decision arising from the making of consent orders finalising proceedings is an ancillary decision under s 4 of the NCAT Act and accordingly, pursuant to s 80(2)(b) of the NCAT Act, an internal appeal against the decision may be made as of right on a question of law, and otherwise with leave (that is, the permission) of the Appeal Panel.
2. An appeal is not simply an opportunity for a dissatisfied or aggrieved party to re-argue the case they put at first instance: Ryan v BKB Motor Vehicle Repairs Pty Ltd [2017] NSWCATAP 39 at [10].
3. In Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 ('Prendergast') the Appeal Panel set out at [13] a non-exclusive list of questions of law: 1. Whether there has been a failure to provide proper reasons. 2. Whether the Tribunal identified the wrong issue or asked the wrong question. 3. Whether a wrong principle of law had been applied. 4. Whether there was a failure to afford procedural fairness. 5. Whether the Tribunal failed to take into account relevant (i.e., mandatory) considerations. 6. Whether the Tribunal took into account an irrelevant consideration. 7. Whether there was no evidence to support a finding of fact; and 8. Whether the decision is so unreasonable that no reasonable decision-maker would make it.
4. The circumstances in which the Appeal Panel may grant leave to appeal from decisions made in the Consumer and Commercial Division are limited to those set out in cl 12 (1) of Sch 4 of the NCAT Act. In such cases, the Appeal Panel must be satisfied that the appellant may have suffered a substantial miscarriage of justice on the basis that: 1. The decision of the Tribunal under appeal was not fair and equitable; or 2. The decision of the Tribunal under appeal was against the weight of evidence; or 3. Significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with).
5. In Collins v Urban [2014] NSWCATAP 17 ('Collins v Urban'), the Appeal Panel stated at [76] that a substantial miscarriage of justice for the purposes of cl 12 (1) of Sch 4 may have been suffered where: … there was a "significant possibility" or a "chance which was fairly open" that a different and more favourable result would have been achieved for the appellant had the relevant circumstance in para (a) or (b) not occurred or if the fresh evidence under para (c) had been before the Tribunal at first instance.
6. Even if an appellant from a decision of the Consumer and Commercial Division requiring leave to appeal has satisfied the requirements of cl 12 (1) of sch 4 of the NCAT Act, the Appeal Panel must additionally consider whether it should exercise its discretion to grant leave to appeal under s 80 (2) (b) of the NCAT Act.
7. In Collins v Urban, the Appeal Panel stated at [84] that ordinarily it is appropriate to grant leave to appeal only in matters that involve: 1. issues of principle; 2. questions of public importance or matters of administration or policy which might have general application; 3. an injustice which is reasonably clear, in the sense of going beyond merely what is arguable, or an error that is plain and readily apparent which is central to the Tribunal's decision and not merely peripheral, so that it would be unjust to allow the finding to stand; 4. a factual error that was unreasonably arrived at and clearly mistaken; or 5. the Tribunal having gone about the fact finding process in such an unorthodox manner or in such a way that it was likely to produce an unfair result so that it would be in the interests of justice for it to be reviewed.
8. Even if the appellant establishes that it may have suffered a substantial miscarriage of justice in the sense explained above, the Appeal Panel retains discretion whether to grant leave under s 80 (2) of the NCAT Act. The appellant must demonstrate something more than the Tribunal was arguably wrong (Pholi v Wearne [2014] NSWCATAP 78 at [32]).
9. In TNT Building Trades Pty Ltd v Baker [2023] NSWCATAP 178 the Appeal Panel summarised the principles distinguishing between purported errors on a question of law, and purported errors that do not involve a question of law and require leave to appeal as follows at [39] and [42]-[43]: 39 If there has been a constructive failure to exercise jurisdiction there will have been error of law which can be addressed on an appeal limited to a question of law: Alexandria Landfill Pty Ltd v Transport for NSW (2020) 103 NSWLR 479; [2020] NSWCA 165 (Alexandria Landfill) at [22] (Basten JA). … 42 Errors in the exercise of a discretion are capable of being agitated on appeal restricted to a question of law alone. If it was apparent that the court had acted on a "wrong principle", then the question of law would be whether that principle was wrong or correct and, if wrong, whether the trial judge acted on that principle and whether that materially affected the outcome: Bimson, Roads & Maritime Services v Damorange Pty Ltd [2014] NSWSC 734 (Bimson) at [48]-[53] (Beech-Jones J). This passage was recently applied by the Appeal Panel in relation to the exercise of the discretion under s 48O of the HB Act: Noori Homes Pty v Patel [2023] NSWCATAP 149 (Noori Homes) at [45]-[47]. 43 Recently the Appeal Panel has decided that a conclusion of mixed fact and law cannot be challenged on an appeal on a question of law under s 80(2)(b) of the NCAT Act except in the circumstances where it can be determined that the conclusion proceeded from a misdirection of law: Jain v Dr N Kalokerinos Pty Ltd [2023] NSWCATAP 141 at [91]. This is to be distinguished from the wrong application of the correct principles to the facts that would be an error of mixed fact and law and an appeal would not lie on a question of law: Bimson at [42]-[45] (Beech-Jones J).

GROUNDS OF APPEAL

1. The Notice of Appeal contains 12 grounds of appeal purportedly identifying errors on questions of law; and a further 8 grounds upon which it is asserted the decision was "against the weight of evidence" (i.e. one of the grounds upon which leave to appeal may be granted under cl 12 of sch 4 of the NCAT Act).
2. The builder's appeal submissions in chief filed on 24 May 2023, to a limited extent, refine the grounds of appeal. However, there is still considerable overlap and repetition.
3. The builder's written submissions in chief are 28 pages in length. The owners' written submissions are 19 pages in length. The builder's written submissions in reply are slightly over 34 pages in length.
4. The importance of legally represented parties filing clear and concise grounds of appeal (and submissions) that clearly distinguish the asserted errors on a question of law; and other errors for which leave to appeal is required, has been asserted on many occasions (Garofali v Moshkovich [2021] NSWCATAP 242 at [52]-[55]; Jandson Pty Ltd v James [2021] NSWCATAP 274 at [29]; Bell Solar Pty Limited t/as Sunboost v Anderson [2021] NSWCATAP 278 at [33]; BNK Café Restaurant Pty Ltd v The Owners-Strata Plan No 33676 [2023] NSWCATAP 161 at [50]-[51]). The failure to do so may constitute a failure to comply with the obligation of a party and its legal representatives to assist the Appeal Panel to achieve the just, quick, cheap and efficient resolution of the real issues in dispute (s 36(3) of the NCAT Act).
5. The builder's grounds of appeal raise, in substance, the following grounds:

Purported Errors on Question of Law 1. Failure to provide adequate reasons. 2. Incorrect application of legal principle. 3. Failure to make material findings of fact. 4. Error in exercising discretion under the principles laid down in House v The King (1936) 55 CLR 499; [1936] HCA 40 (House v The King).

Leave to Appeal 1. The decision was not fair and equitable, and/or was against the weight of evidence.

1. The builder also seeks leave to rely upon fresh evidence. That evidence is an affidavit of the builder's solicitor dated 23 March 2023 which sets out "settlement attempts" of the builder.
2. The builder does not seek leave to rely upon that evidence as significant new evidence that was not reasonably available at the date of the hearing under cl 12(1)(c) of sch 4 of the NCAT Act, but as fresh evidence to be admitted under s 80(3)(b) of the NCAT Act if it becomes appropriate for the Appeal Panel to redetermine the issue of costs under s 81 of the NCAT Act on the basis that the builder's appeal is successful, rather than remitting the matter back to the Tribunal.

CONSIDERATION

1. As discussed previously, the prolixity and repetitiveness of the grounds is unhelpful.
2. As a decision on the issue of costs involves the exercise of discretion, to warrant the intervention of the Appeal Panel the builder must establish an error in the exercise of the discretion falling within the categories outlined in House v The King.
3. The well-established principles in House v The King at 504-505 are as follows: [i]t is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed … It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance.
4. An error in exercising a discretion involving the Tribunal acting upon a wrong principle constitutes an error with respect to a question of law: Bimson, Roads & Maritime Services v Damorange Pty Ltd [2014] NSWSC 734 at [48].
5. The essential gravamen of the builder's challenge to the Tribunal's exercise of the discretion in relation to costs was that the Tribunal had applied the wrong principle firstly in determining that the owners must have succeeded if the proceedings had gone to hearing and secondly in dismissing the significance of the Calderbank letter.
6. For the reasons which follow we have concluded that the Tribunal did apply a wrong principle in determining that the owners must have succeeded such that the builder would be ordered to pay their costs, but not in considering the significance of the Calderbank letter.

Costs When Proceedings Have Not Been Determined on the Merits

1. As both parties proceeded on the basis that r 38 of the NCAT Rules applies to the costs decision the subject of the appeal, it is unnecessary to consider the provisions of ss 60(1) and (2) of the NCAT Act.
2. The principles applicable when considering whether to make a costs order in favour of a party in circumstances where proceedings have not been heard and determined on the merits were set out by McHugh J in Re: Minister for Immigration & Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 (Lai Qin) at 624-625 as follows: In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order. In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation... Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. ... But such cases are likely to be rare. If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases. (footnotes and citations omitted).
3. A party "capitulating" to the other party, in the sense of one party, after litigation has been on foot for some time, effectively "surrendering" to the other party and consenting substantially to the relief sought without any obvious compromise, or (if the applicant) withdrawing the proceedings, is a situation where it is open to conclude either (a) it is clear that one party would have been successful had the proceedings been heard and determined on the merits; and/or (b) a party has acted with sufficient unreasonableness in the proceedings that a costs order should be made (Muhibbah Engineering (M) BHD & Anor v Trust Company Ltd & Anor [2009] NSWCA 205 (Muhibbah Engineering) at [54]-[55]; Shellharbour City Council v Minister for Local Government [2017] NSWCA 256 at [6]-[14]; One.Tel Ltd v Commissioner of Taxation (2000) 101 FCR 548; [2000] FCA 270 at [6] - [8]; (One Tel); Kiama Council v Grant [2006] NSWLEC 96 at [80]; Hunter Development Corporation v Save Our Rail NSW Incorporated (No 2) [2016] NSWCA 375 at [78]-82]).
4. A "surrender" is to be distinguished from a situation where "some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs" (One Tel at [6]; Knox v Bollen; Bollen v Knox [2018] NSWCATAP 106 at [47]).
5. In Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 (Nichols) the NSW Court of Appeal dealt with the principles in Lai Qin in the context of a matter where the parties had entered into consent orders finalising the dispute, but 'reserved' the issue of costs and sought separate determination of that issue.
6. Unhelpfully, neither party referred to Nichols in their submissions before the Tribunal, nor their submissions in the appeal. The Appeal Panel referred the parties to that decision during the course of oral submissions at the hearing of the appeal. Both parties have been legally represented at all relevant times.
7. Nichols is not an obscure authority. It has been referred to in many subsequent decisions, including decisions in the Supreme Court of NSW and the Appeal Panel of the Tribunal (e.g. The Owners-Strata Plan No 5319 v Price [2020] NSWCATAP 245 at [51]; Campara v Australian Islamic Society of Bosnia Herzegovinia Inc [2020] NSWSC 1739 at [75]-[77]; Wang v Cai (No 2) [2021] NSWSC 1268 at [63] Hoare v Taylormade Residential Pty Ltd [2022] NSWSC 1359 at [23]-[27]). Both parties had a reasonable opportunity to prepare and make submissions that dealt with the principles emerging from the decision in Nichols.
8. In Nichols, Basten JA stated at [2]-[3] and [8]-[10]: 2 Where the parties resolve their differences, except as to the costs already incurred in litigation, they should usually expect that the court will not award costs. That is because the general rule applicable in civil litigation in superior courts is that costs will "follow the event." That rule is frequently paraphrased by reference to its purpose, namely that the successful party should generally recover its costs from the unsuccessful party. But where there has been no trial there is no "event" because, except in unusual cases, it is not possible to say that one party has been successful and the other unsuccessful. The orders made by consent may or may not demonstrate capitulation by the "unsuccessful" party. 3 In unusual cases, it may be possible to identify success which is manifest on the face of the record. However, to manufacture a dispute in order to resolve that question is to disregard the statutory obligation imposed on the parties, their legal representatives and the court to conduct civil proceedings so as to facilitate the just, quick and cheap resolution of the "real issues in the proceedings." As explained in Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd: "That purpose may require a more robust and proactive approach on the part of the courts. Unduly technical and costly disputes about non-essential issues are clearly to be avoided. The Court further stated: "It could hardly be suggested that the pursuit of satellite interlocutory proceedings of the kind here in question in any way fulfils the overriding purpose of the [Civil Procedure Act]. To the contrary, it is the very kind of conduct which should be avoided if those purposes are to be achieved." … 8 Secondly, although it is possible to make an order for costs against one party if it can be shown that it has invited the litigation by its unreasonable behaviour, or has unreasonably pursued the litigation, such an order should only be made where that judgment is manifest by reference to known circumstances, not in dispute between the parties. If the question cannot be answered without reviewing large swathes of evidence and resolving, on a tentative basis, disputed questions of fact, the task should not be embarked upon. 9 Thirdly, if contrary to the views set out above, it was appropriate to investigate whether the applicants or the respondent had been unreasonable, either in their conduct prior to the proceedings, or in their conduct of the proceedings, the approach adopted was untenable. Thus, regard was had to the motives of the respondent in commencing proceedings, but no account was taken of the motives of the applicants in capitulating. Further, once it is clear that there is a real dispute as to a significant fact in issue in the proceedings, it is inappropriate to determine that matter, other than in making an interlocutory ruling, by accepting one party's case without permitting the other party an opportunity to challenge the opposing party's witnesses. 10 Once it becomes apparent that such a course is required, the hypothesis on which the examination was undertaken is negated and the inquiry should stop. (Footnotes omitted.)
9. Meagher JA (with whom Payne JA agreed) stated at [30]-[33]: 30 If both parties to a proceeding which has been settled without a hearing on the merits have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. 31 In the present case his Honour's judgment commenced by noting the applicants' submission that he should not embark upon a determination of what would have been the outcome had the matter proceeded to a hearing, as such an approach would be contrary to Lai Qin. The primary judge, whilst having regard to Lai Qin, proceeded to read the 200 plus pages of affidavit evidence on the costs question and observed: "[6] I have read all of the affidavits contained in the court book and I observe that there are a number of disputed conversations and events. I do not think it is necessary to set out any of the detail, because it is clear that: (1) Mr Nichols (and/or the other defendants) held documents which belonged to NFS, that he transferred those documents at the meeting of 8 May 2017 to NFS at NFS' request or demand, and which documents he agreed on 8 May could be deleted from his devices. (2) Mr Nichols agreed to be permanently restrained from using 'in any way any of the plaintiff's confidential information as defined in the orders made on 28 April 2017'." 32 I have concluded that this approach is contrary to principle as explained in Lai Qin and adopted by this Court in many cases since, including Edwards Madigan Torzillo Briggs, Muhibbah Engineering and Shellharbour City Council. 33 Neither of the matters identified by the primary judge was capable of demonstrating that there had been a capitulation by the applicants or that, if the case had proceeded, the respondent would "almost certainly" have succeeded. Nor was either capable of demonstrating that there had been a marked difference in the reasonableness of the actions taken by the parties, so that one party should be rewarded for its reasonable actions and the other party should suffer a detriment in the form of a costs order against them.
10. At [37] - [39] Meagher JA stated that the reference by Sackville AJA in Muhibbah Engineering at [54]-[55] to the consideration of affidavit evidence was made in the specific context of whether a party had "effectively surrendered" in the proceedings, it was not an invitation to consider large swathes of disputed factual evidence in the context of determining whether a party has succeeded in obtaining a material aspect of the relief sought when the parties have settled other than on the issue of costs.
11. At [47]-[49] Meagher JA pointed out that it was inappropriate to make a finding that a party had made a "prima facie untrue" statement or had "lied" in the context of a costs decision where there had been no determination on the merits and the witness had not been cross examined.
12. Much of the parties' submissions on this ground of appeal involve the Appeal Panel decision in Gregory.
13. The importance of this decision is the reference to it at para [43] of the Tribunal decision and the last sentences of para [52] as follows: In Gregory, the Appeal Panel stated that it is sufficient for the Tribunal to determine that a party "would succeed in some form" and "[the other party] would be required to perform some work" in reaching a finding that a party were almost certain to have succeeded to an extent that a costs order would follow. … Although the expert's evidence differed as to potential quantum of the loss suffered by the applicants as a result of the respondent's works, the experts reached agreement as to the rectification of the works, agreeing to the scope of the defective work to be rectified. The Tribunal is satisfied that the applicants would almost certainly have been successful on its claim had the matter been fully tried (Lai Qin). The Tribunal is satisfied that on the material before it including the consent orders and the expert evidence it is more than likely it would have made orders against the respondent in some form requiring it to perform some work.
14. The builder submits that Gregory is not authority for the proposition that it is sufficient for the Tribunal to be satisfied that it would make "some" work order in favour of the owners in order for the owners to be awarded costs when the parties had settled. It referred to the Appeal Panel decision in Bulloch v Linden Building Services Pty Ltd t/as Linden Constructions [2019] NSWCATAP 42, where Gregory was distinguished at [20] as follows: In our view, the factual circumstances in the Gregory matter were very different to those that were before the Senior Member in this case. In Gregory, the defective work involved one item and the only expert evidence before the Tribunal was that the work was defective. The builder had not provided expert evidence to the contrary. The Appeal Panel found, in those circumstances, the Tribunal had not erred in its application of the principles in Lai Qin.
15. The owners submit that Gregory is simply one of many decisions that involve application of the principles in Lai Qin.
16. The owners submit that Lai Qin is not an "invariable rule" but merely "guidance" to the "unfettered discretion to award costs" under r 38, and refer to Price v Price [2020] NSWCA 312 at [32] and Khanna v Bond Realty Pty Ltd [2019] NSWCA 128 at [31]. Additionally, the owners submit that the finding made by the Tribunal that the owners had, in substance, achieved in the consent orders what they were seeking in the litigation was consistent with the "applicable legal principles," citing Nadalio v Eagleton [2021] NSWCATAP 232 at [11]-[12] and Ballina Shire Council v Leadbetter [2023] NSWLEC 12.
17. We accept that Gregory is not authority for the proposition that any work order contained in a settlement is sufficient to satisfy the test in Lai Qin, let alone the principles set out in Nichols.
18. In Gregory, a builder had entered into consent orders at the Tribunal to demolish and rebuild the concrete shell of an inground pool. Each party then sought an order for costs. The Tribunal held, applying Lai Qin principles and in circumstances that the only expert evidence was a report filed by the owners stating the works were defective and required rectification by way of removal and replacement, that the builder should pay the owner's costs.
19. Much of the appeal in Gregory involved whether the reasons were adequate and whether the builder had been denied procedural fairness because the Tribunal member had not informed the parties that the member was applying a "two step" approach under Lai Qin and had not given the builder a reasonable opportunity to make submissions.
20. The Appeal Panel noted (at [9]) the Tribunal found that it was "clear" even before proceedings were commenced that the pool required rectification; and, even if there was no "structural defect" as the builder submitted, it was always "clear" the builder would be required to perform "some work" and consequently the owners were "almost certain" to have succeeded.
21. The Appeal Panel at [21]-[22] noted that the only expert evidence was that of the owner, and that the Tribunal was not in error in concluding, applying Lai Qin principles on the material before it and without conducting a hypothetical hearing, that it was "almost certain" the owner would succeed sufficiently to obtain a costs order if the matter proceeded to hearing and was determined on its merits.
22. The Appeal Panel in Gregory made no reference to Nichols.
23. In Bulloch v Linden Building Services Pty Ltd t/as Linden Constructions [2019] NSWCATAP 42 (Bulloch) the Appeal Panel dealt with an appeal where an owner brought proceedings under the HB Act seeking damages of approximately $140,000 for the cost of rectifying defective work performed in breach of s 18B of the HB Act. Both parties had engaged building experts, who conferred prior to the hearing and prepared a joint report. The parties agreed to a consent work order based on the joint report and a further report by an engineer engaged by the owner.
24. Both parties sought an order for costs. The Tribunal held that each party should pay its own costs. The Appeal Panel rejected the owner's appeal, holding that it was not satisfied the Tribunal had misapplied the principles in Lai Qin. The Appeal Panel stated at [21]-[22]: 21 In this case it is apparent from the Senior Member's reasons that, on the basis of the material before him, he was not satisfied, however, without hearing evidence, that the homeowners would be almost certain to succeed. We agree with the builder that the mere fact consent orders are entered into is insufficient to establish that one party would be almost certain to succeed if the matter went to hearing. While there may be circumstances, as in the Gregory matter, where that outcome may have been inevitable, as McHugh J stated, those cases are rare. 22 The fact that the consent orders contain an agreed scope of works does not, in our view, indicate that the Senior Member was bound to accept that, had the matter proceeded to hearing, matters would not have been contested and a similar outcome would have been reached. It was, of course, not permissible for the Senior Member to try a hypothetical action between the parties.
25. The decision of the Appeal Panel in Bulloch does not refer to Nichols.
26. In our view, the Tribunal committed an error of the first type identified under the principles in House v The King, that is the application of a wrong principle, in finding that this was a rare situation where it could be clearly satisfied on the basis of uncontested factual evidence applying clear and undisputed legal principles that the owners would have succeeded in the litigation sufficient to obtain a costs order in their favour of the same type that the Tribunal made (i.e. that the builder pay the owners' costs of the proceedings as agreed or assessed, rather than some other costs order).
27. It is not sufficient that the Tribunal is almost certain that a work order of some type would have been made. If that were the applicable test, then any consent order for any work in proceedings where the amount claimed or in dispute exceeded $30,000 would result in an order for costs in favour of the owners, irrespective that, had the proceedings been heard to finality, the owners were likely (or even certain) to have failed on substantial issues which may have resulted in the owners not being awarded costs.
28. Rather, the appropriate enquiry is that "even if both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried so that the party should obtain the costs of the action" (emphasis added) (Kiama Council v Grant [2006] NSWLEC 96 at [80]).
29. The Tribunal was clearly in error in finding at [52] that "the experts reached agreement as to the rectification of the works, agreeing to the scope of works to the defective work to be rectified". There were only a very limited number of matters the experts completely agreed upon in respect of existing defective works.
30. What was substantially agreed upon in the joint expert report was the works that were incomplete under the contract.
31. However, there was a critical issue in dispute in the proceedings as to whether the builder lawfully terminated the contract. The builder's position was that it lawfully terminated the contract. If the proceedings had been heard and the owners failed to prove that the builder had not lawfully terminated the contract, the builder would not have been liable to perform any further works, other than rectifying existing defects because performance of future obligations would be discharged. (McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 476-477; [1933] HCA 25).
32. In those circumstances, to the extent the owners were seeking a work order for performance of incomplete work the owners would have failed. (Dimitropoulos v Capital Constructions Pty Ltd; Capital Constructions Pty Ltd v Dimitropoulos [2018] NSWCATAP 100). If the claim had been amended to claim damages for the increased cost of completing incomplete work, that aspect of the claim would also have failed.
33. It cannot be said, given the limited regard that can be had to the contested factual evidence under the principles set out in Nichols, that it is "almost certain" the owners would have succeeded on that issue.
34. The Tribunal clearly applied an incorrect principle in its finding at [52] that it was sufficient to justify an award of costs for it to be satisfied "on the material before it including the consent orders and the expert evidence that it is more likely it would have made the orders against the respondent in some form requiring it to do some work ".
35. Being satisfied that it was "more likely" the Tribunal would have ordered the builder to perform "some work" had the matter been heard and determined to finality is not, having regard to the principles set out in Nichols, the applicable test.
36. The Tribunal clearly was not satisfied that either party had acted so unreasonably in the bringing or prosecution of the litigation that a costs order should be made. Indeed, the owners' written submissions to the Tribunal expressly acknowledged, at [52], that they did not make that submission. Rather, the Tribunal made the costs order in favour of the owners on the second basis outlined by McHugh J in Lai Qin, that is that the Tribunal could "feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried.."
37. To reach that conclusion, the Tribunal had to be satisfied that this was an "unusual" or "rare" case where, with reference only to clear and incontestable information that did not involve reviewing large tranches of evidence and submissions, it could conclude that the owners' would have succeeded in the litigation had it been litigated to finality to the extent that a costs order would have been made in their favour.
38. The Tribunal's reference at [52] that it was sufficient that it was "more than likely" the owners' would have obtained an order in their favour that the builder perform "some work" expresses a significantly lower threshold for a costs order to be made than is suggested by Lai Qin and Nichols. The Appeal Panel decision in Gregory does not set out the test which the Tribunal applies in [52], and even if it did, it would be inconsistent with the principles in Nichols. The reference to "some work" in by the Appeal Panel in Gregory was in the context of the only evidence about defective work and the method of rectification emanating from the homeowner and its expert.
39. Accordingly an error with respect to a question of law, being an error in the exercise of the discretion in respect of costs of the first type referred to in House v The King has been established.
40. In circumstances where the Appeal Panel has the benefit of the parties' costs submissions (both at first instance and in the context of their appeal submissions) and the documentary evidence relied upon by the parties at first instance we regard it as appropriate to redetermine the issue of costs pursuant to s 81 of the NCAT Act. To remit the costs dispute back to the Tribunal is unnecessary to achieve procedural fairness, and will only incur further expense to the parties.
41. Before we embark up on that task, we will deal briefly with the other grounds of appeal raised by the builder.

Failure to Give Adequate Reasons

1. Grounds 1, 2, 3, and 7 in the builder's notice of appeal all involve an alleged failure to give adequate reasons. Grounds 9 and 10 also refer, in part, to a failure to give adequate reasons.
2. In Volkswagen Group Australia Pty Ltd v Saad [2022] NSWCATAP 133 at [58] the Appeal Panel summarised the principles set out by Bell P (as he then was) in New South Wales Land and Housing Corporation v Orr [2019] NSWCA 231 at [66]-[77] as follows: The NSW Court of Appeal in New South Wales Land and Housing Corporation v Orr [2019] NSWCA 231 (per Bell P) helpfully set out the principles relevant to adequacy of reasons at [66] - [77]. They are summarised as follows: (1) The function of the appeal court is to determine not the optimal level of detail required in reasons for a decision but rather the minimum acceptable standard. (2) The quantity (or detail) of reasons, necessary for those reasons to be adequate may vary both with the nature of the decision maker, i.e. whether or not it is a court or tribunal, and, if the latter, possibly the type of tribunal, and the nature of the question being decided. (3) As to the quality of reasons, it is generally accepted that the sheer volume of work undertaken by tribunals is such that a perhaps more relaxed standard of review of reasons is appropriate than may be the case when an appellate court is hearing an appeal from another court. (4) Even in the less formal setting of a tribunal there are certain minimum characteristics that a Tribunal's reasons must possess. These are supplied, in relation to the Tribunal, by s 62(3) of the NCAT Act which, requires there to be set out in reasons (when requested by a party): (a) the findings on material questions of fact, referring to the evidence or other material on which those findings were based, (b) the Tribunal's understanding of the applicable law, and (c) the reasoning processes that lead the Tribunal to the conclusions it made. (5) At least a basic explanation of the fundamental reasons which led the Tribunal to its conclusion is necessary. (6) It is not necessary for a judge to detail each factor which he or she has found to be relevant or irrelevant. Nor is a judge required to make an explicit finding on each disputed piece of evidence. It will be sufficient if the inference as to what is found is appropriately clear. (7) Reasons need not be elaborate. (8) Expression of conclusions in a certain sequence does not indicate a failure to consider the evidence as a whole. (9) The court should not read passages from the reasons for decision in isolation from others to which they may be related. (10) The reasons must be read fairly and as a whole. (11) The reasons recorded ought not to be inspected with a fine tooth-comb attuned to identifying error. (12) There should be a degree of tolerance for looseness in the language of the Tribunal, unhappy phrasing of the tribunal's thoughts or verbal slips.
3. In our view, the reasons of the Tribunal are sufficient to satisfy the minimum acceptable standard. We would not have allowed this ground of appeal.
4. The builder made extensive submissions as to why the Tribunal erred in not ordering that the owner pay the builder's costs due to the owner failing to accept the builder's Calderbank offer. We will return to that issue in the context of redetermining costs under s 81 of the NCAT Act.

Failure to Take Into Account Relevant Evidence

1. The builder submits that the Tribunal failed to consider relevant evidence. That ground of appeal significantly overlapped with its submissions on the Tribunal failing to apply the correct legal principles. It is unnecessary for us to further consider this ground of appeal in circumstances where we are redetermining the issue of costs under s 81 of the NCAT Act.

Denial of Procedural Fairness

1. This ground of appeal is only referred to briefly in the builder's submissions, and is based upon the Tribunal making a "finding" at [53] that "it was not until the day of the hearing that the respondent accepted that the claim should be settled".
2. The builder argues this statement was adopted from the owners' costs submissions in reply and the builder was denied procedural fairness because it did not have the opportunity to make a submission in response.
3. We do not accept that any denial of procedural fairness has been established. Procedural fairness does not require a Tribunal to engage in an endless dialogue with parties in the context of written submissions. Both parties were given a reasonable opportunity to make costs submissions. The comment in [53] was not material to the decision because the Tribunal based its decision on it being satisfied that the owners would have succeeded and obtained a work order; not on the basis that the matter resolving soon prior to the hearing was attributable to the unreasonable conduct of the builder in the litigation such that a costs order should be made. No practical injustice has been demonstrated by the builder not being given a further opportunity to make submissions.

Leave to Appeal

1. As we are satisfied the appeal should succeed as an error on a question of law has been established, it is otiose to deal with the issue of leave to appeal.

Redetermination of the Issue of Costs

1. In circumstances where all relevant material on the issue of costs is before the Appeal Panel, it is appropriate we redetermine the costs application pursuant to s 81 of the NCAT Act.
2. We are not satisfied that this is a "rare case" where it can be said it would be "almost inevitable" on the basis of clear, uncontested material (including the orders sought in the application, the joint expert report and the consent orders) and without making hypothetical findings on contested material, or considering large swathes of material, that the owners would, if the matter had been litigated to finality, achieved an order in their favour in relation to the substantial issues in dispute sufficient to justify an order that the builder pay their costs as agreed or assessed.
3. Our reasons are as follows: 1. It is a matter of speculation as to whether or not the Tribunal would have found the contract had been lawfully terminated by the builder. Had the Tribunal found in the builder's favour on this issue, no order would have been made for the builder to return to the site and complete incomplete work. 2. It is a matter of speculation as to what order would have been made in respect of existing works that were allegedly defective. The joint expert report identified some areas of agreement between Mr Moore and Mr Capaldi. However, it is inaccurate to say there was extensive or complete agreement on the nature of the defects and the method of rectification. If the case had run, and the Tribunal had only made orders on the limited matters agreed to by the experts, that may not have been sufficient to justify an award of costs in favour of the owners. 3. There is nothing to indicate that the owners informed the builder that they were not pressing for an order that the builder rectify defects by demolishing and reconstructing the dwelling. This was "option 1" in Item 1 of the joint expert report. If that had been pressed, and the Tribunal had made work orders of the type set out in the consent orders, there is a real prospect the owners would not have been awarded costs of the proceedings as agreed or assessed on the basis that the parties would have had substantial success against each other (Hogan v Trustees of the Roman Catholic Church (No 2) [2006] NSWSC 74 at [40]); or would have been awarded proportionate costs due to failure to succeed on issues that were dominant or separable (Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38]) . 4. The consent work orders in respect of rectifying existing defects were only in respect of 7 items out of the 20 items identified in Mr Moore's report. 5. The owners submit that it was "incontrovertible" that the dwelling was not built in accordance with the plans. Failure to construct a dwelling in accordance with the plans and specifications is a breach of the statutory warranty under s 18B(1)(a) of the HB Act. However, it is one thing to establish that the plans were not complied with. The owners would still need to establish the appropriate method of rectification and (if the claim was amended and damages were sought, the cost of rectification) in accordance with the well-established principles in Bellgrove v Eldridge (1954) 90 CLR 613; [1954] HCA 36. There was a factual dispute as to whether the female owner had given instructions to raise the garage floor; and whether the owners had given oral instructions that the rear set back of the secondary dwelling should be 3m from the rear boundary. What factual findings would have been made on those issues, and how those findings would have affected the findings made by the Tribunal on the issue of defective work and the appropriate method of rectification are a matter of speculation. 6. The consent orders and notations dealt with a number of matters that were outside the ambit of the orders sought in the proceedings, such as the builder applying for an amended Development Consent from the local Council; the owners supplying amended plans; payments from the owners to the builder that would deal with the dispute about the Local Court judgment obtained by the builder in respect of the Security of Payment order; and payment for the builder to return to site and complete incomplete works. 7. The owners submit that the consent orders gave them in substance what they sought, which was a completed and "compliant" dwelling. Clearly the owners were satisfied with the consent orders, otherwise they would not have agreed to them. However, the consent orders do not make orders in their favour in respect of a number of significant matters they had raised in the proceedings.
4. In our view, the consent orders and notations represent a compromise between the parties.
5. We do not regard the consent orders as a capitulation by either party.
6. We also do not regard the conduct of either party, in bringing or defending the proceedings, or in the conduct of the proceedings, to be so unreasonable that it warrants a costs order in favour of either party.

The Builder's Claim That the Owners Should Pay Its Costs

1. The builder does not press the application for indemnity costs made before the Tribunal on basis of the rejection of the Calderbank offer, but does seek that the owners pay the builder's costs of the proceedings.
2. In pressing that costs application the builder relies on the matters raised in the costs application at first instance (where the builder's Counsel provided prolix written submissions 46 pages in length, plus annexures) and also seeks leave to rely upon an affidavit of the builder's solicitor, Mr Dawson, dated 23 March 2023.
3. The builder's costs submissions before the Tribunal raise two grounds said to justify a costs order in favour of the builder.
4. The first is that the owners "capitulated" in settling the case on the basis of the consent orders. We reject that submission. The consent orders are clearly not a capitulation. A party settling its case for something less than its absolute best case scenario is not obviously a capitulation in favour of the other party. The consent orders provide for a number of substantial things to be done by the builder for the benefit of the owners and reflect a compromise between the positions of the parties on a number of contested issues.
5. The second is the Calderbank offer of 29 August 2022. The builder asserts that the owners unreasonably refused to accept this offer of settlement, in that the offer was a better outcome than the owners achieved by the consent orders.
6. The principles pertaining to Calderbank offers have been the subject of extensive judicial consideration, including the recent NSW Court of Appeal decision in C&V Engineering Services Pty Ltd v Metropolitan Demolitions Pty Ltd (No 2) [2023] NSWCA 240 at [29]- [32]. The principles were summarised by the Appeal Panel in The Owners-Strata Plan No 6307 v Kinsella [2022] NSWCATAP 184 at [97]-[98] as follows: 97 The principles governing Calderbank offers (offers made "without prejudice save as to costs" or similar wording) were set out in the reasons of the Appeal Panel in Thompson v Chapman [2016] NSWCATAP 6 at [91] in reliance upon authority in the NSW CA and Supreme Court there cited, to which can be added Hazeldene's Chicken Farm PL v Victorian Workcover Authority (No 2) (2005) 13 VR 435, [2005] VSCA 298, El-Wasfi v NSW; Kassas v NSW (No 2) [2018] NSWCA 27 and Croghan v Blacktown CC [2019] NSWCA 248 and authority there discussed. 98 In summary: the offer must constitute a real and genuine compromise; rejection must be unreasonable in the circumstances; reasonableness of rejection is to be assessed at the time the offer is made, not with the armchair of hindsight; relevant factors in assessing unreasonableness include the stage of the proceedings when the offer was made, time allowed to consider the offer, extent of compromise in the offer, the offeree's prospects in the litigation at the time the offer was made, clarity of terms of the offer, and whether an application for indemnity costs was foreshadowed in the event of rejection.
7. Assessed prospectively, it was clearly not unreasonable for the owners to have rejected the offer. The offer was that the builder pay $30,000 plus the owners' costs as agreed or assessed to date on a party/party basis on the basis that the owners accept the amount as (a) "full satisfaction of their claims made in this NCAT proceeding" and (b) the amount be "offset from the balance of the judgment debt owed by the applicants to the respondent" in the Local Court proceedings".
8. There was no clear evidence as to what remained owing under the Local Court judgment debt as of 29 August 2022 but as of November 2021 there was approximately $35,000 outstanding.
9. In any event, the offer of the builder was that the amount of $30,000 was to be "offset" against the Local Court judgment amount. The amount of the offer was significantly less than the amount of the Local Court judgment. The offer was not that the builder would set aside the Local Court judgment, but rather the amount paid by the builder would be "offset from the balance of the judgment debt owed" and the builder would retain the monies previously recovered pursuant to the Local Court judgment.
10. If the owners accepted that offer, they would have had their legal costs paid to date (on a party/party basis), but likely no money paid to them (depending upon what amount remained outstanding in respect of the Local Court judgement, with the potential that they would still owe approximately $5,000 to the builder) and left to bear (a) the cost of rectifying defects; and (b) the cost of completing work under the contract.

Fresh Evidence in the Affidavit of Mr Dawson Dated 23 March 2023

1. As we have noted above, for the purposes of the redetermination of the issue of costs under ss 80(3) and 81(1)(d) of the NCAT Act, the builder seeks leave to rely upon an affidavit of its solicitor, Mr Dawson, dated 23 March 2023.
2. The evidence was clearly reasonably available to the builder as of the date the matter was before the Tribunal. Although matters for consideration for leave to rely on fresh evidence under ss 80(3) and 81(1)(d) of the NCAT Act are not identical to whether leave to appeal should be granted under cl 12(1)(c) of sch 4 of the NCAT Act, it is a relevant consideration under ss 80(3) and 81(1)(d) whether the evidence was available at the Tribunal hearing and what explanation has been proffered for failing to tender that evidence.
3. The affidavit contains no explanation why the builder's solicitor only now seeks to rely on the evidence and why it was not provided to the Tribunal with the original costs application.
4. The affidavit is proffered on the basis that it supports the builder's argument that the owners acted so unreasonably in the bringing or conduct of the litigation that the owners should pay the builder's costs of the proceedings.
5. Some of the affidavit refers briefly to conversations between the parties' respective solicitors about attempting to resolve the proceedings. In essence, this evidence is put forward on the basis of supporting a submission that the owners were not responding to the builder's request for the owners to engage in settlement discussions.
6. The conversations referred to do not establish unreasonableness of the type that, applying the principles in Lai Qin and Nichols, would justify a costs order. If one party is not engaging in settlement discussions, the other party can, at any stage of the proceedings, serve an open offer or an offer on Calderbank terms. The builder could also have sought an order under s 37 of the NCAT Act that the parties be directed to participate in mediation or alternative dispute resolution. Merely complaining that the other party is not engaging in settlement discussions is manifestly insufficient to justify a finding that the other party acted so unreasonably in the conduct of proceedings that a costs order should be made against them.
7. The affidavit also annexes an earlier offer of settlement dated 15 March 2022 upon which the builder seeks to rely.
8. That offer is headed "Without Prejudice Save As to Costs" but makes no reference to being relied upon under the principles in Calderbank. It does not contain a time limit for acceptance, but was clearly superseded by the offer of 29 August 2022.
9. The offer was as follows: 1. Owners to pay the builder all outstanding invoices for building works performed to date including accrued interest and costs in relation to the Local Court judgment within 21 days. 2. Owners to provide evidence of their ability to pay for the balance of the works to be undertaken to completion within 21 days. 3. Within 14 days of being notified of the position the owners wanted the OSD Control pit built and being supplied with the engineering requirements for the driveway, the builder will organise the earthworks and concreters to install an OSD Control Pit and driveway to specifications of Davron Engineering. That driveway is to be at a slope from the street level to the current level of the garage. 4. The builder will complete "as promptly as reasonable all other work under the contract for the price it is entitled to charge under the contract. This work will include positioning the rainwater tank behind the carport". 5. Within 7 days the NCAT proceedings be withdrawn and dismissed. 6. Within 2 business days the owners withdraw their claim on the builder's insurer.
10. Leaving aside the fact that the offer was not expressed to be relied upon as a Calderbank offer, we do not consider that the builder has established that it was unreasonable for the owners not to have accepted it. No information is provided as to the amount in respect of the outstanding invoices and Local Court judgment, interest and legal costs that the owners would be required to pay as a basis for the builder recommencing work.
11. Nothing is said in respect of what the builder agrees to do in respect of existing defects, other than the builder asserting that it "does not accept Mr Moore's claim (sic) the building was built in the wrong location nor does our client accept other opinions expressed by Mr Moore." At the stage the offer was made, the owners had served the report of Mr Moore, but the builder had not obtained and served any expert evidence in response to Mr Moore's report.
12. Further, the builder requires leave to rely on this evidence. The builder has provided no explanation as to why the offer of 15 March 2022 was not provided to the Tribunal with the original costs application.
13. Were we to give the builder leave to rely upon the further affidavit, procedural fairness would require that we give the owners an opportunity to respond. That would not be consistent with the obligation of the Tribunal to facilitate the just, quick and cheap resolution of the real issues in the proceedings.
14. Accordingly, leave to rely upon the affidavit of Stephen Charles Dawson dated 23 March 2023 is refused.

Conclusion

1. We are satisfied that there should be no order as to costs in the Tribunal proceedings with the consequence that each party will be left to pay its own costs.

Costs of the Appeal

1. Both parties' written submissions in the appeal assert that they seek costs of the appeal.
2. We do not propose to determine the issue of costs of the appeal without giving the parties a further opportunity to make a costs application and provide submissions that take our reasons into account. Accordingly, we make procedural directions for the disposition of any costs application (if such an application is made).
3. If a costs application is made by one or both of the parties, the submissions filed in support of such application must address: 1. The relevant authorities dealing with r 38 and 38A of the NCAT Rules, in particular in the context of an appeal where the only issue is the allocation of the costs at first instance. 2. The fact that, the builder's submissions to the Tribunal and the Appeal Panel failed to refer to the Court of Appeal decision in Nichols. 3. The fact that the builder pressed for an order that the owners pay its costs of the Tribunal proceedings, and the builder failed in that application. 4. Our reasons dealing with the builder's appeal grounds other than the appeal ground that the builder succeeded upon, and in particular the proposition raised at [73] above.
4. Considering the above matters, it would appear to be open to us to make an order that there be no order for costs in the appeal, with each party bearing its own costs. However, we express no view about what, if any, costs orders will be made if there is a costs application.
5. If no costs application is made by either party in accordance with our procedural directions, there will be no order as to costs in the appeal proceedings.

ORDERS 1. Appeal allowed in part. 2. Order 2 made by the Tribunal on 28 February 2023 in Matter HB 21/29512 is set aside and there is no order as to costs in those proceedings. 3. The appellant's application for leave to rely on the affidavit of Stephen Charles Dawson dated 23 March 2023 is refused. 4. The appeal is otherwise dismissed. 5. If there is a costs application in the Appeal Panel proceedings, it is to be made as follows: 1. A party seeking costs (costs applicant) is to file with the Appeal Panel and serve on the other party (costs respondent) submissions not exceeding five pages and any evidence in support within 14 days of the date of this decision. 2. The costs respondent is to file with the Appeal Panel and serve on the costs applicant submissions in response, not exceeding five pages, and any evidence within 28 days of the date of this decision. 3. The costs applicant is to file with the Appeal Panel and serve on the costs respondent any submissions in reply, not exceeding three pages, within 35 days of the date of this decision. 4. Submissions filed pursuant to this order must indicate whether the filing party consents to the costs decision being determined without a further oral hearing and if not, why not. 5. Either party may apply to the Appeal Panel in writing to vary the procedural timetable for the filing and serving of costs submissions and evidence. Such application must be made no later than the applicable date for compliance with the timetable.

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

Amendments 01 March 2024 - Order date changed from 1 March 2024 to 01 March 2024 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: 01 March 2024