The principal decision in this matter (the Decision) was published on 11 June 2021. By the Decision I ordered the respondent (the builder) to pay the applicants the sum of $23,264.
The matter before me was a renewal application brought by the applicants on 22 January 2020 pursuant to clause 8 of schedule 4 of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act).
The applicants alleged that the builder had failed to rectify nine items which were the subject of consent orders made on 28 February 2019.
By the Decision I found that some, but not all, of the items claimed by the applicants to have been defective required rectification, and assessed the reasonable cost of rectification, which was the amount the builder was ordered to pay.
The applicants had also sought to raise an additional item, not the subject of the previous orders, which was that the concrete slab supporting a rainwater tank was also defective. I determined that any defect in the slab was not a major defect and that the Tribunal did not have jurisdiction to determine any claim relating to the slab as the warranty period in respect of that work had expired.
I made orders permitting either party to file submissions seeking an order for costs and for the other party to file submissions in response and required that any such submissions indicate whether the issue of costs could be dealt with on the papers and without a further hearing.
The applicants filed submissions on 25 June 2021 seeking an order "that the builder pay the owners' costs of, or incidental to, the proceedings as well as the costs of, or incidental to, the circumstances giving rise to the proceedings".
The builder filed submissions on 9 July 2021 in which it accepted that a costs order should be made against it, but that it should be ordered to pay only a part of the applicants' costs, having regard to:
1. The fact that the applicants were unsuccessful in respect of a number of significant issues; and
2. The applicants' disentitling conduct which led to the incurring of unnecessary costs.
The builder's submissions suggested that the appropriate proportion of the applicants' costs which the builder should be ordered to pay was 25%.
The builder submitted that the application for costs should be determined on the papers in accordance with s 50(2) of the NCAT Act.
Despite the direction made in the orders made on 11 June 2021, the applicants did not address the question whether the application could be determined on the papers.
I am satisfied that the issue of costs can be dealt with on the basis of the written submissions and without a hearing and I will make an order pursuant to s 50 of the NCAT that the question of the costs of the proceedings is to be determined on the papers without an oral hearing.
On 19 July 2021 the applicants filed a document headed "Owners' submissions (in reply) on costs".
On 22 July 2021 the parties forwarded to the Tribunal a letter which described itself as a joint communication by the parties. That document identified that an issue had arisen between the parties in relation to the "Owners' submissions (in reply) on costs" dated 19 July 2021.
The builder objected to those submissions being received by the Tribunal, as they had been filed by the applicants without leave of the Tribunal. The builder referred to the Court of Appeal decision in Bull v Lee (No 2) [2009] NSWCA 362 in which the Court of Appeal had stated:
8 In Notaras v Waverley Council [2007] NSWCA 333; (2007) 161 LGERA 230 at 267 [147], Tobias JA (with whom Mason P and Hodgson JA agreed) said:
"As leave to file the final submissions was neither sought nor granted, authority requires that they should be ignored … the notion that supplementary submissions can be filed without leave is misconceived and this is so even if the other party to the proceedings consents. It should not occur."
9 The effect of making submissions after judgment has been either delivered or reserved, that go beyond the scope of any leave that has been granted is not confined to having those submissions ignored. Counsel should understand that it is a breach of their professional responsibilities to the Court to seek to make submissions that go outside the scope of the leave that has been granted. For counsel to act in that way seeks to undermine the important principle that, save in the most exceptional circumstances, all arguments relating to an appeal should be put at the one time. It has the capacity to cause waste of the Court's time, and both waste of time and expense for counsel's opponent in deciding what to do about the submissions that have been made without leave.
The applicants submitted that the letter from the builder's solicitor under cover of which the builder's submissions had been served upon the applicants' solicitor had concluded "we await receipt of any Submissions in reply". The applicants submitted that, by opposing the filing of the submissions in reply, the builder was seeking to resile from a position it had expressly taken.
The applicants also submitted that Order 3 made on 11 June 2021, which stated "if either party files submissions in accordance with Order (2), the other party may file submissions in response within a further 14 days", provided leave for the applicants to file submissions in reply to the submissions filed by the respondent.
In the alternative, if Order (3) did not authorise the filing of the written submissions, the applicants sought leave to rely upon the submissions in reply. In that regard the applicants "asked the Tribunal to consider the applicants have already incurred the costs of preparing and filing the submissions and that submissions in reply on costs are not unusual or out of the ordinary".
The applicants also submitted that the respondent's submissions raised issues regarding "alleged disentitling conduct by the applicants" and submitted that, in fairness, the applicants should be afforded an opportunity to respond to those allegations.
I do not agree with the applicant's submission that Order (3) of the orders of 11 June 2021 permitted the applicants to file a reply to the respondent's submissions. Order (3) permitted a party to respond to submissions filed by the other party seeking an order in relation to the costs of the proceedings. It did not provide for a further response to submissions filed in accordance with Order (3).
Nevertheless, I consider that, had the applicants sought leave to file submissions in reply, leave would have been given to file submissions strictly in reply. For that reason I will grant the applicants leave to file the submissions in reply, to the extent that they are strictly in reply, and I will disregard any submissions which cannot be so characterised.
I do not consider that the decision of the Court of Appeal in Bull v Lee requires me to disregard the submissions regardless of whether leave, if sought, would have been granted. The submissions filed without leave in Bull v Lee effectively sought to re-open the appeal to raise further grounds. That is a quite different circumstance to the applicants' reply submissions in this case. I also take note of the fact that the covering letter for the builder's submissions had effectively acknowledged the likelihood that the applicants would wish to file submissions in reply.
The parties were in agreement that the applicants' claim in the proceedings had exceeded $30,000 and that accordingly rule 38 of the Civil and Administrative Tribunal Rules 2014 (NSW) was applicable. Rule 38 provides:
38 Costs in Consumer and Commercial Division of the Tribunal
(1) This rule applies to proceedings for the exercise of functions of the Tribunal that are allocated to the Consumer and Commercial Division of the Tribunal.
(2) Despite section 60 of the Act, the Tribunal may award costs in proceedings to which this rule applies even in the absence of special circumstances warranting such an award if -
(a) the amount claimed or in dispute in the proceedings is more than $10,000 but not more than $30,000 and the Tribunal has made an order under clause 10(2) of Schedule 4 to the Act in relation to the proceedings, or
(b) the amount claimed or in dispute in the proceedings is more than $30,000.
Although the amount awarded to the applicants did not exceed $30,000, I am satisfied that the applicants brought a claim exceeding $30,000 in good faith and accordingly I am satisfied there is no reason to depart from the usual principle that costs follow the event: see Kursun v Gareffa (No 2) [2017] NSWCATCD 23 at [7].
The applicants submitted that they had succeeded in having compensation awarded in respect of each of the nine items listed in the agreed joint Scott Schedule, although they acknowledged that "the amount awarded was not what the applicants' had claimed". The applicants submitted that the only item on which the applicants did not succeed was Item 33 relating to the rainwater tank on the concrete slab.
The applicants also sought a specific order that the builder pay the applicants' costs incurred during the period after the consent orders were made on 28 February 2019. The applicants referred to Cominos v Di Rico (No 2) [2016] NSWCATAP 138 in support of the submission that an order for costs of and incidental to proceedings includes costs incurred as part of the preparation for litigation.
As noted, the builder accepted that an order that it pay part of the applicants' costs was appropriate. However, the builder submitted that "it is well recognised that there may be a departure from the ordinary rule that costs follow the event where the party that is ultimately successful does not succeed on significant issues". The builder referred to a number of Court of Appeal authorities including Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38] where the Court of Appeal summarised the principles governing the making of an order as to costs so as to reflect the time taken in dealing with a particular issue on which the successful party in the proceedings did not succeed.
The builder submitted that "the disputed question of fact or law which took up the most significant part of the hearing time both in terms of evidence and argument was the appropriate method of rectification of the stained face bricks". The builder submitted that the Tribunal had ultimately accepted the builder's submission that the treatment proposed by the builder, that is Mr Mouatt's solution of applying a treatment solution to the brickwork, was a satisfactory solution.
The builder submitted that it followed that the applicants were unsuccessful on that issue. The builder acknowledged that the amount awarded for rectification of the brickwork exceeded the amount contended for by the builder but submitted it was a "far cry" from the amount claimed by the applicants.
The builder further submitted that the other significant issue which took up a significant amount of hearing time was the applicants' claim in respect of the rainwater tank concrete slab, which was rejected.
Thirdly, the builder submitted that, in respect of the quantum of various items in dispute, the Tribunal had: preferred the evidence of the builder's expert in respect of the time it would take to carry out rectification work; found that Mr Bournelis' estimates of the time required to complete tasks "are excessive and not founded upon a careful analysis of the work involved"; and preferred the builder's position as to the appropriate level of margin that should be allowed on rectification costs.
The builder submitted that the applicants were unsuccessful on a number of issues that took up a significant amount of hearing time and that "having regard to the applicants' lack of success on those issues, the Tribunal should deprive the applicants of a proportion of their costs by apportioning costs".
The builder submitted that the Tribunal had determined that the amount to which the applicants were entitled was only 23% of the amount claimed by the applicants and suggested that, adopting a broad brush approach, the Tribunal should order the builder to pay 25% of the applicants' costs of or incidental to the proceedings.
The builder further submitted that the Tribunal should deprive the applicants of a proportion of their costs by reason of disentitling conduct. The alleged disentitling conduct on which the builder relied was the service by the applicants of a lengthy affidavit from Ms Debra Bourke which, together with exhibits, consisted of just under 300 pages, and was almost entirely directed to justifying a claim for damages as opposed to a further work order. Only a single paragraph of the affidavit was relevant to other issues in the proceedings.
The builder submitted "the applicants served such a lengthy affidavit that contained all manner of prejudicial allegations against the respondent, even though in its Points of Defence the respondent did not plead that it is seeking a further work order". The builder also submitted that, faced with that affidavit, the builder had had to lead evidence from Mr Stothard to respond to the allegations in Ms Bourke's affidavit.
The builder also submitted that the applicants' representative had spent a considerable time cross-examining Mr Stothard about his evidence, despite the fact that the builder had acknowledged in its outline of submissions that damages and not a work order was an appropriate remedy. The builder submitted that in that respect the applicants had substantially extended the proceedings unjustifiably.
The builder submitted that it would not be appropriate to make a specific order relating to the "circumstances giving rise to the proceedings". The builder submitted that the appropriate order would be an order requiring the payment of (a proportion of) the costs of and incidental to the proceedings. The builder submitted that the meaning of that term was well understood and that it was properly a matter for a costs assessor, if the parties were unable to agree, to determine the extent to which legal costs incurred prior to the filing of the application were costs incidental to the proceedings.
In its reply submissions, which, as noted above, I have taken into account only to the extent that they are strictly in reply, the applicants submitted that the builder was seeking to "separate" the brick staining issue in order to claim that the applicants had not succeeded on it.
The applicants submitted that significant elements of the solution proposed by Mr Mouatt had only emerged in cross-examination and pointed out that the builder had not disclosed the methodology of Mr Mouatt until after the filing of the renewal application. The applicants also pointed out that the amount awarded in respect of the brick staining and the amount acknowledged by the builder, bore a similar proportion to that between the amount claimed by the applicants and that awarded by the Tribunal.
In relation to the builder's submission concerning disentitling conduct of the applicants, the applicants submitted that the builder had only first disclosed that it would agree to a damages claim when it filed its opening written submissions. The applicants also submitted that the cross-examination of Mr Stothard had not extended the proceedings as they had been listed for one day and had been concluded within one day.
[2]
Consideration
As noted, it is common ground between the parties that rule 38 applies in this case and I do not need to find special circumstances before making an order for costs in relation to the proceedings.
In Thompson v Chapman [2016] NSWCATAP 6, an Appeal Panel of this Tribunal held, in relation to the exercise of the discretion to award costs where rule 38 applied:
69. The starting point in exercising such discretion is that the "usual order for costs" is that a successful party should be entitled to an order for costs in their favour: see Latoudis v Casey [1990] 170 CLR 534 per Mason CJ at 554 and Oshlack v Richmond River Council (1998) 193 CLR 72 per McHugh J at 97.
70. The reason for such an order is that it is appropriate for the party who incurred costs caused by the other party in litigation to be reimbursed. Further, an award of costs is by way of an indemnity to the successful party and not as punishment of the unsuccessful party: see Latoudis v Casey per Mason CJ at 543 and McHugh J at 567 and in Oshlack v Richmond River Council per Brennan CJ at 75.
71. Where 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 nor is there any rule that a successful party might not be ordered to bear the costs of an unsuccessful party: see Oshlack v Richmond River Council per Gaudron and Gummow JJ at 88 and Kirby J at 121 - 123.
72. The factors to be considered in awarding costs in a particular case are not to be confined as to do so would constrain the general discretion. However it is clear from the authorities that factors that might influence whether the usual order for costs should apply and, if so, to what extent include:
1. Whether, by reason of the relative success of the parties on different issues and the time taken to determine those that an order for costs based on issues should be made: see for example Bostick Australia Pty Ltd v Liddiard (No 2) [2009] NSWSCA 304; and
2. Whether, by reason of the nature of the proceedings the usual rule should otherwise be displaced in whole or in part: see Oshlack v Richmond River Council per Gaudron and Gummow JJ at 41 - 44.
The applicants have been successful in the proceedings, albeit in an amount substantially less than the amount sought. I accept the builder's submission that the applicants' entitlement to costs should be discounted in light of the fact that the builder was successful on substantial issues which took up much of the hearing.
I do not accept the applicants' submission that they succeeded on all items other than the concrete slab. There were other items, for example the cracked tiles, where the owners succeeded only in respect of a small part of a larger allegation of defective work.
I also accept that in many respects the dispute between the parties was not about whether items were defective, but rather the cost of rectification of those items. In that respect I consider that the builder had a greater degree of success than the applicants. In particular, in relation to the brickwork, I accept that the builder was successful in relation to a number of issues arising in relation to the staining on the brickwork and that the issues on which the builder was successful had the effect of substantially reducing the claim made by the applicants.
In this context I note my comment in the Decision at [88], it was unfortunate that neither party had thought it appropriate to trial Mr Mouatt's solution on the brickwork prior to the hearing.
I also accept that the proportion of the applicants' costs which the builder should be ordered to pay should also be discounted by reference to the extent to which the applicants filed evidence but did not rely upon it. However, in that regard I do not consider that the evidence was entirely unwarranted. Even where the parties have consented to money orders, the Tribunal retains the power to make work orders.
Section 48MA of the Home Building Act 1989 (NSW) provides that rectification of defective work by the responsible party is the preferred outcome in a building claim involving an allegation of defective residential building work. Section 48O(2) provides that the Tribunal can make an order even if it is not the order that the applicant asked for.
It would be an unusual case in which a work order was made in renewal proceedings, but it is not unprecedented and it cannot be said that evidence of the circumstances in which a builder failed to complete a work order is irrelevant to renewal proceedings, even if the parties are in agreement that a money order would be the appropriate result.
Nevertheless, I do not accept that the extent of the discount suggested by the builder is appropriate. There is no evidence before me that the builder had made any offer of settlement prior to the hearing. Accordingly the applicants were obliged to bring the proceedings in order to obtain the relief that they obtained and, as the applicants point out, it was only when the renewal application was lodged that the builder put forward Mr Mouatt's solution to the brick staining issue.
I accept the builder's submission that it is not appropriate to make a specific order relating to the circumstances giving rise to the proceedings. It is appropriate to make an order requiring the builder to pay a proportion of the applicants' costs "of and incidental to" the proceedings. As the applicants appeared to acknowledge, the underlined words are appropriate to include costs incurred in relation to a dispute before proceedings are filed. It will be a matter for a costs assessor, if the parties are unable to agree on the amount payable, to determine whether particular costs, including costs incurred before the application was filed, are costs "of and incidental to the proceedings".
In my view, the appropriate order is that the builder pay 50% of the applicants' costs of and incidental to the proceedings as agreed or assessed.
My orders will be:
1. Pursuant to section 50(1)(c) of the Civil and Administrative Tribunal Act 2013 (NSW), a hearing in respect of the costs of the proceedings is dispensed with.
2. The respondent, Wincrest Group Pty Ltd is to pay 50% of the applicants' costs of and incidental to the proceedings as agreed or assessed.
[3]
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
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Decision last updated: 22 September 2021