Brodyn Pty Ltd v Owners Corporation - Strata Plan 73019 - [2016] NSWCATAP 224 - NSWCATAP 2016 case summary

NCAT Appeal Panel|2016-10-07

REASONS FOR DECISION

On 23 May 2016, in this appeal, the Appeal Panel ordered that: 1. The appeal be allowed in part. 2. Order 1 made by the Tribunal on 31 March 2015 be varied by substituting the amount of $112,900.49 in lieu of the amount of $316,212.99. 3. The proceedings be remitted to the Tribunal as originally constituted to re-determine the amount to be awarded in respect of item 24 recorded in the Schedule found at par [352] of its reasons for decision dated 31 March 2015 in accordance with the published reasons and on certain terms, see Brodyn Pty Ltd v Owners Corporation Strata Plan 73019 [2016] NSWCATAP 113.
The Appeal Panel also ordered that, subject to receiving written submissions, each party was to pay their own costs of the appeal. The Appeal Panel stated: 192. Our preliminary view is that the appellant has had limited success in this appeal, although the success has significantly altered the amount of the award, at least until the issue of the reasonable rate is re-determined. Also one matter (GST) was conceded by the respondent. The appellant has otherwise failed on the remaining grounds. 193. Having regard to the partial success of the builder, our preliminary view is that each party should pay their own costs of the appeal. This is a case is in which either party seeking costs would need to establish that special circumstances exist and, even if these circumstances were established, the relative success of the parties would militate against an order in favour of one or other of the parties. This is particularly so because the Appeal Panel has not been able to resolve all issues in dispute because all relevant evidence has not been provided. So as to avoid any unnecessary application, we will make a conditional costs order and allow the parties to make submissions if either contends for a different order for costs. Those submissions should include submissions on the issue of whether a hearing should be dispensed with pursuant to s 50 (2) of the NCAT Act.
This decision relates to the costs of this appeal.

Submissions

Submissions were received by the respondent on 6 June 2016. After referring to s 60(3) of the Civil and Administrative Tribunal Act 2013 (the NCAT Act), the respondent submitted that there were special circumstances warranting an award of costs in its favour. In summary, the respondent says that the nature and complexity of the appeal, and the relative strength of the appeal, were special circumstances.
In relation to the matter remitted to the Tribunal, described in the submissions as "the Courtyard rate", the respondent submits that the Tribunal may make (and in fact did make) the same decision. This being the case, the respondent will have been "100% successful", another matter relevant in determining whether or not there are special circumstances. In this regard the respondent relied on Obieta v Australian College of Professionals Pty Ltd [2014] NSWCATAP 38.
In the alternative, the respondent submitted that if the Appeal Panel did not accept that there were special circumstances warranting an award of costs, the decision on the costs of the appeal should wait the final decision of the Tribunal below, and that the parties be given an opportunity to make further submissions after that decision.
Submissions of the appellant in response to the respondent's submissions were filed on 16 June 2016. In summary, the appellant submits that neither the nature and complexity of the appeal or the relative strength of the appeal establish special circumstances.
In relation to the amount allowed for defective work to the courtyard, the appellant submits that it is not to the point whether or not the respondent is or is not ultimately successful. Rather, the appellant submits that whatever the outcome, it was relevant for the Tribunal to reconsider the matter.
Finally, the appellant submits that there is no merit in the respondent's suggestion that the Appeal Panel wait for the determination of the remitted Tribunal proceedings before making a decision on the costs of the appeal.
Brief submissions in reply were received from the respondent on 24 June 2016. The respondent submits that, the proceedings having been remitted to the Tribunal, "[a]s we anticipated, [the Tribunal] has not reduced the amount awarded in the Original Proceedings and, in fact, has increased the amount awarded for the courtyard defect". Accordingly, the respondent submits that it has been completely successful in the appeal, and, in fact, achieved a better result that in the original proceeding. Accordingly, the respondent submits that it should be awarded the costs of the appeal: "[t]his is because the Appeal was hopeless and the Respondent should be compensated for having to defend the appeal.

Consideration

It is appropriate to commence a consideration of the costs arguments by summarising the appeal decision.
Grounds 1 and 2 of the appeal raised the issue of whether or not the Tribunal correctly interpreted the operation of cll 5 and 6 of the Deed. In short, the appellant contended that the effect of a Deed of Release dated 11 November 2005 (the Deed) meant that the developer had enforced the statutory warranties, and that the owner, being the successful party, was not entitled to any remedy for the identified defects by reason of s 18D(2) of the Home Building Act 1989 (HB Act).
These grounds of appeal were rejected by the Appeal Panel.
Grounds 3 and 4 of appeal related to the Tribunal's finding that there was a need to replace the waterproof membrane installed to the tiled area of the court yard (ground 3); and the planter boxes in the court yard (ground 4).
Ground 4 was rejected by the Appeal Panel.
However, in relation to ground 3, the Appeal Panel, having determined that there was an error of law in the Tribunal failing to consider the question of whether or not a reasonable rate for removing and repairing the waterproof, remitted that issue to the Tribunal.
By consent, ground 5 was also successful. The parties agreed that the inclusion of GST in the Tribunal's decision was incorrect: see [179].
Ground 6 was the last ground of the appeal. Here the appellant builder had submitted that the Tribunal was obliged to consider s 48MA of the HB Act and have regard to the principle that rectification of the defective work by the builder is the preferred outcome in a home building case. The Appeal Panel found that no error had been made by the Tribunal. Accordingly, this ground of appeal also failed.
In summary then, of the six grounds of appeal, four failed. Ground 5 was upheld by consent. Ground 3 was allowed, and the issue remitted to the Tribunal for determination of the Courtyard rate. As it happened, the Tribunal increased the Courtyard rate.

Relevant Principles in respect to an award of costs

This appeal was commenced prior to the introduction of Rule 38A of the Civil and Administrative Tribunal Rules 2014. Consequently, a party must establish that there are "special circumstances" warranting that award of costs Section 60 provides: (1) Each party to proceedings in the Tribunal is to pay the party's own costs. (2) The Tribunal may award costs in relation to proceedings before it only if it is satisfied that there are special circumstances warranting an award of costs. (3) In determining whether there are special circumstances warranting an award of costs, the Tribunal may have regard to the following: (a) whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings, (b) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings, (c) the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law, (d) the nature and complexity of the proceedings, (e) whether the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance, (f) whether a party has refused or failed to comply with the duty imposed by section 36 (3), (g) any other matter that the Tribunal considers relevant.
That is, if satisfied special circumstances exist, the Appeal Panel has a discretion to award costs.
As is evident from a number of decisions of the Tribunal, special circumstances means circumstances that are out of the ordinary, not necessarily extraordinary or exceptional: see Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120 and subsequence cases.
Any application for costs depends upon the circumstances of the individual case: Brunsprop Pty Ltd v Joanne Hay & Wes Davies [2015] NSWCATAP 152 at [27].
Further, where special circumstances are found to exist, the Tribunal has a discretion to exercise in deciding what, if any, order should be made. Relevant to the exercise of that discretion are those facts upon which the finding of special circumstances was based. However, those findings do not constitute the whole of the relevant matters to be considered in deciding what, if any, order for costs should be made. Rather, the principles applicable to awarding costs generally must also be taken into account. These include: 1. Costs are compensatory: see Latoudis v Casey (1990) 170 CLR 334; 2. That an unsuccessful party bears the costs of the successful party: Oshlack v Richmond River Council [1998] HCA 11 at [134]; 3. 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 eg Bostick Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304.
Further, in some circumstances where s 60 of the NCAT Act regulates an award for costs, a limited order for costs might be made to reflect the fact that only some aspects of the appeal should properly be categorised as out of the ordinary and to make a general order for costs in favour of a successful party might be inappropriate having regard to principle that absent special circumstances each party is to pay their own costs. See eg McPherson v Mace (No 2) [2016] NSWCATAP 198.
Overall, the Tribunal is to exercise its discretion in a manner that is fair and reasonable having regard to the circumstances of the particular case.

Should a costs order be made?

At pars [192] and [193] of its substantive reasons, the Appeal Panel formed the preliminary view, subject to the receipt of submissions, that each party should pay its own costs in this matter. As we noted, the appellant had limited success in this appeal, with one matter being conceded by the respondent, and the other matter being remitted to the Tribunal for further consideration.
The respondent submits that the complexity consists of "the proper interpretation of the terms of a deed and consideration of whether the deed binds the respondent", and legal arguments including the proper interpretation of s 48A of the HB Act. In our view, these matters do establish that this was a complex appeal involving the interpretation of the HB Act, 1989. Further, the appeal raised complex issues concerning the circumstances in which an allowance for betterment should be made. Lastly, the respondent also challenged earlier decisions of the Tribunal concerning its appeal jurisdiction.
Each of these issues could properly be described as out of the ordinary and amount to special circumstances within the meaning of s 60(2) of the NCAT Act.
The respondent also submits that the relative strength of the appeal establishes special circumstances. It submits that it was successful on all grounds, save for the two referred to above.
We disagree with the respondent's submission. As indicated in the substantive decision, each party had some success and with the exception of the challenge by the respondent, somewhat faintly, to the jurisdiction of the Appeal Panel to hear this appeal, no issue raised in the appeal could properly be characterized as weak.
However, even though we think there were special circumstances within the meaning of s 60(3) of the NCAT Act, in our view no order for costs should be made in favour of the respondent and each party should pay its own costs.
The reasons for this view are as follows.
Each party has had some success in the appeal. While one might seek to apportion costs by reference to the issues raised: see eg Bostik, in the present case this is a difficult task and one which we think to do justice between the parties would require awards being made in favour of each of the parties on the issues upon which they succeeded. In this regard, we can see from the evidence and arguments presented on appeal that there was significant legal analysis required on the questions of law concerning betterment and the construction of the Deed (issues upon which the respondent succeeded) and there was significant work on compiling and analyzing the somewhat complicated and convoluted evidence concerning quantum for the courtyard repairs (upon which the appellant succeeded). There was also the time spent in dealing with the respondent's challenge to the jurisdiction of the Appeal Panel (an issue resolved in favour of the appellant).
Doing the best we can, we think that the "netting off" of costs payable to each party in respect of issues on which they succeeded would ultimately lead to the result that neither party would be entitled to a payment in their favour.
Accordingly, we think that each party should pay its own costs of the appeal.
Finally, we do not consider that the decision of the Tribunal upon remittal has any bearing upon whether an order for costs should be made in favour of the respondent in this appeal. To the contrary, what has occurred counts against the claim for costs by the respondent. This is because, as we indicated in the substantive reasons at [137]-[139], it was clear from the evidence filed in the appeal that the Tribunal at first instance that it was in error in concluding that there was "no evidence" provided by the appellant on the issue of the rate applicable for work to rectify the courtyard defect. If this had been recognized by the respondent, it was open to the respondent to provide to the Appeal Panel all the evidence provided to the Tribunal at first instance so as to enable a final resolution of this matter by the Appeal Panel without remittal. Absent doing this, the fact of subsequent success upon remittal does not provide a basis to award costs in the appeal as the appeal was not resolved in favour of the respondent.
For these reasons, the respondent's application for costs is dismissed.

Orders

The Appeal Panel makes the following order: 1. Each party is to pay its own costs of the appeal. I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 07 October 2016

Brodyn Pty Ltd v Owners Corporation - Strata Plan 73019

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