Building Insurers' Guarantee Corporation v CTTT & Ors [2005] NSWSC 503 | Case summary

JUDGMENT 1 Master: The second and third defendants (the owners) entered into a building contract with the fourth defendant (the builder). Disputes arose between them and on 6 August 2001, the owners brought proceedings in the Fair Trading Tribunal. The proceedings later continued in the Consumer Trader & Tenancy Tribunal (the Tribunal). 2 At about the same time, the owners also made an insurance claim on the home warranty insurer (Strategic). Strategic was a corporate vehicle for the plaintiff. The plaintiff did not indemnify the owners under the policy. 3 On 31 May 2002, Strategic was joined as a respondent to the proceedings. On 23 July 2002, the plaintiff became a respondent in lieu of Strategic. The nature of the claim brought against the plaintiff is described as being by way of appeal (Part 6A of the Home Building Act 1989). 4 The Tribunal first heard the liability issue on the claim made against the builder (in September 2002). It handed down its decision on 28 November 2002. The owners were successful on this question. 5 On 29 January 2003, the matter came before the Tribunal for directions. The builder did not appear. By this stage, he had become insolvent and did not further participate in the proceedings. 6 The Tribunal then heard both the issue of quantum ("the amount of loss and damages") on the claim against the builder and the appeal (the hearing commenced in October 2003). 7 On 15 September 2004, these matters were decided. Quantum was assessed and the appeal was determined in favour of the owners. 8 Subsequently, the Tribunal dealt with questions of costs. On 7 December 2004, it ordered that the builder and the plaintiff pay the costs of the owners on a party/party basis. 9 The plaintiff has brought an appeal against the costs order. 10 The grounds of appeal are as follows:- (a) the Tribunal misdirected itself that as a matter of law the proceedings were brought jointly against the Fourth Defendant builder and the Plaintiff; (b) the Tribunal misdirected itself that as a matter of law it did not have to consider the payment of costs relating to the Second and Third Defendants' claim against the Plaintiff separately from the payment of costs relating to the Second and Third Defendants' claim against the Fourth Defendant builder; (c) the Tribunal misdirected itself that as a matter of law any costs recoverable by the Second and Third Defendants from the Fourth Defendant builder were losses in respect of which the Second and Third Defendants were entitled to an indemnity from the Plaintiff under Part 6A of the Home Building Act 1989 ; (d) the Tribunal misdirected itself that as a matter of law it was entitled to consider the prospect of the Fourth Defendant's insolvency or inability to satisfy an adverse costs order when deciding to make a costs order against the Plaintiff; (e) the Tribunal misdirected itself in finding that the Fourth Defendant was insolvent or unable to satisfy an adverse costs order when there was no evidence upon which to make such a finding; (f) the Tribunal erred in finding that the Second and Third Defendants were substantially successful in respect of the claims made in the proceedings against the Plaintiff. 11 The appeal was argued on 26 May 2005. The parties have relied on written submissions supplemented by oral argument. 12 The appeal is brought pursuant to s67 of the Consumer Trader & Tenancy Tribunal Act 2001 (the Act). The section provides an avenue of appeal in those cases where the Tribunal decides a question with respect to a matter of law. The avenue is available only to a party in the proceedings. The section provides that a reference to a matter of law includes a reference to "a matter relating to the jurisdiction of the Tribunal". 13 The section is intended to provide a narrow avenue of appeal. The avenue is not equivalent to an avenue of appeal available where there has been error in point of law. There is authority for the proposition that it should be confined to a pure question of law. 14 In this case, the Tribunal decided a question of costs. It seems to me that the decision made in this case is not a decision with respect to a matter of law. In this case, the decision made by the Tribunal was one that was to be reached by the exercise of a discretion. I shall return to the nature of that discretion in due course. 15 Further, it does not seem to me that any contention as to lack of jurisdiction would assist the plaintiff in this case. I consider that the Tribunal had power to make the order that it did. 16 It may have been open to the plaintiff to seek a rehearing pursuant to s68 of the Act. It did not pursue that avenue of challenge. It seems to me that s68 was an avenue that the parliament had in mind for the dealing with challenges which do not fall within the ambit of the appeal provisions. 17 What has been said, effectively disposes of this appeal. However, in deference to the arguments put by counsel, I propose to make brief observations in relation thereto. 18 The plaintiff accepts that the Tribunal was entitled to make an order for costs against it in respect of costs incurred from 21 January 2004. 19 Broadly speaking, there were two aspects to the attack on the decision of the Tribunal. Firstly, it was said that there was a lack of power until either 31 May 2002 or 23 July 2002. The basis for this attack is said to be that until then the plaintiff was not a party to the proceedings. Secondly, it is said that there was misdirection in the exercise of the discretionary power to award costs. The alleged misdirections are identified in the grounds of appeal. 20 The power to award costs is found in s53 of the Act. For present purposes, the relevant provisions thereof are as follows:- (1) Subject to this section and the regulations, the parties in any proceedings are to pay their own costs. (2) The Tribunal may, in accordance with the regulations, award costs in relation to any proceedings. (3) If costs are to be awarded by the Tribunal in accordance with regulations, the Tribunal may: (a) determine by whom and to what extent costs are to be paid, and (b) order costs to be assessed on the basis set out in Division 6 of Part 11 of the Legal Profession Act 1987 or on any other basis. 21 The relevant provision in the Consumer Trader and Tenancy Tribunal Regulation 2002 (the Regulation) is clause 20 thereof. It is unnecessary to set out the provisions of this clause. It was common ground that circumstances of this case fell within cl 20(4) of the Regulation. 22 I should now return to the proceedings themselves. It may be that the proceedings should have been conducted differently. Be that as it may, the course that the proceedings did take is of importance. 23 There was only one proceeding on foot. Both the builder and the plaintiff became parties to that proceeding. It was a proceeding in which both the claim against the builder and the claim against the plaintiff were ventilated. 24 Strategic seems to have been involved in the dispute in an early stage. Following its becoming a respondent, the plaintiff proceeded to play a role in respect of both claims. 25 It played an active role in the hearing of the issue of the liability of the builder. During the hearing of that issue, the builder came to act in person. The plaintiff was legally represented. It took the stance that the claim against the builder should be first determined and opposed the granting of relief to the owners. 26 Thereafter, the insolvent builder left the scene and the plaintiff conducted the defence during the hearing concerning quantum and the appeal. Again, it opposed the granting of the relief sought. The plaintiff substantially failed on all issues. 27 The Tribunal gave written reasons for the costs order. The reasons recite that the owners were largely successful against both the builder and the plaintiff and the early involvement of the plaintiff. It set out submissions made on behalf of the parties. 28 Under the hearing "Conclusions", the Tribunal, inter alia, observed as follows:- I agree with the proposition that the expressio unius rule does not extend to a situation such as the present. Amendments to legislation are often for the purpose of clarification as to what was intended to be the existing position. I reject the submission that legal expenses were not in contemplation or too remote. I also reject the submission that they are within the exclusion under the policy at 5.2 as being financial loss not directly involved in the rectification of the work. Part 6A of the Home Building Act provides for indemnification by the state in respect of insolvent insurers. Set out in Part 6A are a number of provisions describing the extent of the indemnity. It is extended to any person who would have been entitled to recover under a contract of insurance in connection with any matter to the extent of the cover under the policy with the insolvent insurer. (Section 103 I). Part 6A goes on to describe the enforcement of the indemnity by claims to and proceedings against BIGC and the way that claims are to be made in disputes regarding decisions of BIGC. This Tribunal has the same jurisdiction in relation to claims for indemnity as it has in relation to claims under Part 6 contracts, of insurance. I cannot see any reason to consider an insurance appeal against a decision of BIGC as being different from any other insurance appeal. BIGC's position in relation to indemnity is only to be distinguished from that of any other insurer by reference to specific legislative provisions. It is my view that the applicants are entitled to the legal costs incurred in seeking to establish the liability of the first respondent and hence, the second respondent's obligation to indemnify them. In general terms subject to any specific legislative limitations regard must be had to the proposition that if costs are not awarded against both respondents the applicants will not have received the benefit of the determination in their favour. 29 The primary submission was that the Tribunal had no power to make an order against the plaintiff until 23 July 2002 (which was when the plaintiff became a party). I do not accept that submission. 30 It seems to me that such an argument requires the Court to give a restricted meaning to s53. I consider that the language of the section does not justify such a restriction. 31 Whilst, in the appropriate case, the fact that an entity became a party at some time after the commencement of the proceedings may be a relevant circumstance in the exercise of the discretionary power to award costs, it does not seem to me to be relevant to the question of the powers of the Tribunal to award costs. 32 The discretionary power conferred by s53 of the Act and the Regulation is cast in the widest of terms. The section does not stipulate criteria to which regard is to be had in the exercise of the discretion. Clause 20(4) enables the awarding of costs in relation to the subject proceedings in such circumstances as it sees fit. 33 It is unnecessary to consider whether or not the power extends to awarding costs against a non-party. However, on what has been argued before me, I am not presently persuaded that such a power is excluded by the relevant provisions. 34 The precise reasoning that led to the reaching of its decision is not free from doubt. Before the reaching of the decision, the Tribunal dealt with various submissions. The submissions related to the question of indemnity. This matter was mentioned again immediately following the Tribunal's expression of its view that the plaintiffs were entitled to the legal costs incurred in seeking to establish the liability of the builder. 35 In the circumstances of this case, it would have been erroneous to award such costs on the basis that legal costs fell within the compass of the indemnity. The question of the indemnity had been earlier decided and the Tribunal was left to determine a pure question of costs. 36 Whatever may have been the determinative reasoning process, the Tribunal made an order that was not only reasonably open to it in the relevant circumstances of this case, but one that seems to me should have been reached by a proper exercise of the discretionary power. Accordingly, even if it be assumed that this appeal fell within the ambit of s67 of the Act, I am not satisfied that the decision as to costs should be disturbed. 37 In my view, the appeal must fail. The summons is dismissed. The plaintiff is to pay the costs of the summons. **********

Building Insurers' Guarantee Corporation v CTTT & Ors

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