Catherine Frederiksen v Port Stephens Veterans and Citizens Aged Care Limited

reasons for decision 1These proceedings were commenced by the applicant in April of 2012. The applicant claimed the sum of $23,500.00 which she asserts was due under a licence agreement and a loan agreement which she signed with the respondent in July 1995. 2The agreements entitled the applicant to reside in Villa 11 of [XXX], Fingal Bay. 3The licence agreement provided in clause 9 for what would occur if the applicant wished to vacate Villa 11 and surrender her rights under the licence agreement. 4Clause 9 set out the financial details of the applicant leaving Villa 11 and the payments she was to receive from the respondent in that event. 5The applicant claims that the respondent should have paid her an additional $23,500.00 when she vacated Villa 11. In these proceedings she sought a recalculation of the amount she was paid under clause 9 of the licence agreement under section 181(8) of the Retirement Villages Act 1999. 6The respondent strenuously opposed the applicant's claim. Both parties engaged solicitors. There were appearances before the Tribunal as the parties' solicitors prepared their clients' cases for hearing. Adjournments were sought and obtained as the parties' solicitors considered decisions of appeal courts that had a bearing on the applicant's case. Documents were filed in the Tribunal and the applicant issued a summons to produce documents. There was an application to set aside the summons to produce documents which was argued before the Tribunal and upheld. 7In September 2013 the proceedings were set down for hearing. The hearing date of 15 November 2013 was allocated and on 25 September 2013 the parties were notified of the hearing date. The respondent lodged its outline submissions in the Tribunal in preparation for the hearing. 8On 12 November 2013 the applicant's solicitors wrote to the Tribunal stating that the applicant "proposes to discontinue her claim". 9On the same day the Tribunal sent a notice that the application was withdrawn under section 28 (5) (h) of the Consumer, Trader and Tenancy Tribunal Act, 2001 (the "Act"). 10Section 28 (5) (h) of the Act states that: The Tribunal: must, if requested by the applicant, allow the applicant to withdraw the application. 11The respondent stated that it did not consent to the applicant's discontinuance of the proceedings and stated that it was instructed to make an application for costs. 12On 15 November 2013 the Tribunal made orders that gave the parties liberty to make a costs application and made further procedural orders in that regard. 13The applicant wrote to the Tribunal on 17 November 2013 stating that the Tribunal was functus officio and had no authority to entertain the costs application. 14On 4 December 2013 the respondent filed and served its application and submission on costs with a supporting affidavit. 15On 19 December 2013 the applicant filed her submissions in the Tribunal in opposition to the respondent's application for costs. 16On 17 January 2014 the respondent filed its reply submissions. Functus officio 17In my view the first issue that I should deal with is whether, as asserted by the applicant, the Tribunal is functus officio and therefore not in a position to deal with the respondent's costs application. 18The respondent dealt with this issue in paragraphs 36 and 37 of its 4 December 2013 submissions. The applicant responded to the functus officio issue in paragraphs 4(1) - 13 of its submissions. The respondent's reply submissions of 17 January 2014 address the issue in paragraphs 1 - 4. 19The respondent relies upon the decision of the Court of Appeal in The Owners Corporation of Strata Plan 4521 v Zouk & Anor [2007] NSWCA 23 ("Zouk") to establish that the Tribunal was not functus officio when on 15 November 2013 it made orders that gave the parties liberty to make a costs application and made further procedural orders in that regard. 20The applicant states that the Tribunal is not bound by the decision in Zouk because it was decided in relation to a completely different statutory scheme. 21Despite the fact that Zouk was decided on the basis of section 192 of the Strata Schemes Management Act 1996, I will follow that decision to the extent possible having regard to the difference between section 192 of the Strata Schemes Management Act 1996 and the applicable section in the Act, namely section 53. 22In Zouk the Tribunal dismissed an appeal from the decision of a Strata Schemes Adjudicator and sometime later made a costs order against Mrs Zouk. Acting Justice Malpass, as he was then, set aside the costs order. The Owners Corporation appealed. Mrs Zouk's counsel submitted that the costs order against his client could only be made at the time of the dismissal of the appeal. 23In Zouk, Ipp JA (with whom Beazely JA agreed) stated as follows in paragraphs 27 - 30 and in paragraph 36: "27 The first point to be addressed is whether (as Malpass AsJ held and Ms Zouk argued) that - after the Tribunal had dealt with the question of the dismissal of the appeal - it was not entitled to make an order for the payment of costs. Counsel for Ms Zouk submitted that a costs order under s 192 may only be made "at the time of the dismissal". 28 Section 192 does not require an order for the payment of costs to be made contemporaneously with the dismissal of the appeal. The power is to make an order for the payment of costs "in relation to" an order dismissing an appeal. Logically, such an order can only be made after an order has been made dismissing the appeal. 29 Section 192 does not provide expressly that a costs order may only be made "when" (that is, on Ms Zouk's argument, immediately after) the appeal is dismissed. Counsel for Ms Zouk submitted that s 192, itself, is an indication that the legislature's policy was to limit the Tribunal's power to order payment of costs. That may be accepted; s 192 circumscribes the Tribunal's power to order costs. But neither such a policy nor the words of s 192 supports a construction that limits the time at which the Tribunal is empowered to make costs orders. Moreover, there is no practical reason or policy that is derived from the general interests of justice to limit the Tribunal's power in this regard. 30 I would add that s 192 does not restrict the matters to be considered when determining whether a costs order should be made to findings that were made when the appeal was dismissed. It merely requires the appeal to be dismissed on one of the grounds stated in sub-paras (a) or (b) of the section. This suggests that a fresh argument can be put on the issue when an application is made for a costs order. 36 In my opinion, the Tribunal is empowered by s 192 - at least within a reasonable time after dismissing an appeal - to make an order for the payment of costs. Its powers are not limited to making such an order when dismissing the appeal." 24Section 53 of the Act states: 53 Costs (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 the 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 11 of Part 3.2 of the Legal Profession Act 2004 or on any other basis. (4) In this section, costs includes the costs of, or incidental to, proceedings. (5) This section does not apply in relation to proceedings under the Strata Schemes Management Act 1996 or the Community Land Management Act 1989. 25It is necessary to have regard to the regulations referred to in section 53. Regulation 20 of the Consumer, Trader and Tenancy Tribunal Regulation, 2009 states: (1) This clause applies to the awarding of costs by the Tribunal as provided by section 53 of the Act. (2) The Tribunal may award costs in relation to proceedings in respect of which the amount claimed or in dispute is not more than $10,000, or in respect of which no amount is claimed or in dispute, only if the Tribunal is satisfied that there are exceptional circumstances that warrant the awarding of costs. (3) In any proceedings in respect of which the amount claimed or in dispute is more than $10,000 but not more than $30,000, the Tribunal may award costs in relation to the proceedings only if: (a) the Tribunal is satisfied that there are exceptional circumstances that warrant the awarding of costs, or (b) the Tribunal has made an order under section 30 (2) of the Act in relation to the proceedings. (4) In any proceedings in respect of which the amount claimed or in dispute is more than $30,000, the Tribunal may award costs in relation to the proceedings in such circumstances as it thinks fit. (5) Despite any other provision of this clause, the Tribunal may order: (a) that the costs of proceedings on an application for rehearing of a matter are, if the applicant fails to attend the hearing of the application, to be paid wholly or in part by the applicant, or (b) ) that the costs of proceedings that the Tribunal considers to be frivolous, vexatious, misconceived or lacking in substance, or that otherwise should not be heard or proceeded with, be paid wholly or in part by the person who instituted the proceedings. (6) The amount of any costs under subclause (5) is to be substantiated in accordance with directions given by the Chairperson or, in the absence of such directions, in such manner as the Tribunal thinks fit.' 26Section 4 of the Act defines 'proceedings' as follows: proceedings means proceedings in or before the Tribunal, and includes any alternative dispute resolution procedures under Part 5. 27I have read and had regard to the parties' submission about whether or not the Tribunal was functus officio when it made its order permitting the parties to make a costs application and setting out the procedure for the filing of submissions in the event that a costs application was brought. 28In my view and I hold, it was not. The decision in Zouk holding that the Tribunal was empowered by s 192 of the Strata Schemes Management Act 1996, at least within a reasonable time after dismissing an appeal, to make an order for the payment of costs is a powerful basis for the decision that I have reached. 29As was the case in Zouk in relation to section 192 of the Strata Schemes Management Act 1996, sections 53 and 28(5)(h) of the Act and regulation 20 do not require an order for costs to be made contemporaneously with a final order, or an order allowing the withdrawal of an application. Section 28(5)(h) of the Act is mandatory in its requirement that if requested by the applicant the Tribunal must allow the applicant to withdraw the application. To paraphrase what was said in Zouk, logically, a costs order can only be made after the Tribunal has allowed the withdrawal. 30The power to award costs exists in relation to proceedings in or before the Tribunal. The fact that an order is made allowing the withdrawal of an application does not mean, in my view, that as soon as the order is made the application is no longer in or before the Tribunal. As stated in paragraph 29 of Zouk as set out above, "there is no practical reason or policy that is derived from the general interests of justice to limit the Tribunal's power in this regard." 31Having decided that the Tribunal is not functus officio, I will now proceed to consider the respondent's costs application. The relevant sections of the Act and the regulations which deal with the Tribunal's power to award costs are set out above. The Respondent's costs application 32The respondent seeks an order that before 25 June 2013 each party bear its own costs, and after that date the applicant pay the respondent's costs on an indemnity basis. 33The respondent puts its case on two bases. 34The first was that it is entitled to costs order under regulation 20 (5)(b) of the Consumer, Trader and Tenancy Tribunal Regulation, 2009 on every ground mentioned in that sub section. The second was that it was entitled to a costs order under regulation 20(3)(a) because exceptional circumstances exist. Jurisdiction for the Tribunal to award indemnity costs 35The power of the Tribunal to award indemnity costs is not in doubt. There have been numerous decisions in the Tribunal where indemnity costs have been awarded often on the basis of "Calderbank" offers. In Owners Strata Plan 63804 v Building Insurers Guarantee Corporation [2010] NSW CTTT 105 (24 March 2010), indemnity costs were awarded on the basis that the proceedings were misconceived. 36In Bruckner v JVZ Steel Roof (2011) NSW CTTT 382 (24 August 2011) Senior Member Meadows made an order for part indemnity costs after the respondent largely succeeded against the applicant. In my view it is clear that my jurisdiction under section 53(2) of the Act and regulation 20 of the Consumer, Trader and Tenancy Tribunal Regulation 2009 allows me to make an order for indemnity costs. The Parties Submissions 37The parties have made detailed submissions on the issue of costs. 38The respondent's position as simply and shortly as I can summarise it is that the applicant's case was always hopeless. The first reason for this is Davidson's case, a decision of the Tribunal made on 5 March 2010 in RV 09/40683 in an "Application to the Tribunal concerning Fingal Haven Retirement Village 44 Farm Road Fingal Bay NSW". According to the respondent the Licence Agreement in the present case and in Davidson's case were identical and the construction of those documents by the applicant in this application was expressly rejected in Davidson's case. The respondent submits that the prospects of the Tribunal following Davidson's case were very high and further the applicant never stated why she was of the view that Davidson's case was wrong. 39The respondent further submits that when these proceedings were commenced, there was uncertainty about whether section 181(8) of the Retirement Villages Act 1999 had any application to the facts. 40After these proceedings were commenced, the Tribunal heard a case known as Mitchell's case. The Tribunal came to a decision in Mitchell's case which assisted the applicant. However, the respondent appealed and in Port Stephens Veterans & Citizens Aged Care Limited v Colin John Mitchell as Executor of the Estate of the Late Colin Hilton Mitchell [2013] NSWDC Robison J came to a contrary conclusion which the respondent states meant that the "further prosecution of these proceedings was entirely misconceived". 41The respondent submits that the uncertainty about section 181(8) of the Retirement Villages Act 1999 was removed by the decision in Mitchell's case. Mitchell's case held that section 181(8) had no role to play in the expectation of a party, such as the applicant, as regards an entitlement to a capital gain upon vacating a retirement village. The respondent submits that the combined effect of Davidson's case and Mitchell's case was that the applicant' case was hopeless. The applicant does not dispute this proposition in her submissions. 42In a "Without Prejudice Save As To Costs" letter dated 25 June 2013 the respondent referred the applicant to the decision of the District Court in Port Stephens Veterans & Citizens Aged Care Limited v Colin John Mitchell as Executor of the Estate of the Late Colin Hilton Mitchell [2013] NSWDC described as Mitchell's case, which it had provided the applicant with a copy of under an open letter, also dated 25 June 2013. 43The "Without Prejudice Save As To Costs" letter contained an offer to the applicant that, having regard to the decision Mitchell's case, her case be dismissed on the basis that each party bear its own costs. 44The offer was open for acceptance until 17 July 2013. 45The solicitors for the parties exchanged correspondence regarding the respondent's offer. This exchange concluded on 10 July 2013, before the date the respondent's offer lapsed. The applicant's solicitors stated to the respondent's solicitors that they "expect that our client will obtain the opinion the opinion of Counsel as to whether the decision' in Mitchell's case is binding". They concluded by stating that for a variety of reasons they did not expect findings of fact to be binding "in other matters". 46The applicant did not accept the respondent's offer. 47I have considered the applicant's response to the respondent's submissions. The following points were, among others, made on her behalf. They seem to me to be the most significant. First, the applicant was not in a position fully to consider the respondent's Calderbank offer of 25 June 2013 because she and presumably her advisors could not ascertain whether the terms of the lease in Mitchell's case were identical to the terms of the lease in her case. Her solicitor's submission points out at paragraph 20 that the decision in Mitchell's case did "not reproduce the relevant clause of the licence agreement being litigated". 48Secondly, the applicant's solicitors refer to the fact that on 31 October 2013 they requested the Tribunal to commence the proceedings at 10.15 am rather than 9.15 am to allow the applicant to travel to the Tribunal from Scone. The Tribunal refused this request due to a lack of consent from the respondent. This is said to have been a reason for the withdrawal of the application by the applicant. I note that the applicant has not sworn an affidavit to put this matter into evidence in a proper manner. 49Thirdly, it is said that the applicant gave "ample" notice to the respondent of the intention to discontinue the proceedings. Such ample notice is stated to have been given in a telephone conversation between the parties' solicitors on 11 November 2013. The proceedings were set down for hearing on 15 November and as stated above, notice of that fact had been given by the Tribunal on 25 September 2013. 50The submissions referred to above were dealt with by the respondent in its submissions in reply. 51The most significant point is that the respondent's solicitors state that by letter dated 25 June 2013 they sent to the applicant's solicitors a copy of the licence agreement between the respondent and the late Mr Colin Hilton Mitchell. This fact is set out in paragraph 12 of the affidavit of Mr McMahon sworn 4 December 2013. 52Having regard to the evidence of Mr McMahon which I accept, and which I note is not expressly contradicted by the applicant's solicitors, I find that contrary to the submission in paragraph 20 of the applicant's submissions, the applicant and her solicitors were on or about 25 June 2013 in receipt of the licence agreement the subject of Mitchell's case. They were therefore in a position to compare the licence agreement in that case with the licence agreement relevant to the applicant's case and come to an assessment of the applicant's prospects of success having regard to Mitchell's case. They were also in my view, after they had the opportunity of considering these documents, in a position to consider whether or not the respondent's offer should be accepted. 53The second point raised by the applicant referred to above does not in my view have a great deal of relevance to the material issues to be considered in the respondent's costs application. In any event The Deputy Registrar of the Tribunal in responding to the applicant's solicitors stated "should it be necessary, any oral evidence from the applicant can be taken when she arrives." If a litigant withdraws proceedings because the Tribunal's practices regarding the time for the commencement of a hearing does not suit him or her, they are entitled to do so, but that fact will not shield the party from a liability for the costs of the proceedings, if that is appropriate in the circumstances. 54The third point referred to above is that the applicant gave ample notice of the intention to discontinue the proceedings. Mr McMahon in his affidavit sworn 4 December 2013 states that he had a conversation with the applicant's solicitor on 12 November when the applicant's intention to withdraw the application were disclosed. I do not consider two days notice to be ample. I do not consider this to be a relevant factor to be taken into account as regards the issues to be decided, namely whether the proceedings were lacking in substance or whether exceptional circumstances existed. The Respondent's costs application 55As stated above the respondent's costs application is put on two bases. 56The first basis is that the pursuant to section 53 of the Act and regulation 20(5)(b) of the Consumer, Trader and Tenancy Tribunal Regulation, 2009 both of which are set out above, the Tribunal has jurisdiction to award costs in proceedings which the Tribunal considers to be, as stated in regulation 20(5)(b): frivolous, vexatious, misconceived or lacking in substance, or that otherwise should not be heard or proceeded with. 57The respondent quotes Ipp JA at paragraph 45 of Zouk as authority for the proposition that the phrase "lacking in substance" means "not reasonably arguable". The applicant does not express any disagreement with the statement of IppJA in Zouk as referred to, or its applicability to the respondent's costs application. 58In my view the proceedings when commenced, could not be described as not reasonably arguable, frivolous, vexatious or misconceived. The respondent in its own submissions concedes that despite the decision in Davidson's case there was uncertainty about whether section 181(8) of the Retirement Villages Act 1999 applied to the facts of this case. 59To the extent that the respondent's solicitors submit that the proceedings should not have been proceeded with, in my view, once the decision in Mitchell's case was provided to the applicant's solicitors with the copy of the licence agreement between the late Mr Mitchell and the respondent, the applicant's case was not reasonably arguable because it was very highly probable that the Tribunal would have followed the decision in Mitchell's case and if it did not, an appellate court would have. The applicant's case was therefore at that point of time "lacking in substance". 60Having regard to the preceding paragraph, I find that on or about 25 June 2013 the applicant's case was lacking in substance such as to justify a costs order being made against her under regulation 20(5)(b) of the Consumer, Trader and Tenancy Tribunal Regulation, 2009. 61In addition, the respondent states at paragraph 32 of it submissions that the applicant by withdrawing the proceedings shortly before the final hearing has demonstrated that the proceedings should not have been heard or proceeded with. The fact is that the proceedings were not heard. In my opinion there is no basis for making a costs order against the applicant because the proceedings should not have been heard. 62However, it is open for the respondent to seek a costs order on the basis that the proceedings should not have been proceeded with, which it has done, albeit faintly. I do not give a great deal of weight to the applicant's assertion that the reason for withdrawing the proceedings was the fact that the respondent objected to a 10.15 am commencement of the hearing on 15 November 2013. 63In my view the facts demonstrate the proceedings became 'lacking in substance' on or about 25 June 2013 and should not have been proceeded beyond that time. 64It is appropriate, I find, to make a costs order in the respondent's favour pursuant to section 53 of the Act and regulation 20(5)(b) of the Consumer, Trader and Tenancy Tribunal Regulation, 2009. 65The second basis for the respondent's costs application is under regulation 20(3)(a) set out above. To be successful under regulation 20(3)(a) the respondent must establish that 'exceptional circumstances' exist that warrant the award of costs. 66The respondent cites John Hatch v Sutherland Shire Council [1999] NSWLEC 120 where the court stated that: "Conduct which could be regarded as unreasonable, vexatious, frivolous or arising out of mala fides could each constitute exceptional circumstances and would warrant a court exercising its discretion to award costs". 67The applicant makes no comment on this quotation or its applicability to the respondent's costs application. 68The respondent cites five factors which it states qualify as "exceptional circumstances". I do not propose to set them out here. 69In my view the applicant's conduct has been unreasonable, but not vexatious, frivolous or arising out of mala fides. In my view, and I so find, the applicant was unreasonable in her conduct by deciding to persist with her application after the decision in Mitchell's case was provided to her solicitors together with the copy of the licence agreement between the late Mr Mitchell and the respondent. 70It was open to her in the period between 25 June and 17 July 2013 to consider her position and to accept the respondent's offer which was to bring the proceedings to an end on the basis that each party bear their own costs. She did not do that, but instead, elected to withdraw the application two days before the hearing was due to start. In my view these two factors qualify as unreasonable conduct. 71I would also add that in my view, the period between 25 June and 17 July, 22 days, was a reasonable period of time for the applicant and her legal advisers to consider her position in light of Mitchell's case. 72For the reasons set out above I find that the respondent has made out the grounds for a costs order against the applicant under section 53 of the Act. The costs order has been made out under either regulation 20(5)(b) or 20(3)(b) for the reasons set out above. Indemnity costs order in these proceedings 73The respondent has referred me to the decision of Colgate Palmolive Co and Another v Cussons Pty Limited 118 ALR 248 as authority for the proposition that costs on an indemnity basis may be awarded because of "an imprudent refusal of an offer of compromise " per Sheppard J. at page 257. 74As stated above, the Tribunal has the power to make an indemnity costs order. 75The making of a "Calderbank Offer" that is bettered by the offeror does not in itself entitle the offeror to an order for indemnity costs. That was decided in Jones v Bradley (No. 2) [2003] NSWCA 258. 76I refer to the recent Court of Appeal decision in Miwa Pty Ltd v Siantan Properties Pte Ltd (No. 2) [2011] NSWCA 344. In that case Basten JA identified two questions which are relevant to a "Calderbank" offer and a claim for indemnity costs. They are whether: (a)there was a genuine offer of compromise, and (b)it was unreasonable for the offeree not to accept it. 77I have reached the view that the respondent's letter of 25 June 2013 was a genuine offer to the applicant. At the time of receipt of the letter the applicant had received a copy of the decision in Mitchell's case and a copy of the licence agreement relevant to that case. The effect of Mitchell's case was that it was highly probable that the applicant's case would fail. In addition, the respondent had provided the applicant with a copy of the licence agreement in Mitchell's case so that she and her lawyers could satisfy themselves that the relevant provisions the subject of the decision in Mitchell's case were identical to the relevant provisions of the licence agreement applicable in her case. 78The offer was open for consideration for what I have found to be a reasonable time. The terms of the offer were, I find, reasonable in that if the offer were accepted, each party was to bear its own costs. If the proceedings were to proceed to final hearing, it was highly probable that the applicant's case would have been dismissed thereby exposing her to a costs order. The offer for the proceedings to be brought to an end at that point without the applicant being exposed to a costs order against her was, in my view, an advantage to her. 79In these circumstances I have reached the conclusion that it was unreasonable for the applicant to have refused the offer. 80In my view it is appropriate to make an indemnity costs order in favour of the respondent. The costs order should commence after the expiration of the offer as it is necessary in my view that a recipient of a costs offer should have a reasonable time to consider the offer. 81The order is that the applicant must pay the respondent's costs of or incidental to the proceedings on an indemnity basis as and from 18 July 2013 as agreed, or in the absence of agreement, such costs to be assessed as provided for in the Legal Profession Act 2004. Each party must bear its own costs in the period before 18 July 2013. D Goldstein Senior Member Civil and Administrative Tribunal of New South Wales 22 April 2014 I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Registrar