Chinchilla on the Bay Pty Ltd v Independent Reserve Pty Ltd

Costs - the applicable law

1. Costs in the Consumer and Commercial Division and the Appeal Panel of the Tribunal are to be determined in accordance with s 60 of the Civil and Administrative Tribunal Act 2013 (NSW) (the NCAT Act) and Rule 38 of the Civil and Administrative Tribunal Rules 2014 (NSW) (Rule 38).
2. 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. (4) If costs are to be awarded by the Tribunal, 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 the legal costs legislation (as defined in section 3A of the Legal Profession Uniform Law Application Act 2014) or on any other basis. (5) In this section - costs includes - (a) the costs of, or incidental to, proceedings in the Tribunal, and (b) the costs of, or incidental to, the proceedings giving rise to the application or appeal, as well as the costs of or incidental to the application or appeal.
3. Rule 38 provides an exception to section to s 60 with respect to certain matters in the Consumer and Commercial Division. It provides: (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.
4. In this case there is a dispute whether rule 38 has any application.
5. The Tribunal's power to award costs is discretionary. McHugh J explained in Re The Minister for Immigration and Ethnic Affairs (Cth); ex parte Lai Qin (1997) 186 CLR 622 that: 6. 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. 7. 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. Thus, for example, in R v Gold Coast City Council; Ex parte Raysun Pty Ltd the Full Court of the Supreme Court of Queensland gave a prosecutor seeking mandamus the costs of the proceedings up to the date when the respondent council notified the prosecutor that it would give the prosecutor the relief that it sought. The Full Court said that the prosecutor had reasonable ground for complaint in respect of the attitude taken by the respondent in failing to consider the application by the prosecutor for approval of road and drainage plans. 8. 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. This is perhaps the best explanation of the unreported decision of Pincus J in The South East Queensland Electricity Board v Australian Telecommunications Commission where his Honour ordered the respondent to pay 80 per cent of the applicant's taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare. 9. 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.
6. In One.Tel Limited v Commissioner of Taxation (2001) 101 FCR 548, at 6, Burkett J made a distinction between cases: "… in which one party, after litigating for some time, effectively surrenders to the other, and cases 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. In the former type of case there will commonly be lacking any basis for an exercise of the Court's discretion otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs."

Material before the Appeal Panel:

1. In considering this appeal and the costs issue we have had regard to the following materials provided by the parties. 1. By the appellant: 1. Notice of Appeal lodged 19 July 2022 and annexures; 2. Appellant's submissions on costs dated on 20 October 2022; 1. From the first respondent: 1. Respondent's costs application material filed on 13 October 2022. 2. Respondent's submissions filed 3 November 2022.

The respondent's submissions

1. The respondent is the cost applicant in the proceedings and for convenience I shall refer to the respondent's submissions first. The respondent's primary position is that rule 38 applies in the present case and therefore the Tribunal's discretion to award costs in the appeal proceedings is enlivened and an award of costs does not necessitate a finding of special circumstances.
2. The respondent submits that the amount claimed or in dispute in the appeal proceedings is $90,000 therefore vastly exceeding the $30,000 threshold set by rule 38 before costs may be awarded without considering special circumstances. The respondent relies on the following indicia to support its submission that the claim as made exceeded $30,000: 1. The three application forms filed in the Tribunal proceedings claim the total amount of $109,804. Each individual application exceeded $30,000; 2. the amended application form filed in the Tribunal proceedings claim the total amount of $90,000; 3. the written submissions filed on behalf of the appellant in the Tribunal proceedings state that the applicant has lost over $100,000 from Ms Neal's superannuation fund; 4. the combined losses subject of the Tribunal proceedings are claimed in the sum of $109,804; 5. the Notice of Appeal form filed by the appellant in the appeal proceedings on 19 July 2022 pleads three separate consumer claims pursuant to section 79I of the FT Act and claims that the Tribunal has jurisdiction to make three separate orders in each of the matters up to the jurisdictional limit of $40,000 each as conferred by section 79S of the FT Act .
3. It is the respondent's submission that costs should be awarded in favour of the respondent for three reasons: 1. First, the appellant has withdrawn the appeal after over two months of preparation and six months after the increased jurisdictional limit was announced by the Tribunal and came into force, raising the Tribunal's jurisdictional limit in respect of consumer claims from $40,000 to $100,000. 2. Second, during the conduct of the appeal the appellant relied on the authority of Gaskell and Bourke v Northshore Homes Pty Ltd and Nazha [2021] NSWCATCD 33 in support of its contention that the Tribunal has jurisdiction to make orders pursuant to section 74(3) of the FT Act for misleading and deceptive conduct in any amount that "the Tribunal thinks fit" exceeding any jurisdictional limit set by s 79S of the FT Act. The respondent submits that it had to spent considerable time responding to this argument and therefore should be awarded the costs of the appeal. 3. Third, the appellant served its evidence five days late and contrary to Tribunal directions made on 5 August 2022 without making any reference to the regulation or the increased jurisdictional limit and raising fresh arguments. The respondent was forced to seek an extension of time from the Appeal Panel which was granted allowing the respondent to lodge its evidence on 19 September 2022. The hearing date of 26 September 2022 was confirmed.
4. On the morning of 23 September 2022 being the Friday before the Monday hearing, the appellant's solicitor advised the respondent that there has been a legislative change advising that the Tribunal has jurisdiction to make orders up to $100,000 "there was little utility in maintaining the appeal" and the appeal is withdrawn.
5. It is submitted that the Tribunal should award costs as there are special circumstances because: 1. the Notice of Appeal was deficient (see s 60(3)(a) of the NCAT Act); 2. the appellant's non-compliance with the Tribunal's timetable for service of its material satisfies s 60(3)(a) of the NCAT Act; 3. the applicant's legal representative had been admitted since 1987 and should conduct appeal proceedings in a more appropriate manner (s 60(3)(g) of the NCAT Act); 4. the appellant or his legal representatives should have been alive to the fact that the jurisdictional limit of the Tribunal had increased to $100,000 on 18 July 2022 and should have withdrawn the case in a more timely manner (s 60(3)(g) of the NCAT Act).

Costs on an indemnity basis

1. The respondent submits the costs of the appeal is $28,576 and costs should be awarded on an indemnity basis.
2. The respondent submits it is appropriate to award costs on an indemnity basis because the appeal was unnecessary. The fact that the appellant was unaware of the increase of the jurisdictional limit renders the appeal one where the justice of the case warrants an order for indemnity costs. In addition the appellant required and sought an extension to file its evidence, which was declined, and the appellant filed and served evidence out of time and contrary to directions.
3. Alternatively, if the Appeal Panel is not minded to make an award for indemnity costs the respondent submits that an award of a fixed sum of $22,000 being approximately 77% of the total costs accrued by the respondent would be an appropriate amount of order. If the Appeal Panel was not minded to assess the appellant's costs the Appeal Panel may make an order to have the costs assessed.

The appellant's submissions

1. The appellant contends that there should be no order as to costs and relies on its submissions of 20 October 2022.
2. The appellant submits that in these proceedings there has been no determination on the merits of the case and the usual principle that costs follow the event is not applicable. The principle that applies is that articulated in Ex parte Lai Qin where there has been no final determination on the merits each party bears its own costs save for two exceptions: 1. even though both parties have acted reasonably, one party was almost certain to have succeeded if the party had been fully tried; or 2. where one of the parties has acted so unreasonable that the other party should obtain the costs of the action.
3. As to the first exception described by McHugh J, where a judge feels confident that although both parties have acted reasonably, "one party was almost certain to have succeeded if the matter had been fully tried", it is submitted that the Appeal Panel cannot make such a finding given the nature of the appeal and the absence of any submissions being made by the respondent to that effect.
4. It is submitted that there is no suggestion that either side acted unreasonably in commencing or maintaining the proceedings for the following reasons: 1. when the appeal was commenced on 24 January 2022 the jurisdictional limit of the Tribunal to resolve consumer claims was $40,000. 2. there is no suggesting that commencing and maintaining the appeal prior to the jurisdictional limit increasing to $100,000 on 15 July 2022 was unreasonable; 3. whilst the jurisdictional limit increase to $100,000 on and from 15 July 2022, the respondent did not raise this issue with the appellant or the Tribunal at any time, the Tribunal did not raise the issue with either party at any time; 4. as soon as the appellant became aware of the law changing thereby making the outcome of the appeal academic as opposed to commercial, the appellant withdrew the appeal; 5. the withdrawal made by the appellant is aligns with the obligations imposed on the appellant and its legal representatives by s 36 of the NCAT Act; 6. the change in circumstances that occurred on 15 July 2022 when the law changed was not caused by the appellant or otherwise foreseeable; 7. the Appeal Panel is not required to examine in detail whether one party or the other acted unreasonably in these proceedings because the determination would be made on a hypothetical basis without a final hearing without any final hearing it may be unfair to reach a view that one party or the other had acted unreasonably; 8. no commercial offers of any kind were made by the respondent to resolve the dispute.

The respondent's reply submissions

1. The respondent relies on reply submissions filed on 3 November 2022. It is the respondent's submission that the withdrawal of the proceedings is not the deciding factor, and that the Appeal Panel authorities make it clear that the usual rule in proceedings is that the party withdrawing the proceedings is to pay the costs.
2. The respondent relies on the authority of Azzi v Phan [2017] NSWCATAP 215 where the Appeal Panel found at [21] and following: "the usual rule in proceedings is that the party withdrawing an appeal … ought to pay the costs. It is not an absolute rule, but it embodies the important principle that, subject to certain limited exceptions, as successful party in litigation is entitled to an award of costs in its favour. The fact that the appellant has withdrawn the appeal is, in substance, a successful outcome for the respondent. In our opinion Mr Azzi should pay the respondent's costs of the appeal as agreed or assessed. It is Mr Azzi who commenced the appeal. Whether or not he considered it was a good case is not to the point. The fact remains that he commenced the appeal that are causing the respondents to incur costs. Orders for costs are not by way of punishment but are by way of indemnity for costs incurred by a successful party. No this entitling conduct of the respondent is apparent to the court and which would disentitle him to an order for costs."
3. In Channell v Graham [2017] NSWCATAP 129 the Appeal Panel held that the fact there was no finding on the merits is not the only determining factor in deciding whether the appellant should bear the costs of the appeal: [21] In our view it is appropriate to make an order that the appellant pay the respondent's costs of the appeal. The appellant initiated the appeal and the consequences of that was that the respondent was put to some expense in considering how she would respond to the appeal and in complying with the directions made by the Appeal Panel. The appeal was then withdrawn. There was no dis entitling conduct by the respondent. [22] The fact that the merits of the appeal have not been determined because of the withdrawal and consequent dismissal does not result in the appellant avoiding an order for costs of the appeal. The event is constituted by the dismissal. This view is consistent with that expressed in Solomons v Valley Motor Auctions Pty Ltd [2017] NSWCATAP 31.
4. Further and in the alternative the respondent submits that the appellant did in fact acted so unreasonably in the circumstances that the respondent should obtain the costs of the action.
5. The respondent submits that the appellant commenced and maintained the appeal proceedings and it is the appellant's responsibility to ensure that any of the claims raised by the appellant are reasonable and meritorious. It is noted that the appellant's withdrawal of the appeal proceedings occurred on the Friday before the scheduled Monday hearing after some months of hearing preparation.
6. It is the respondent's submission that the appellant ought to have known that the jurisdictional limit of the Tribunal in respect of consumer claims increased to $100,000 on 18 July 2022 and notes that the appellant was at all relevant times legally represented. As the appeal proceedings were futile from their commencement, the question of whether or not there was a final determination of the appeal on the merits is not relevant.

Consideration

1. There can be little doubt that the claim as made concerned an amount exceeding $30,000. For the following reasons I am of the view that rule 38 has been enlivened. In Alan v TriCare (Hastings) Ltd [2017] NSWCATAP 25 the Appeal Panel considered the meaning of the phrase "amount… In dispute in the proceedings" stating that in applying rule 38(2)(b): 1. the determinative factor is the amount in dispute in each appeal, not the amount in dispute in the proceedings at first instance; 2. the phrase in dispute is to be construed as meaning truly in dispute or at issue or, inversely not unrealistically in dispute; 3. whether the amount in dispute in each appeal is more than $30,000 depends on whether there is a realistic prospect that in each appeal the wealth of the appealing party would be changed by more than $30,000 or, put another way, whether the right claimed by the appealing party, but denied by the decision at first instance, prejudices that party to an amount in excess of $30,000; 4. the fact that the value of the property the subject of any appeal exceeds $30,000 does not, of itself, mean that the amount in dispute in that appeal is greater than $30,000.
2. The applicant commenced three sets of proceedings on 24 January 2022, each seeking damages exceeding $30,000. In addition, the appeal as filed sought orders that the Tribunal reinstate GEN 22/02987 and hear it concurrently with matters GEN 22/02595 and GEN 22/03002. If successful on the appeal, each of the three applications potentially resulted in the applicant's wealth changing by more than $30,000. Even if the appellant was not successful in reinstating GEN 22/02987, the successful appeal in respect of a single matter had some prospects of changing the wealth of the successful party by an amount exceeding $30,000.
3. It is clear from the Notice of Appeal that the amount claimed or in dispute in the appeal exceeded $30,000. The amount claimed or in dispute was $109,000 as the appellant sought orders for the Tribunal to make "three separate orders in each of the matters up to the jurisdictional limit of $40,000" (see grounds of appeal). The right claimed by the appealing party well exceeded $30,000.
4. In addition, if it were accepted by the Appeal Panel that the Tribunal has an unlimited jurisdiction to award damages for misleading and deceptive conduct, the damages that could be awarded to the appellant were arguably at large in accordance with the principles enunciated by Senior Member Goldstein in Gaskell and Bourke.
5. For these reasons I am of the view that rule 38 is enlivened and it is not necessary for the respondent to establish special circumstances. The issue I must therefore determine are whether the usual orders applies, and costs follow the event ie costs follow the outcome, unless there is disentitling behaviour by the successful party: Latoudis v Casey [1990] HCA 59, Oshlack v Richmond River Council [1998] HCA 11.
6. The appellant submits there should be no award as the appeal has not been determined on the merits but was withdrawn. For the reasons that follow I disagree.
7. First, the award of costs is discretionary as long as it is exercised judicially. I agree with the respondent that the appellant ought to have known before 23 September 2022 that the jurisdictional limit of the Tribunal increased to $100,000 and should have withdrawn the appeal in a more timely manner. On 18 July 2022 the Regulation commenced and the increased jurisdictional limit came into force and on the same day NCAT announced changes to the Fair Trading Act 1987 on its website. I respectfully disagree with counsel's submission that it was incumbent upon the respondent or the Tribunal to bring any legislative changes to the attention of the appellant. It is the responsibility of the appellant to ensure the cause of action is prosecuted in the correct forum and to understand and be aware of the Tribunal's enabling legislation and its amendments. Further, the amendments were published on the Tribunal's website and were therefore made known to the respondent. Rather than withdrawing the appeal in a timely manner, the appellant sought an extension of time to file and serve evidence and submissions, resulting in the respondent incurring more costs to answer the appellant's arguably futile appeal.
8. I am of the view that the appeal proceedings were of no utility from their commencement on 19 July 2022 and therefore the question of whether or not there was a final determination is not relevant.
9. In Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 Basten JA said: 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. … See also Payne JA at 32.
10. In this case the appellant's commencement of the proceedings on 19 July 2022 was unreasonable, given the legislative amendment and increase of the Tribunal's jurisdictional limit on 18 July 2022. At the very least it was unreasonable to maintain these proceedings by seeking the leave of the Appeal Panel to file and serve evidence and submissions out of time. Once these were filed the respondent was put to the expense of preparation for the impending hearing.
11. The appeal was withdrawn as a result of an intervening circumstance which meant they were of no utility. However, if I were to accept that even the most experienced legal practitioner may not know of legislative amendments on the day of proclamation, it is in my view not unreasonable to expect that the appellant's legal representatives make reasonable enquiries to ensure that the enabling legislation that confers jurisdiction on the Tribunal in respect of consumer claims is reviewed and that steps are taken to be informed of relevant legislative amendments in a timely fashion.
12. It is incumbent upon the legal representatives of the parties to assess a change in circumstance and if necessary to withdraw applications or appeals if prospects of success are no longer realistic, or as in the circumstances of this case, a change in the enabling legislation renders the appeal futile. Parties and or their representatives may be exposed to liability as to costs if legislation changes and it is no longer reasonable to continue to prosecute an appeal and the parties who continue to prosecute proceedings regardless may attract liability.
13. It is in my view not relevant to assess whether the appeal, in the absence of an increase in the jurisdictional limit, would have succeeded (Ex parte Lai Qin). Rather the relevant enquiry is whether the appeal, should have been commenced at all on 19 July 2022 or, once commenced, should have been withdrawn in a more timely fashion. I am of the view that the legislative amendment should have been known to the appellant, given it was published on the NCAT website. The appellant, in continuing to prosecute the appeal by filing submissions and evidence out of time and shortly before the hearing, unnecessarily caused the respondent to incur costs. To remain ignorant of the legislative changes in light of their publication on the NCAT website and for a prolonged period of time is in my view sufficient reason to warrant an award of costs. For these reasons I am of the view that the appellant should pay the respondent's costs of the appeal.
14. In respect of indemnity costs, the appellant submitted that there should be no order as to costs. The appellant contended that where there has been no determination on the merits, there should be no order as to costs. In support of this proposition I was referred to the decision of McHugh J in Ex Parte Lai Qin (1997) 186 CLR 622 at 625: 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.
15. However, McHugh J also noted that in an appropriate case, the Court can make an order for costs "even where there has been no hearing on the merits and the moving party no longer wishes to proceed with the action".
16. As set out above, I reject the submission that there should be no order as to costs. The appellant should have withdrawn the appeal in a more timely fashion and minimised the respondent's costs of the appeal.
17. But I do not think that the appellant's conduct in the proceedings was so unreasonable as to justify an award of costs on an indemnity basis. Although in hindsight it is clear that the legislative change rendered the appeal futile, in the absence of any evidence or submission to the contrary I proceed on the basis that the appellant's legal representatives overlooked the legislative amendment. I cannot find that there was delinquency on the part of the appellant such that an award for indemnity costs would be warranted.
18. In the present case, there is no evidence when the appellant's legal representatives became aware of the legislative amendments, but on Friday 23 September 2023 its legal representatives quite properly acknowledged the problem and withdrew the appeal. I see nothing in this which suggests an abuse of process. The very fact that the appellant withdrew the appeal once it was realised that the increase in jurisdiction rendered the appeal futile suggests that the appellant was not acting in "wilful disregard of the law". Given the legislation had only recently been amended, it seems much more likely that the appellant was not fully informed of the relevant legislative changes for some time after the appeal was commenced.
19. The appellant commenced appeal that was rendered futile by reason of legislative changes that came into force one day before the appeal was commenced and will have to pay the respondent's costs as a result. But in my view this is not a case in which there were any "special or unusual features" that would justify the Court departing from the ordinary measure of assessment: see Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233. I do not propose to make an order for indemnity costs.
20. I note that the Appeal Panel is not in a position to assess reasonableness of costs and I decline to make an order for a fixed amount.

Orders

1. The Appeal Panel makes the following order with respect to its redetermination of the costs order in the initial proceedings: 1. A hearing on costs is dispensed with pursuant to s 50(1)(c) of the Civil and Administrative Tribunal Act 2013. 2. Chinchilla on the Bay Pty Ltd is to pay Independent Reserve Pty Ltd's costs of the appeal, on the ordinary basis, as agreed or assessed. 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 25 May 2023 - Coversheet amended - insert counsel 'M Klooster' for Appellant and 'S Constable' for Respondent. 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: 25 May 2023