Colourrender (Australia) Pty Ltd v Sarkis; Sarkis v Colourrender

Owner

1. The owner submits that the Appeal Panel should make the following orders:

First Instance 1. Builder to pay the owner's costs in the builder's proceedings against the owner as agreed or assessed on a party/party basis until "the date of dismissal". 2. Builder to pay the owner's costs in the owner's proceedings against the builder as agreed or assessed on a party/party basis until 29 November 2020; and on an indemnity basis "thereafter".

Appeal 1. Builder to pay the owner's costs of the builder's appeal against the owner as agreed or assessed on an indemnity basis. 2. Builder to pay the owner's costs of the owner's appeal against the builder as agreed or assessed on an indemnity basis.

Builder

1. The builder submits that the Appeal Panel should make the following orders:

First Instance

1. Each party bear its own costs; or the issue of costs be remitted to the Tribunal along with the other matters remitted.

Costs at First Instance-Submissions of the Parties

1. The owner submits that the owner was the successful party at first instance and the amount claimed or in dispute in the proceedings exceeded $30,000 (r 38 of the Civil and Administrative Tribunal Rules 2014 (NSW). The owner submits, in support of its claim for indemnity costs, that they made a "Calderbank offer" the details of which are described below.
2. The owner made an offer on a 'Calderbank' basis dated 19 November 2020 that was less than the outcome obtained by the owner at final hearing; was a genuine compromise; and was unreasonably refused.
3. The owner had sent correspondence to the builder on 30 September 2021 inviting the builder to put a "sensible" offer to the owner, but the builder had failed to do so.
4. The builder submits that it has paid the amount of $64,000 to the owner and a further $8,500 arising from the stay orders of the Appeal Panel. The builder submits that it would not be in the interests of justice to determine the costs at first instance in circumstances where the proceeding have been remitted back to the Tribunal, and the Appeal Panel should not speculate as to what is going to be the final outcome.

Costs of the Appeal-Submissions of the Parties

1. The owner submits that it was, in substance, the successful party in both appeals. In respect of indemnity costs, the owner submits that the builder acted so unreasonably in bringing its appeal and defending the owner's appeal because: 1. The builder made an "unreasonable offer" on 23 October 2022. 2. The owner wrote to the builder's Solicitor asking the builder to make a "sensible offer" on 30 September 2021 and 5 April 2023, but no response was received. 3. The "entirety of the owner's costs" of the appeal proceedings would have been avoided if the builder had accepted the owner's offer of 19 November 2020.
2. The owner's offer of 19 November 2020 was expressed to be an "offer of compromise" but also referred to having been made "in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333". The offer was to settle both the owner's proceedings and the builder's proceedings. The offer was open until 5.00 pm on 26 November 2020. The offer was made after there had been a procedural directions hearing where directions were made for the filing and serving of evidence, but before the time period to file and served evidence had expired.
3. The offer also attached a copy of the owner's expert report of Mr Matley.
4. The offer set out why it was asserted the offer was a reasonable offer and why it was asserted the owner was likely to obtain a better outcome at the hearing if the offer was not accepted.
5. The terms of the offer were that: 1. The builder pay the owner $90,000. 2. The amount of $90,000 "be deemed to consist" of $80,000 for damages and $10,000 for costs. 3. The parties agree that they would enter into a "Deed of Mutual Release" on "reasonable commercial terms" within 7 days of acceptance of the offer. No proposed Deed was attached to the offer. 4. The NCAT proceedings of each party were to be withdrawn by consent with the Tribunal making a notation of the terms of the agreement, including that the builder had agreed to pay the owner $90,000.
6. The builder submitted that each party had "success" on various issues and were "unsuccessful" on other issues in the appeal, and that the appropriate costs order for the appeals should be that each party pay its own costs of the appeals.

Applicable Principles

1. Under s 60 (1) of the NCAT Act, parties are to bear their own costs unless there are "special circumstances" established under s 60 (2) of the NCAT Act. Section 60 (3) of the NCAT Act sets out matters to be considered as to whether "special circumstances" are established.
2. However, the relevant exception to ss 60(1) and (2) of the NCAT Act is r 38 of the NCAT Rules, which states that, in proceedings in the Consumer and Commercial Division, the Tribunal may award costs without reference to "special circumstances" if the amount "claimed or in dispute" in the proceedings exceeds $30,000.
3. Rule 38A of the NCAT Rules applies the same principles to appeal proceedings. If the amount claimed or in dispute in both the proceedings at first instance and the appeal exceeds $30,000, the Appeal Panel may award costs of the appeal proceedings without "special circumstances" being established (Allen v TriCare (Hastings) Ltd [2017] NSWCATAP 25 at [43]; Hanave Pty Ltd v Wine Nomad Pty Ltd; Wine Nomad Pty Ltd v Hanave Pty Ltd (No 2) [2022] NSWCATAP 361 at [78]-[79]; Promina Design & Construction Pty Ltd v The Owners-Strata Plan No 97449 (No 2) [2023] NSWCATAP 164 at [7]).
4. In both the proceedings at first instance, and in the appeal proceedings, we are satisfied the amount claimed or in dispute in the proceedings at first instance exceeds $30,000; and the amount claimed or in dispute in the appeal proceedings exceeds $30,000. The outcome of the appeal involves an amount claimed or in dispute exceeding $30,000 by reason of the orders made at first instance which are the subject of the appeal.
5. Accordingly, it is unnecessary to consider whether or not there are "special circumstances" to justify a costs order.
6. The usual principle is that the unsuccessful party pays the successful party's costs of the proceedings (Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72).
7. The circumstances in which a Court or Tribunal can depart from that principle relevantly include: 1. Where each party has had substantial success, in which case the Tribunal can make no order as to costs: Hogan v Trustee of the Roman Catholic Church (No 2) [2006] NSWSC 74 at [40]. 2. Where there is mixed success by the parties on multiple issues. In such circumstances, a proportionate costs order can be made. The applicable principles were summarised in Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38] as follows: 1. Where there are multiple issues in a case the court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed. Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Waters v P C Henderson (Aust) Pty Ltd [1994] NSWCA 338. 2. In relation to trials, it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument: Sabah Yazgi v Permanent Custodians Limited (No 2) [2007] NSWCA 306 at [24]. 3. If the appellant loses on a separate issue argued on the appeal which has increased the time taken in hearing the appeal, then a special order for costs may be appropriate which deprives the appellant of the costs of that issue: Sydney City Council v Geftlick & Ors (No 2) [2006] NSWCA 374 at [27]. The same principle applies to hearings at first instance. 4. Whether an order contrary to the general rule that costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed: State of NSW v Stanley [2007] NSWCA 330 at [18] per Hislop J (with whom Beazley and Tobias JJA agreed). 5. A separable issue can relate to "any disputed question of fact or law" before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [34]. 6. Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation: James v Surf Road Nominees Pty Ltd (No 2), citing Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272. 1. There is disentitling conduct by the successful party, such as (a) the successful party inviting the litigation (Ritter v Godfrey [1920] 2 KB 47); (b) the successful party unnecessarily and unreasonably prolonging the proceedings (Lollis v Loulatzis (No 2) [2008] VSC 35 at [29]); (c) the successful party pursuing the matter solely for the purpose of increasing costs recoverable (G R Vaughan (Holdings) Pty Ltd v Vogt [2006] NSWCA 263 at [20]); or (d) the successful party unreasonably failing to accept a 'Calderbank' offer in circumstances including that the offer was a genuine compromise; the successful party did not obtain a better outcome at the hearing; the offer was sufficiently detailed; and there was a reasonable time to consider the offer before its expiration (Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8]).
8. The principles pertaining to 'Calderbank' offers have been the subject of judicial consideration on many occasions. A concise summary was set out by Ward P in Abdi v Abdi (No 2) [2022] NSWSC 582 at [20]-[30] as follows: The purpose of costs awards is primarily compensatory not punitive (see Sze Tu v Lowe (No 2) [2015] NSWCA 91 at [37] per Gleeson JA, with whom Meagher and Barrett JJA concurred, his Honour there citing Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59 at 542 per Mason CJ; and see also Ohn v Walton (1995) 36 NSWLR 77). The discretion to be exercised in a manner which is primarily directed to the position of the successful party. However, it is also well known that there are circumstances in which special costs orders are warranted. Leaving aside cases of relevant delinquency (see Fountain Selected Meats (Sales) Pty Ltd v Universal Produce Merchants Pty Ltd (1988) 81 ALR 397; [1988] FCA 364; Dunstan v Rickwood (No 2) [2007] NSWCA 266 at [44] per McColl JA), special costs orders are commonly sought where the offer of compromise procedure under the UCPR is validly invoked or where the Calderbank principles are applicable. The public policy underlying the making of special costs orders in such circumstances is the interest in encouraging settlement of litigation and discouraging wasteful and unreasonable behaviour of litigants (see Leichardt Municipal Council; Maitland v Fisher (No 2) (1992) 27 NSWLR 721 at 724 per the Court). … …In Whitney v Dream Developments (2013) 84 NSWLR 311; [2013] NSWCA 188 , the Court of Appeal considered what amounts to the essence of a Calderbank, emphasis being placed on whether the offer (or the circumstances in which it was conveyed) indicated the intention that it was to be relied on as to costs if it were to be rejected or not accepted and a judgment more favourable than the offer be achieved (see Bathurst CJ at [42]; Barrett JA similarly at [57]-[59]), it being crucial (in determining whether the offer took effect as a Calderbank offer) to determine the manifested objective intention of the offeror. In the present case, that intention was clearly manifest in the Calderbank offer made to the defendants. It is also necessary, to enliven the discretion to make special costs orders by reference to the rejection of a Calderbank offer, that the offer in question amounts to a genuine offer of compromise (that was it unreasonable for the party against whom the order is sought not to accept) (see the authorities referred to by the plaintiff above; and see also Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375 at [4] per Handley, Basten and Beazley JJA; and Hancock v Arnold (No 2) [2009] NSWCA 19 at [23] per Ipp, McColl and Basten JJA). … The making of a valid Calderbank offer that is better than the result ultimately obtained at the conclusion of a contested hearing does not automatically result in an indemnity costs order (see Commonwealth v Gretton at [43]), nor does it raise a prima facie presumption that such an order should be made (see SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 (at [37]) per Giles JA; Jones v Bradley (No 2) [2003] NSWCA 258 (Jones v Bradley) at [7]-[9] per Meagher, Beazley and Santow JJA; South Eastern Sydney Area Health Service v King [2006] NSWCA 2 (South Eastern Sydney Area Health Service) at [90] per Hunt AJA; see also Favotto Family Restaurants Pty Ltd v Chief Commissioner of State Revenue (No 2) [2020] NSWSC 519 (Favotto) at [28]; Chief Commissioner of State Revenue v Platinum Investments Management Ltd (No 2) [2011] NSWCA 197 at [9] per Campbell and Macfarlan JJA and Handley AJA. The party seeking the special costs order bears the onus of demonstrating that the rejection of the offer was "unreasonable" in all the circumstances of the case (see Leichhardt Municipal Council at [19]; Evans Shire Council v Richardson (No 2) [2006] NSWCA 61 at [26] per Giles, Ipp and Tobias JJA). Whether rejection of a Calderbank offer (or other offer of settlement) was unreasonable is an evaluative judgment to be made by reference to the terms of the offer and all the relevant surrounding circumstances (King Network Group Pty Ltd v Club of the Clubs Pty Ltd (No 2) [2009] NSWCA 204 at [11] per Young JA with whom Campbell and Hodgson JJA agreed). It has been said that a finding of unreasonableness should not be made other than on clear grounds (Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353 at [113] per Basten JA with whom Giles JA and Young CJ in Eq agreed). The factors to be taken into regard when considering whether the rejection or non-acceptance of the offer was unreasonable (summarised in Favotto at [20]-[30]) include: the stage of the proceeding at which the offer was received; the time allowed to the offeree to consider the offer; the extent of the compromise offered; the offeree's prospects of success assessed as at the date of the offer; the clarity with which the terms of the offer were expressed; and whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it (see Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435; [2005] VSCA 298 at [25] per Warren CJ, Maxwell P and Harper AJA; Commissioner of State Revenue v Challenger Listed Investments Ltd (No 2) [2011] VSCA 398 at [8] per Buchanan and Tate JJA and Sifris AJA; Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [12] per Basten JA with whom McColl and Campbell JJA agreed). Factors that have been found to be relevant in determining whether the rejection of a Calderbank offer was not unreasonable, and tending against such finding, have included: all relevant evidence not having been served at the time of the offer (Vale v Eggins (No 2) [2007] NSWCA 12 at [22] per Beazley JA); the full parameters of the dispute remaining uncertain at the time of the offer (Precision Products (NSW) Pty Ltd v Hawkesbury City Council (2008) 74 NSWLR 102; [2008] NSWCA 278 at [192] per Allsop P with whom Beazley and McColl JJA agreed); the offeror's case changing after the making of the offer (South Eastern Sydney Area Health Service at [85] per Hunt AJA); the inclusion of conditions in the offer (Magenta Nominees Pty Ltd v Richard Ellis (WA) Pty Ltd (unreported, FCAFC, Spender, French and Lee JJ, 29 August 1995); and the issues in dispute in the proceedings being complex (MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236 at 242D per Lindgren J). (Other than the first, it is difficult to see that any of these factors is here applicable.)

The Costs of the First Instance Proceedings

1. We are not satisfied that it is appropriate for us to make an order as to the costs at first instance pursuant to the discretionary powers we have under s 81 of the NCAT Act.
2. We stated at [189]-[192] of the appeal decision: The Homeowners contended that we should make an order consistent with Mr Matley's option 1 and order the Builder to pay $163,543.60. The Homeowners also contended that option 2 proposed by Mr Matley was viable. We do not think it is appropriate for us to make a determination as to the quantum of the damages due by the Builder to the Homeowners. That is because it is necessary for consideration to be given to the representation claims contained in the Amended Points of Claim, and whether, if those claims are upheld, the Builder's liability to the Homeowners is to be calculated consistently with the expert opinion of Mr Matley or whether the quantum of damages is to be calculated on a basis differently from the way in which the Tribunal calculated quantum. We are of the opinion that those issues need to be reconsidered at first instance and that it would not be appropriate for us to do so. Regrettably therefore, the issue of the contentions contained in the Amended Points of Claim and the calculation of damages for the cost of rectification of defective work and for incomplete work will have to be the subject of a remittal. The proceedings on remittal will not reconsider the jurisdictional issue which we have determined in favour of the Homeowner's contentions. We have considered whether the remittal may be limited in any additional way given our determination of the issues concerning the out of pocket expenses. We have also considered whether the remittal may be confined in other ways so as to avoid the expense imposed on the parties in being engaged in fully relitigating the issues in dispute. For example there is an issue concerning the claim for scaffolding costs. We are of the view that limiting the remittal by excising some issues could result in difficulties, lead to ancillary disputes as to the ambit of the remittal and possibly operate to hamper the decision making obligations of the member on remittal if an issue is not fully discrete from the issues being considered on remittal.
3. The proceedings have been remitted back for re-hearing to the Tribunal. Although the owner asserts that it will be successful in the remitted proceedings and that not all issues have been remitted, the first instance proceedings remain on foot and the ultimate outcome of those proceedings is a matter of speculation. We do not regard it as procedurally fair, or in the interests of justice for us to make a costs order in respect of the proceedings at first instance. To do so would be premature and would be an inappropriate exercise of the discretionary powers under s 81 of the NCAT Act.
4. It is only after the proceedings at first instance are determined to finality that it can properly be assessed who is the successful party and what are appropriate costs orders. This is particularly pertinent when the owner is asserting that the builder should pay a proportion of its costs on an indemnity basis.
5. In our view, it is not usually appropriate for the Appeal Panel to determine costs at first instance unless the Appeal Panel has made an order under s 81 of the NCAT Act that determines the proceedings to finality, rather than remits the proceedings (in whole or part) back to the Tribunal for determination according to law. There may be circumstances where it is appropriate to do so, such as where the Appeal Panel is referring a single issue which is not complex and does not involve an extensive re-determination of what is the appropriate remedial order. However, it is unnecessary for us to explore that issue further. In the circumstances of this matter, we regard it as inappropriate.
6. Earlier we recorded that the owner seeks a costs order against the builder in the proceedings commenced by the builder. Those proceedings were withdrawn prior to the Tribunal at first instance concluding the proceedings brought by the owner. The Tribunal stated that in respect of the withdrawn proceedings there is no order to make [39]. We do not see how in those circumstances the owner can now claim costs, nor can the Tribunal on the remittal make a costs order because the builder's proceedings have not been remitted. The remittal order only applies to the owner's proceedings.

Costs of the Appeal Proceedings

1. A significant issue in the builder's appeal was the so-called jurisdictional issue, namely the builder's contention that the owner's application was lodged out of time with the consequence that the owner's claims could not be the subject of orders in their favour for compensation or work orders. That issue was decided against the builder. In our view it was both a dominant issue in the builder's appeal and separable from other issues. In respect of the other issues in the builder's appeal the builder was unsuccessful except in relation to the use of the Proyalbi quote. On the other hand, the owner's appeal was successful.
2. We do not accept the owner's submission that the builder should pay its costs of the appeal on an indemnity basis.
3. In circumstances where the proceedings have been remitted back to the Tribunal, we cannot be satisfied in the appeal proceedings that the 'Calderbank' offer made by the owner on 19 November 2020 was unreasonably refused in accordance with the legal principles previously expressed as they relate to the appeal proceedings.
4. We do not propose to deal with the 'Calderbank' offer extensively in this decision, for the simple reason that the proceedings have been remitted and that offer may again be the subject of a costs application at the end of the remitted proceedings. However, we note that no further offer in 'Calderbank' terms was made by the owner in the appeal proceedings; nor did the offer contain any proposed Deed of Release for consideration by the builder.
5. The other matters referred to by the owner are insufficient to establish disentitling conduct by the builder sufficient to make an indemnity costs order. Writing to a party and seeking that the other party make an offer, and the other party failing to make an offer, is not disentitling conduct. The owner could have put forward a 'Calderbank' offer in the appeal proceedings, but failed to do so. Rejecting offers put forward by the other party and describing them as "insufficient" is not a basis for ordering indemnity costs against the other party.
6. Further, we are not satisfied that the builder acted so unreasonably in bringing its appeal; or opposing the appeal of the owner, that an indemnity costs order should be made. The issues raised by the builder in its appeal were arguable, and its opposition to the owner's appeal was not clearly unarguable. The builder did not engage in conduct that unnecessarily prolonged the appeal proceedings. There is no "sufficient or unusual feature" (Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233-234) or "relevant delinquency" in the conduct of the appeal proceedings (Oshlack v Richmond River Council (1998) 193 CLR 72 at [44]) to justify an indemnity costs order.
7. We are of the view that the bulk of the costs incurred by the owner in the appeals should be paid by the builder so as to reflect that the builder was mainly unsuccessful in its appeal but not entirely unsuccessful. We have decided that the appropriate order in the circumstances is that the builder pay two thirds of the owner's costs incurred in both appeals on the ordinary basis in the amount agreed or as assessed.
8. We make the following orders: 1. A hearing on the question of whether there should be costs orders is dispensed with. 2. Colourrender (Australia) Pty Ltd is to pay two thirds of the costs incurred by George and Sonya Sarkis in both appeals (Matters AP 2022/00220143 and AP 2022/00244797) in the amount agreed or as assessed on the ordinary basis set out in the legal costs legislation (as defined in section 3A of the Legal Profession Uniform Law Application Act 2014 (NSW)). 3. The question of whether there should be costs orders in respect of the proceedings between the parties at first instance is remitted to the Consumer and Commercial Division of the Tribunal for determination.

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: 04 September 2023