Cooper v JFW Constructions Pty Ltd

The Tribunal's Decision

1. The Tribunal's decision on costs which is under appeal should be considered together with the Tribunal's Reasons dated 26 November 2019 because the costs decision makes extensive reference to the Tribunal's findings in those earlier Reasons.
2. The Tribunal received detailed submissions on costs from both parties. As noted in the Tribunal's decision at [8], each party filed two sets of written submissions before the Tribunal made its decision "on the papers".
3. In the costs decision, the Tribunal had regard to s 60 of the CAT Act and r 38 of the Civil and Administrative Tribunal Rules 2014 (the CAT Rules). The latter relevantly provides: 38. Costs in Consumer and Commercial Division of the Tribunal (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. The Tribunal approached its task of determining the question of costs in the context of r 38 of the Rules as follows at [50]: In order to firstly assess whether a costs order should be made in favour of either party ... the Tribunal has to conduct a detailed review of the evidence and matters relied upon by the parties. The tasks in these proceedings are somewhat difficult because the decision of the Tribunal does not involve any order for payment be either party of a particular amount.
5. At [19] of the Reasons the Tribunal had regard to the respondent's Points of Defence filed on 8 April 2019 which stated: "...the Builder remains ready, willing and able to complete any defective or incomplete work subject to: (a) updated and compliant plans; (b) the variations being approved; and (c) the Applicant clearing his belongings from the site.
6. The Tribunal found that the three conditions imposed by the respondent before returning to the site were in the case of: 1. condition (a), "entirely reasonable and necessary" having regard to the respondent's express concerns with substantial and progressive changes to the works. Further, the rejection of that condition "was not only unreasonable but also against his own interests" (at [20]); 2. condition (b), "necessary because of the approach taken by the Homeowner to the finalisation of the details of the work actually required and the many changes introduced by the Homeowner" (at [21]). Again, this attitude was described as being both unreasonable and "against [the appellant's] own interests" (at [22]); 3. condition (c), "necessary" because the appellant had a dog (described by the respondent as "vicious") in a room which restricted workspace available to the respondent and in other rooms, the appellant stored personal possessions in various rooms which the respondent had to relocate, protect and clean during the course of the works (at 23]). The Tribunal found that the "Homeowner's apparent insistence that he remain in occupation whilst the work was completed was unsafe and entirely unreasonable" (at [43]).
7. In its Reasons, the Tribunal considered exchanges of correspondence between the parties' solicitors which constituted various offers in relation to the resolution of the proceedings.
8. The Tribunal considered the "relevance and probative value" of that correspondence in the context of "assessing, whether any of these offers ... involves a position which is more favourable than the outcome under the Tribunal's decision" [15].
9. In response to the appellant's offer in a letter dated 7 June 2019, at [35] the Tribunal set out part of the respondent's offer of 11 June 2019 in which the respondent's solicitors stated: Our client is ready, willing and able to come back on site, complete the works and be paid as noted in Option 1 and in accordance with the contract, however, pursuant to the contract our client is owed money in relation to provisional sums.
10. The reference to option 1 was to the appellant's proposal that work recommence in three weeks and be completed within 5 weeks thereafter and the respondent be paid $40,250.16, failing which the appellant could renew the proceedings before the Tribunal. The option also required the respondent pay the appellant's costs of the proceedings on a party/party basis.
11. The Tribunal observed at [36] that the respondent's letter also identified that under the provisional sum adjustments, some amounts that were outstanding and further allowances that should be made for the cost to complete work under items such as electrical, rendering, electrical plans and Prime Cost (PC) Items (identified in the "Job Break Up" in the contract as toilets, tapes, tiles, bath sinks, vanities, mirrors, drains, screens and fans).
12. The Tribunal found that the appellant's rejection of the respondent's further requirement in its letter of offer dated 11 June 2019 relating to the preparation of electrical plans and PC items before returning to perform work was also unreasonable and against his own interests (at [41] and [45]).
13. The Tribunal also found: 1. the actions of the appellant "caused the dispute to arise and the performance of the work to cease": [52]; 2. the refusal to accept the "entirely reasonable" conditions imposed by the respondent before it would to return to work "ensured that the proceedings had to continue": [52] 3. the appellant's "purported termination of the contract was unjustified and the final precipitant of the proceedings": [53]; and 4. the conduct of the appellant in relation to provisional sums prior to the cessation of the work was "unsustainable" and maintaining that "unsustainable position throughout the proceedings was entirely unreasonable": [54]
14. Based on the above matters, the Tribunal found that the respondent was entitled to its costs. However, having regard to the decisions of the Appeal Panel of the Tribunal in Dimitropoulos v Capital Constructions Pty Ltd [2019] NSWCATAP 164 at [54]-[59] and Mendonca v Tonna [2017] NSWCATAP 176 at [59]-[64] (set out at [57] and [58] of the Reasons) the Tribunal concluded at [59] that although the conduct of the appellant both "prior to and during the proceedings was unreasonable" there was no "proper basis" for an award of indemnity costs.

Grounds of appeal

1. The appellant contended in his Notice of Appeal filed 1 June 2020 that the Tribunal erred in finding that the respondent was the successful party in the proceedings and that the appellant acted unreasonably by rejecting certain conditions that the respondent imposed before it would return to the site and complete the works. In summary, three grounds were raised: 1. First, the Tribunal "misconstrued its own findings of fact" in finding that the appellant acted unreasonably by rejecting conditions that the respondent imposed before it would return to the site and complete the works. These were described as the "Plans Condition" and the "Variations Condition". Therefore the Tribunal's finding was not supported by any evidence. 2. Secondly, the decision was not fair and equitable because in awarding the respondent its costs in accordance with the "usual rule" that costs follow the event, the Tribunal did not have regard to the (unsuccessful) cross application filed by the respondent and therefore "misconstrued" the evidence as to the outcome of the proceedings in terms of the builder's overall "position". 3. Thirdly, the Tribunal's approach to determining "which party was successful" was against the weight of the evidence in that the "conditional" nature of the builder's position was given insufficient weight and that if it had been afforded appropriate weight the Tribunal could not have found that the respondent's position had been "vindicated'.
2. The appellant sought an order to have the Tribunal's decision set aside and in its place "no order as to costs ... with the intent that each party pay its own costs" of the proceedings before the Tribunal.

Reply to Notice of Appeal

1. A Reply to the Notice of Appeal was filed on 15 June 2020. In that Reply, the respondent contended: 1. the conditions imposed before returning to site were entirely reasonable, particularly given the conduct of the appellant prior to the cessation of work; 2. the Tribunal found that the rejection of those conditions by the appellant "was not only unreasonable but also against his own interests"; 3. the appellant refused to accept that he would incur additional costs in the works when he initiated changes in the build; 4. the minimal information in the architectural scope and detail of work meant that many of the decisions made by the appellant were because of matters which were absent from the contract documents; 5. the paucity of detail in the documents was correctly addressed by respondent under Provisional Sums; 6. there was no specification or schedule of finishes and the drawings were very general with respect to compliance with Standards; 7. the engineering drawings contained errors and deficiencies which created problems for the parties; 8. there was a number of "unusual aspects" to the works noted by the Tribunal and which caused delay and additional costs for the respondent; 9. the appellant did not challenge the principal decision of the Tribunal that the conditions before returning to site were reasonable; 10. there was no basis to accept the appellant's contention that the decision was not fair and equitable or that it was against the weight of the evidence.

Statutory basis of the appeal

1. A decision by a Tribunal to award costs is an "ancillary" decision within the meaning of the CAT Act: see s 4(1). Therefore, s 80(2)(b) of the CAT Act applies and there is a right of appeal on a question of law and otherwise leave to appeal is required.
2. The circumstances in which the Appeal Panel may grant leave to appeal from decisions made in the CCD are limited to those set out in cl 12(1) of Schedule 4 of the CAT Act. In such cases, the Appeal Panel must be satisfied that the appellant may have suffered a substantial miscarriage of justice on the basis that: 1. the decision of the Tribunal under appeal was not fair and equitable; or 2. the decision of the Tribunal under appeal was against the weight of evidence; or 3. significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with).
3. Even if an appellant from a decision of the CCD has satisfied the requirements of cl 12(1) of Schedule 4, the Appeal Panel must still consider whether it should exercise its discretion to grant leave to appeal under s 80 (2)(b) of the CAT Act.
4. In Collins v Urban [2014] NSWCATAP 17, after discussing the decision of the NSW Court of Appeal in BHP Billiton Ltd v Dunning [2013] NSWCA 421 (especially at [19]-[21]), the Appeal Panel held at [84] (omitting citations): "84. (1) In order to be granted leave to appeal, the applicant must demonstrate something more than that the primary decision maker was arguably wrong in the conclusion arrived at or that there was a bona fide challenge to an issue of fact. (2) Ordinarily it is appropriate to grant leave to appeal only in matters that involve: (a) issues of principle; (b) questions of public importance or matters of administration or policy which might have general application; or (c) an injustice which is reasonably clear, in the sense of going beyond merely what is arguable, or an error that is plain and readily apparent which is central to the Tribunal's decision and not merely peripheral, so that it would be unjust to allow the finding to stand; (d) a factual error that was unreasonably arrived at and clearly mistaken; or (e) the Tribunal having gone about the fact finding process in such an unorthodox manner or in such a way that it was likely to produce an unfair result so that it would be in the interests of justice for it to be reviewed ...."

Appellant's Submissions

1. The appellant submitted: 1. First, that three conditions imposed by the respondent before it would return to the site were mischaracterised by the Tribunal as "necessary". These were the Plans Condition, the Variations Condition and the Occupation Condition. Further, only the Occupation Condition was reflected in the Work Order made by the Tribunal. Therefore, the premise on which the Tribunal found the appellant's rejection of those conditions as "unreasonable" was "flawed". 2. Second, in applying the principle that costs follow the event, the Tribunal was wrong in concluding that the respondent was successful in the proceedings. The proper approach in determining the successful party was to compare the respondent's position "as evidenced in the Builder's points of defence and the Builder's offer dated 11 July [sic] 2019" and the Work Order made by the Tribunal. The "critical consideration" was that the builder's work was defective and it was not willing to provide a remedy by the payment of cash compensation or "by rectification absent its conditions". The appellant's opposition to a Work Order did not necessarily lead to the conclusion that the respondent was successful as the precise form of remedy "is merely a matter of mechanics". 3. Third, the Tribunal failed to mention the respondent's cross application that sought an amount of $52,938. The variations allowed by the Tribunal totalled $1,260. 4. Fourth, the respondent's offers in the various exchanges of correspondence between the parties' solicitors and in particular dated 4 July 2018, 7 May 2019 and 11 June 2019 were relevant to the Tribunal's determination at [59] as to whether indemnity costs should be awarded but not the "threshold issue" of who was the successful party in the proceedings.

Respondent's Submissions

1. The respondent opposed the granting of leave to appeal.
2. The respondent accepted the appellant's characterisation that the "usual rule" means that "costs follow the event". The relevant "event" in this case was the respondent's success in the proceedings in both "absolute" and "relative" terms.
3. The appellant did not seek to challenge any of the findings made in the principal decision of the Tribunal. The respondent was not merely successful in a "peripheral" way but at "every turn".
4. The Tribunal's findings were not unreasonable or inequitable and the decision "was squarely within the bounds of reason to award costs". There was no substantial miscarriage of justice.
5. The respondent's willingness to return to complete the work on a conditional basis was dealt with in an "orthodox manner" with no demonstrated error. The builder's position was "vindicated" as found by the Tribunal at [50].
6. The Tribunal's decision to award the respondent its costs "had nothing to do with the offer of compromise in the letter of 11 June 2019. It had everything to do with the willingness of the builder to return to complete - a position consistently taken by the builder and a position consistently opposed by the Owner".

Consideration

1. The Notice of Appeal does not raise a question of law for our determination.
2. The respondent did not challenge the Tribunal's finding that it was not entitled to indemnity costs. The only challenge to the Tribunal's decision was whether it was open to the Tribunal to have awarded costs in favour of the builder respondent.
3. The issue raised by the appeal is whether the Tribunal erred in the exercise of its discretion in awarding costs in favour of the respondent. Although the appellant's written submissions referred to House v King (1936) 55 CLR 499, at the hearing of the appeal, the appellant did not submit that the Tribunal's discretion miscarried in the sense described the High Court in that case (at 505), namely some error in exercising the discretion from which we may infer, having regard to the facts, that the discretion was wrong in principle, unreasonable or unjust.
4. For the reasons which follow, we uphold the finding by the Tribunal that the respondent builder was the successful party in all relevant respects, that there was no error in the exercise of the Tribunal's discretion to award the respondent its costs by applying the "usual rule" and to the contrary, we can discern no reasonable or proper basis on which the Tribunal should have exercised its discretion to have decided otherwise.
5. The appellant contended that the decision of the Tribunal was not fair and equitable and/or it was made against the weight of evidence. For the reasons which follow, the appellant has not satisfied us that the appeal is founded on "something more" than a contention that the decision of the Tribunal was "arguably wrong" and that it would be unjust to allow the decision to stand.
6. At the hearing of the appeal, it was accepted by both parties that the "usual rule" was that "costs follow the event". The focus of both parties' submissions concerned the question of who was the successful party in the proceedings. The gravamen of the appellant's challenge to the Tribunal's decision was that it erred in finding that the respondent builder was the successful party. Indeed, the appellant almost singularly presented a negative case to assert why the respondent was not successful rather than making a positive case to explain how he could have been regarded as the successful party in the proceedings.
7. As we have set out above, the Tribunal in its Reasons and the parties in the appeal focussed on who was the successful party. We are satisfied that it was open to the Tribunal to find that the respondent was the successful party on several bases, the most obvious being the finding that the respondent's position in being willing to return to work (albeit on conditions found to have been reasonably imposed) was "vindicated" by the making of a Work Order.
8. We reject the submission by the appellant that except for the Occupation Condition, the fact that the Work Order did not contain any of the other conditions which had been imposed by the builder before returning to site suggests a lack of "vindication". The Work Order must be read together with the performance requirements at [144] of the principal decision which provided a role for the parties' experts to be available in resolving issues arising under the Work Order and the Tribunal's clarification of provisional sum and incomplete/defective works in Annexure A to its Reasons.
9. As stated by Barrett J (as his Honour then was) in Golding v Vella (No 2) [2001] NSWSC 731 at [8]: "... it is unwise to be too technical about what it mean by "event" or "issue" in this context ... In particular one does not look at issues as if they were pleaders' issues, but approaches the matter with a broad brush."
10. On a "broad brush" approach the respondent's position was consistent with the overall effect and outcome provided by the making of a Work Order. Also, the usual rule that costs follow the event is the "practical result of a particular claim": Sze Tu v Lowe (No 2) [2015] NSWCA 91 at [39].
11. A curious feature of the Notice of Appeal is that the appellant seeks an order that the Tribunal's decision be set aside and substituted with "no order as to costs of the principal proceedings, with the intent that each party pay its own costs". In our view, the costs order now sought by the appellant does not easily sit with his contention that he was the successful party in the proceedings before the Tribunal.
12. It is well recognised that the discretion to order costs ought to be exercised judicially and in accordance with established principles and factors directly connected with the litigation: Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at [67] and [69] (Oshlack)
13. We see no error in the approach taken by the Tribunal in characterising the respondent as the successful party in the proceedings. The Tribunal approached the matter which accorded with the High Court's decision in Northern Territory v Sangare [2019] HCA 19; 265 CLR 164 (Sangare), (per Kiefel CJ, Bell, Gageler, Keane and Nettle JJ) where their Honours said at [24] - [25]: The discretion as to costs 24. It is well established that the power to award costs is a discretionary power, but that it is a power that must be exercised judicially, by reference only to considerations relevant to its exercise and upon facts connected with or leading up to the litigation. While the width of the discretion "cannot be narrowed by a legal rule devised by the court to control its exercise", the formulation of principles according to which the discretion should be exercised does not "constitute a fetter upon the discretion not intended by the legislature". Rather, the formulation of principles to guide the exercise of the discretion avoids arbitrariness and serves the need for consistency that is an essential aspect of the exercise of judicial power. 25. A guiding principle by reference to which the discretion is to be exercised - indeed, "one of the most, if not the most, important" principle - is that the successful party is generally entitled to his or her costs by way of indemnity against the expense of litigation that should not, in justice, have been visited upon that party. The application of that principle may be modified or displaced where there is conduct on the part of the successful party in relation to the conduct of the litigation that would justify a different outcome. For example, a successful defendant may be refused its costs on the ground that its conduct induced the plaintiff to believe that he or she had a good cause of action. But in the present case, there was nothing of this kind in the conduct of the appellant in relation to the litigation that might have weighed against the exercise of the discretion in its favour. There was no suggestion of any conduct on the part of the appellant, whether by unreasonable delay or a want of the cooperation required of litigants to ensure the "just resolution of the real issues in civil proceedings with minimum delay and expense", that might have been taken into account to justify refusing the appellant an order for its costs. (Footnotes omitted)
14. The Tribunal had regard to matters in addition to the "outcome" of the proceedings in exercising its discretion. However, by unduly focusing on the challenge to the Tribunal's finding that the respondent was the successful party, the appellant did not challenge several other important findings made by the Tribunal and which also informed the Tribunal's decision on costs.
15. The appellant did not challenge any of the following factual findings made by the Tribunal and to which it expressly referred at [55] to conclude that the respondent was entitled to its costs of the proceedings: 1. the actions of the appellant "caused the dispute to arise and the performance of the work to cease": [52]; 2. the refusal to accept the "entirely reasonable" conditions imposed by the respondent before it would to return to work "ensured that the proceedings had to continue": [52] 3. the appellant's "purported termination of the contract was unjustified and the final precipitant of the proceedings": [53]; and 4. the conduct of the appellant in relation to provisional sums prior to the cessation of the work was "unsustainable" and maintaining that "unsustainable position throughout the proceedings was entirely unreasonable": [54]
16. While a successful party may in some circumstances not be entitled to its costs, the appellant has not made out a case to establish the applicability of any of those exceptions to the issues on the appeal. To the contrary, based on the unchallenged findings made by the Tribunal set out above, the appellant's conduct suggests in favour of us upholding the Tribunal's decision to award the respondent its costs and not award the appellant its costs.
17. Having regard to the approach espoused by the NSW Court of Appeal in Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256 (Tomanovic), even assuming the correctness of the appellant's submissions that the Tribunal did not have sufficient regard to the outcome of the unsuccessful cross application by the respondent (which we do not accept), we find no error in the Tribunal's Reasons on that basis. In Tomanovic Campbell JA at [84] held: 84. As has been repeatedly stated, where there is a mixed outcome in proceedings the question of apportionment of costs between issues on which the party who has overall been successful has succeeded, and those on which that party has failed, is very much a matter of discretion, and mathematical precision is illusory: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [36]; Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd [1993] FCA 259; (1993) 26 IPR 261 at 272; Roads and Traffic Authority v McGregor (No 2) [2005] NSWCA 453 at [19]; Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38]; Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 2) [2011] NSWCA 171 at [22].
18. The general principles concerning the awarding of costs under r 38 of the NCAT Rules were considered by the Appeal Panel in Rekrut and Scott v Champion Homes Sales Pty Ltd [2018] NSWCATAP 97 at [21]-[23]: 21. Generally, the exercise of an unfettered power to award costs involves costs "following the event" unless there are factors which militate against the successful party being awarded all of the party's costs - Oshlack v Richmond River Council (1998) 193 CLR 72 at [67] and [69]; [1998] HCA 11. 22. Generally the "event" refers to the event of the claim or the appeal, as the case may be, and may be understood as referring to the practical result of a particular claim or appeal - Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 at [15]. 23. 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 - Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 (Bostik) at [38].
19. The appellant has not established any error in the Tribunal's assessment that the respondent was for all practical purposes the successful party in the proceedings. There was no substantial miscarriage of justice. The decision was not founded on any proven error of fact or principle. The appellant has not demonstrated how the Tribunal's findings were unreasonable or inequitable or that there was any appropriate basis warranting the Tribunal to have departed from the "usual rule".

Disposition of the appeal

1. Leave to appeal is refused and the appeal is dismissed.

Costs

1. In the Notice of Appeal the appellant seeks his costs of the appeal if we uphold the appeal. The appellant has not indicated his position if leave is refused. The respondent seeks to be heard on the costs of the appeal.
2. We consider it likely that rule 38 applies to the appeal proceedings as it did to the proceedings before the Tribunal and that special circumstances do not need to be established in order to warrant an order for costs. The appellant is clearly the unsuccessful party on the appeal. In those circumstances, we have made an order for costs in favour of the respondent. However, as we have not heard from the parties in relation to costs, we have allowed for an application to be made for a different costs order.

Orders

1. We make the following orders: 1. Leave to appeal is refused; 2. The appeal is dismissed; 3. Subject to order 4 below, the appellant is to pay the respondent's costs of the appeal, on the ordinary basis, as agreed or assessed. 4. Order 3 above ceases to have effect if either party contends for a different costs order, in which case the following procedural directions apply: 1. Any application for a different costs order is to filed and served within 14 days of the publication of these orders and is to be supported by submissions not exceeding five pages in length and any evidence to be relied upon, including whether a hearing on the question of costs should be dispensed with pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013. 2. Any response to the costs application(s) is to be filed and served 14 days thereafter and is to be supported by submissions not exceeding five pages in length and any evidence to be relied upon, including whether a hearing on the question of costs should be dispensed with pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013. 3. Submissions in reply are to be filed and served within 7 days of receipt of submissions in response.

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: 22 October 2020