This is an application for costs by respondents to an appeal brought by the appellant.
The Appeal Panel dismissed the appeal pursuant to s 55(1)(a) of the Civil and Administrative Tribunal Act 2013 (NSW) (the "NCAT Act") on 27 February 2020 as a result of the appellant withdrawing its appeal.
On the same day the Appeal Panel made directions that should the respondents wish to make an application for costs of the appeal they should file and serve written submissions in support of the making of such an order and the appellant should file and serve submissions in response.
Pursuant to those directions the respondents filed submissions seeking costs and setting out the reasons why they should receive an order for costs.
The appellant has not filed any submissions in response.
The respondents consent to us dispensing with a hearing of this application for costs. In our opinion the issues for determination can be adequately determined in the absence of the parties by considering the written submissions provided.
In the Tribunal below the respondents claimed $40,000 from the appellant. The proceedings were allocated to the Consumer and Commercial Division of the Tribunal. In the result, the appellant was ordered to pay the respondents $41,588.30. The appellant challenged that order in its Notice of Appeal and said that the Appeal Panel should set aside that order, and in lieu thereof order that the respondents' claim against it be dismissed.
We must first consider Rule 38A of the Civil and Administrative Tribunal Rules 2014 (NSW) (the "NCAT Rules").
Rule 38A says that that rule applies to an internal appeal (which this is) lodged after 1 January 2016 (which it was) if the provisions that applied to the determination of costs in the proceedings of the Tribunal at first instance differed from those set out in section 60 of the NCAT Act because of, amongst other things, the procedural rules. The procedural rules are the NCAT Rules.
Rule 38 of the NCAT Rules applied to the determination of costs in the first instance proceedings because the amount claimed or in dispute was $40,000 and was thus greater than the $30,000 referred to in the rule.
The provisions of r 38 differed from the provisions of s 60 of the NCAT Act in that r 38 provides that costs may be ordered in the absence of any "special circumstances". The presence of "special circumstances" is required before costs can be awarded under s 60 of the NCAT Act.
It follows that r 38A applies and we must apply the costs provisions of r 38.
Rule 38 says:
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.
As can be seen, r 38 says that costs may be awarded, but does not express how the discretion as to costs should be exercised.
Therefore, the principles that apply in answering the question whether costs should be awarded are common law principles. There are differing principles depending on the circumstances.
The most common law principle adverted to is that costs follow the event, that is, the losing party is ordered to pay the winning party's costs, the "event" being the result of a hearing on the merits.
In this case, however, there was no hearing on the merits. The appeal was dismissed by the Appeal Panel after the appellant indicated it wished to withdraw its appeal.
Different common law considerations apply where there has been no hearing on the merits. Further, there are a number of reasons why there may be no hearing on the merits and differing considerations apply depending on the reason why there was no hearing on the merits.
One commonly encountered circumstance which results in there being no hearing on the merits is where the parties to the litigation reach a settlement. In such a case the principle is that if 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 costs discretion will usually mean that the court will make no order as to the costs of the proceedings - see Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 per Payne J at [25] and [30], with whom Basten and Meagher JJA agreed, applying McHugh J's oft-cited decision of Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6.
An order for costs may be made if it can be shown that a party has invited the litigation by its unreasonable behaviour or, has unreasonably pursued litigation. In such cases an order for costs 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 - Nichols at [8], [13] and [31].
Rarely should a court or tribunal determine, hypothetically, who would probably have won a case. In Lai Qin McHugh J said at [31]:
"It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a Court determining how the costs of the proceeding should be borne to endeavour to determine for itself the case on the merits or, as it might be put, to determine the outcome of a hypothetical trial. This will particularly be the case where a trial on the merits would involve complex factual matters where credit could be an issue."
Accordingly, it is not necessary nor appropriate for us to try to discern a clear hypothetical winner in this case.
Another circumstance which may justify an order for costs is where one party, in effect, capitulates or surrenders to the other. In those circumstances the usual order is that the capitulating/surrendering party pays the costs. Capitulation can take different forms, but withdrawing proceedings is sometimes a form of capitulation.
So it was in Khanna v Bond Realty Pty Ltd [2019] NSWCA 128 in which Bell P and Gleeson JA said at [31]:
"The 26 October notice of motion which was dismissed was a notice of motion which Mr Khanna sought to withdraw in the course of the hearing and it was reasonable that the First Respondent be awarded its costs in relation to that notice of motion. There was and is no good reason why a party that has prepared to meet a notice of motion should be deprived of its costs if a party that has filed it withdraws it in the course of argument. Whilst costs will not always be ordered in such circumstances (see Re Minister for Immigration & Ethnic Affairs; ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622 at 624-625; see also Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84), that is not an invariable rule and there was no error of principle in the primary judge's decision to award costs in relation to the 26 October 2018 notice of motion."
The general principles applicable to costs where there has been no hearing on the merits were summarised in Kiama Council v Grant [2006] NSWLEC 96 at [80], a decision approved by the Court of Appeal in Hunter Development Corporation v Save Our Rail NSW Incorporated (No 2) [2016] NSWCA 375 at [78], [81] and [82].
In Kiama, and after a review of the authorities, Preston CJ said:
"[80] The principles that emerge from these cases are that in a civil enforcement or judicial review case where there has been no hearing on the merits:
(a) where one party effectively surrenders to the other party by:
(i) discontinuing without the consent of the other party; or
(ii) giving undertakings to the Court or submitting to the Court making orders against the party substantially in the terms or to the effect claimed by the other party;
the proper exercise of the costs discretion will ordinarily be to make the usual order as to costs, unless there is disentitling conduct on the part of the other party; and
(b) where some supervening event or settlement so removes or modifies the subject of the dispute that no issue remains except that of costs, the proper exercise of the costs discretion will ordinarily be to make no order as to costs unless:
(i) one of the parties has acted so unreasonably that the other party should obtain the costs of the action; or
(ii) even if both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried so that the party should obtain the costs of the action.
Discontinuances do not exist in the Tribunal, and decisions of the Supreme Court of NSW (and courts subject to similar rules) in relation to costs questions arising from discontinuances or dismissals may have little relevance to the Tribunal given the differences between the Tribunal's Rules and the Uniform Civil Procedure Rules 2005 (UCPR).
For example, UCPR 42.19 provides that, prima facie, a discontinuing party pays the other party's costs. UCPR 42.20 makes similar provision in relation to claims which are dismissed. No like provision applies to dismissals made pursuant to s 55 of the NCAT Act in the Tribunal.
Be that as it may, the effect of a dismissal under s 55 of the NCAT Act is similar to the effect of a discontinuance elsewhere. The proceedings are brought to an end without a hearing on the merits.
It will be apparent, of course, that a dismissal of an appeal following the withdrawal of the appeal by an appellant may be a surrender per Preston CJ's first category of case, or it may be the result of a supervening event or settlement referred to in the second category. Thus, the relevant circumstance is not so much the form the surrender may take (be it a withdrawal, dismissal by consent, discontinuance etc), but the reason for or circumstances giving rise to it. Thus, a dismissal following a settlement reached between the parties would be considered differently to a dismissal which was tantamount to a surrender.
In the present case the appellant withdrew its appeal, as it was entitled to do, and the Appeal Panel made a consequential order dismissing the appeal per s 55(1) of the NCAT Act.
There is no evidence nor indication that the proceedings were withdrawn because of a supervening event, and the appellant has decided not to provide us with submissions which may have indicated otherwise. Nor was there a settlement between the parties.
The appellant lost the case at first instance and the learned member delivered comprehensive and detailed reasons for that decision. The appellant filed a Notice of Appeal and an application for a stay of enforcement of the decision, an application which was refused.
The respondents filed a Reply to the Notice of Appeal, and five days later the appellant informed the respondents that it no longer pressed the appeal. Four days later it communicated that intent to the Appeal Panel and the order dismissing the appeal was made six days after that.
In these circumstances it seems to us that the appellant has effectively surrendered to the respondents and we can see no good reason why the respondents, who have incurred some expense in meeting the appeal up to the time the appellant withdrew it, should be deprived of their costs.
[2]
Orders
We make the following orders:
1. A hearing on costs is dispensed with.
2. The appellant is to pay the respondents' costs of the appeal as agreed or assessed in accordance with s 60(4)(b) of the NCAT Act.
[3]
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
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Decision last updated: 20 May 2020