Dimitropoulos v Capitol Constructions Pty Ltd; Capitol Constructions Pty Ltd v Dimitropoulos

Summary

1. Reasons for decision in these appeals were published on 27 April 2018: Dimitropoulos v Capitol Constructions Pty Ltd; Capitol Constructions Pty Ltd v Dimitropoulos [2018] NSWCATAP 100 (the Appeal Decision).
2. As with the Appeal Decision, we shall refer to Mr and Mrs Dimitropoulos as the homeowners, and Capitol Constructions Pty Ltd trading as Vogue Homes as the builder.
3. The primary decision considered two appeals. The first appeal was AP 16/32203. This was the homeowners' appeal. It had two aspects: 1. the decision of the Tribunal of 29 June 2016 ordering the appellants to pay the builder the sum of $73,968.96: see Dimitropoulos v Capitol Constructions Pty Ltd; Capitol Constructions Pty Ltd v Dimitropoulos [2016] NSWCATCD 61 (the principal decision); and 2. the decision of the Tribunal of 15 December 2016, ordering the homeowners to pay the builders costs as agreed or as assessed (the costs decision).
4. The second appeal was AP 17/24463. This was a cross-appeal by the builder. The builder claimed that the Tribunal erred at law and failed to provide it with procedural fairness in relation to the issue of the abandonment of the contract. The builder claimed that this lack of procedural fairness had the practical effect of denying it the possibility of securing a more favourable result that would flow from a finding that the homeowners' repudiation had been accepted by the builder.
5. For the reasons stated in the Appeal Decision, each appeal was allowed in part.
6. In relation to costs we stated: 250. We have found that the contract was validly terminated by the builder. Who terminated the contract, and the circumstances in which it came to an end, has always been in dispute, as has the amount due to the builder. While the builder's Notice of Appeal was filed out of time, having regard to what has occurred, time should be extended to permit the appeal as the grounds raised are interrelated with the homeowners' grounds. No prejudice arises from this. 251. Having regard to the concession made by the builder that it does not seek to claim loss of profits in the event we determined it had validly terminated the contract, all that is necessary to do is to set aside order 1, being the award of $73,968.96, and remit the proceedings to the Tribunal as originally constituted to re-determine this issue in accordance with these reasons. That is, the only question on remittal is what amount, if any, the builder may be entitled to recover for work performed but not loss of profits. The adjustment for GST and margin, referred to at [34(5)] and [37(1)] above, should also be dealt with as part of the redetermination. The Tribunal may determine whether this matter can be determined without a further hearing on the evidence previously provided or may make such directions as it considers necessary to finalise the matter. 252. In respect of costs, each party has had some success. In these circumstances, our preliminary view is that each party should pay their own costs. We will make this order, subject to either party making an appropriate application for a contrary order.
7. For the following reasons, we consider that Mr and Mrs Dimitroplous should pay the costs of Capitol Constructions Pty Ltd attending the hearings on 21 October 2016 and 30 May 2017 and the costs thrown away because of various amendments to the Notice of Appeal. Otherwise, each party is to pay their own costs.

Need for a hearing

1. The homeowners consider that a hearing on the issue of costs can be dispensed with, and that the matter can be resolved by reference to the written submissions provided.
2. The builder disagrees. It submits that a hearing is necessary given the history of the matters, and the course adopted by the homeowners. This is a reference to, in particular, the homeowners being permitted to "recast their appeal".
3. We consider that the issue of costs can be adequately dealt with on the papers, and without a hearing. The parties have had an opportunity to provide written submissions and have done so. The party seeking a hearing, the builder, is represented by Counsel. No doubt Counsel is able to articulate, in writing, what the builder wishes to say in respect of costs and has done so by providing written submissions. A hearing would only add further unnecessary costs in what have been protracted proceedings. The holding of a hearing would be inconsistent with the guiding principle that the Tribunal facilitate the just, quick and cheap resolution of the real issues in the proceedings: Civil and Administrative Tribunal Act 2013 (NCAT Act), s 35.

Parties' submissions

1. Each party filed submissions pursuant to directions. In summary, the homeowners are content with the costs order indicated by in the Appeal Decision, that is, each party should bear its own costs.
2. The builder disagrees. It seeks its costs.

The builder's submissions

1. The builder submissions can be summarised as follows: 1. On 21 October 2016, the Appeal Panel adjourned the appeals on the application of the homeowners to allow them to reformulate their appeals. Costs were reserved. The builder submits that the homeowners subsequently "recast" their appeal and that its costs of preparation for and appearance at the hearing on 21 October 2016 were thrown away. In this respect the builder seeks an order that the homeowner pay its costs of and incidental to the appearance on 21 October 2016, and the costs thrown away by reason of the subsequent amendments to the homeowners' appeal; 2. The builder was "largely successful" in resisting the homeowners' appeal, in that, of the nine grounds of the homeowners' appeal, the homeowners were unsuccessful on eight. The builder says that it was put to enormous cost in dealing with each of the nine grounds, in circumstances where the homeowners were only successful on one minor ground, being the calculation of interest, which was capable of being determined in a short time. 3. As to their own appeal, the builder submits that, as it succeeded in two of its three grounds, the third ground not being specifically addressed by the Appeal Panel; it ought to have its costs of its appeal.

The homeowners' submissions

1. The homeowner does not seek a costs order.
2. In relation to their appeal, the homeowners said that the builder wrongly claims that the homeowners were only successful in relation to one ground of appeal. They submit that they were successful in four of the grounds, and here rely on pars [223], [233], [235] and [251] of the primary decision. They submit that they too incurred substantial costs, in circumstances where the builder: 1. vigorously objected to every issue in relation to their appeal; and 2. chose not to resolve any of the issues directly with the homeowners.
3. As to the builder's appeal, the homeowners submit that the builder only succeeded on one ground (not two as claimed), and that the Tribunal also relevantly found that: 1. the builder was not entitled to recover the sum of $9,132.00 which the Tribunal had found was payable to the homeowners for the cost of rectifying defective work (here the homeowners refer to pars [223] and [237] of the primary decision); and 2. the builder was not entitled to recover unpaid progress claims and retain progress claims when the contract was terminated (here the homeowners refer to pars [238] and [239] of the primary decision).
4. In summary, the homeowners submit that the primary decision was detailed and rational in determining that each party only had some success in the appeals. Therefore, they accept that each party should bear their own costs.

Applicable legislation and principles

1. Rule 38A of the Civil and Administrative Tribunal Rules 2014 provides: 38A COSTS IN INTERNAL APPEALS (1) This rule applies to an internal appeal lodged on or after 1 January 2016 if the provisions that applied to the determination of costs in the proceedings of the Tribunal at first instance (the "first instance costs provisions") differed from those set out in section 60 of the Act because of the operation of: (a) enabling legislation, or (b) the Division Schedule for the Division of the Tribunal concerned, or (c) the procedural rules. (2) Despite section 60 of the Act, the Appeal Panel for an internal appeal to which this rule applies must apply the first instance costs provisions when deciding whether to award costs in relation to the internal appeal.
2. Rule 38A applies because a different cost rule applied to the proceedings at first instance because of the operation of "the procedural rules". In the proceedings at first instance r 38 applied because the "amount claimed or in dispute (was) more than $30,000": see r 38(2)(b).
3. Consequently, despite s 60 of the NCAT Act, the Appeal Panel may award costs in relation to the proceedings even in the absence of special circumstances.
4. There is a general discretion to award costs. The starting point for the award of costs is "the ordinary rule" that a successful party is entitled to the costs: see Oshlack v Richmond River City Council [1993] HCA 11; (1998) 193 CLR 72 per McHugh J at 97 and Thompson v Chapman [2016] NSWCATAP 6 at [69].
5. In this respect, we accept the builder's submission that, as a general rule, the successful party is entitled to their costs. We also accept that the purpose of a costs order is to compensate or indemnify a person in whose favour it is made, not to punish the person against whom the costs order is made: Oshlack per Brennan CJ at 75 and Latoudis v Casey [1990] 170 CLR 534 per Mason CJ at 543 and McHugh J at 567.

Consideration

1. As the Appeal Panel stated in Thompson v Chapman [2016] NSWCATAP 6 at [72]: The factors to be considered in awarding costs in a particular case are not to be confined as to do so would constrain the general discretion. However it is clear from the authorities that factors that might influence whether the usual order for costs should apply and, if so, to what extent include: (1) Whether, by reason of the relative success of the parties on different issues and the time taken to determine those that an order for costs based on issues should be made: see for example Bostick Australia Pty Ltd v Liddiard (No 2) [2009] NSWSCA [sic] 304; and (2) Whether, by reason of the nature of the proceedings the usual rule should otherwise be displaced in whole or in part: see Oshlack v Richmond River Council per Gaudron and Gummo[w] JJ at 41 - 44.
2. In Bostick Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 the Court of Appeal noted at [38] that the principles governing the making of an order as to costs so as to reflect the time taken in dealing with a particular issue in which the successful party in the proceedings or on the appeal did not succeed were reviewed in Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373. We paraphrase the Court of Appeal's summary of the relevant principles as follows.
3. First, where there are multiple issues in a case, the Court (here the Tribunal) 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 (Court of Appeal, 6 July 1994, unreported).
4. Secondly, 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].
5. Thirdly, 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 New South Wales v Stanley [2007] NSWCA 330 at [18].
6. Fourthly, 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].
7. Fifthly, 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) at [38], citing Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd [1993] FCA 259; (1993) 26 IPR 261 at 272.
8. These appeals were matters where both parties achieved a measure of success. On the one hand, the homeowners were successful in having the matter remitted for further determination. On the other hand, the builder was successful in in persuading the Appeal Panel that it had accepted the homeowners' repudiation of the contract and exercised its right to terminate the contract.
9. We considered the homeowners' grounds of appeal under the headings set out at [41] of the Appeal Decision. They were: 1. abandonment/termination on notice for substantial breach (including alleged breaches in respect of time, windows, balcony ceiling height and kitchen bench tops); 2. unlicensed subcontracting; 3. amount payable to the builder for work carried out, unpaid credit variations and Variation 9 interest; 4. delay in completing building works and loss of rent; 5. homeowners' appeal on costs.
10. Both parties contended that the contract had not been abandoned and that they had not been provided an opportunity to make submissions on this aspect. Consequently, it was necessary to determine the issue of whether the contract was terminated, and if so, by whom. This issue required the Appeal Panel to review each of the items said to constitute breaches of the builder's obligations, determine if they were breaches and whether they were "substantial" within the meaning of the contract.
11. The builder's challenge in relation to this matter was not limited to the issue of whether the breaches were substantial. The builder also asserted certain items did not constitute breaches at all. In this regard the builder contended it could change the brand of windows and doors, at its discretion, without a variation. It failed on some of these matters.
12. Further, the builder said that the amount awarded by the Tribunal should not be disturbed because it was not seeking damages for loss of profits. In effect, the builder contended there had been no error in the amount awarded for damages. Necessarily, resolution of these matters involved the Appeal Panel reviewing the defects found by the Tribunal and whether the assessment of damages was correct. Entwined in this issue was the question of whether the Tribunal had properly assessed what work had been completed, including work required in consequence of agreed variations. Again, the builder was unsuccessful in resisting the award being set aside.
13. Seen in light of the above we are not satisfied we should undertake a process of dissecting issues. This is because, on any view, it was necessary to look at the particular defects and the work completed to determine the entitlement of the builder, in respect of work completed up to the date of termination. As we have found, we could not do so and the proceedings needed to be remitted. However, the fact remained that, ultimately, the homeowners were successful in having the earlier award set aside and the proceedings remitted for further hearing.
14. Balancing the success of both parties in relation to the above aspects would lead us to the view that each party should pay their own costs.
15. Despite this conclusion, there are two matters that warrant an award of costs in favour of the builder.
16. First, as we recorded in our reasons, the appellants amended their Notice of Appeal on multiple occasions after the hearing of the appeal originally commenced on 21 October 2016, the original Notice of appeal having been filed on 6 July 2016: see Appeal Decision at [15]-[18]. This occurred in circumstances where, at the start of the hearing on 21 October 2016 the homeowners sought to "just disregard [the Notice of Appeal] and … work with the submissions" which they had filed: Appeal Decision at [19]. At this time, the Notice of Appeal had already been amended by Notice of Appeal dated 18 July 2016.
17. Unremarkably, the Tribunal, as then constituted, found this an unsatisfactory state of affairs and made directions for the filing of an amended Notice of Appeal.
18. Thereafter, two more iterations of the Notice of Appeal were filed.
19. In our view, the usual costs rule should apply in respect of these amendments and the homeowners should pay the builder's costs thrown away by reason of the amendments.
20. Secondly, as noted in the Appeal Decision, the appeal had numerous hearing days.
21. In this regard, as to the costs of the hearing on 21 October 2016, we noted in the Appeal Decision at [19], It is clear from the transcript that some time was spent at that hearing trying to identify precisely what issues the homeowners wished to raise in their appeal. The then Notice of Appeal did not, apparently, set out all of the claims which the homeowners wished to raise, Mr Dimitropoulos saying at the hearing "just disregard those and we'll work with the submissions".
22. The Appeal Panel reserved the costs of that hearing day. We think it appropriate that the homeowners pay the builder's costs of this day. The homeowners were not in a position to proceed with their appeal on that day.
23. In addition, the builder should be allowed some additional costs arising from the manner in which the homeowners otherwise conducted their appeal. We consider that the conduct of the homeowners' appeal was characterised by a continued failure to articulate their grounds of appeal, demonstrated by no fewer than four versions of the Notice of Appeal, their preparation of the appeal documents, failure to provide an appropriate bundle of documents, their lengthy oral submission and the consequential impact on the hearing time. Appeals are usually listed for half a day hearing, even where complex issues are raised, the parties being expected to clearly articulate their grounds of appeal and explain in written submissions their position in the appeal. In this way, an opponent is informed of the case they have to meet and is able to respond in a timely and efficient manner.
24. These appeals took place over more than four half day sessions, and very little time was taken up by the builder in oral submissions in responding to the homeowners' submission or providing oral submissions in support of its appeal. We were informed by one of the homeowners, Mr Dimitropoulos, that he was a law clerk and we are unaware of any circumstances that might explain the convoluted way in which the appeal was presented. The submissions were repetitive and, on occasion, confusing, both matters that lead to significant and unnecessary additional hearing time. In our view, the builder should be compensated for the additional time taken in hearing these appeals which is directly attributable to the manner in which they were conducted by the homeowners.
25. Accepting that the homeowners were not represented by lawyers and that Mr Dimitropoulos is not himself admitted as a lawyer, some allowance needs to be made in determining by how much the hearing was unnecessarily extended. We have reached the view that a proper allowance is to award the builder its costs of preparing for and appearing at the hearings on 21 October 2016 and 30 May 2017. In this way, allowance is made for those matters identified at [19] of the Appeal Decision and for the fact that the homeowners thereafter took up an unnecessarily lengthy period of time in completing the hearings.

Orders

1. In conclusion, we make the following orders: 1. Pursuant to s 50(2) of the Civil and Administrative Tribunal Act, 2013, the hearing of the application for costs is dispensed with. 2. Mr and Mrs Dimitroplous are to pay the costs of Capitol Constructions Pty Ltd in preparing for and attending the hearings on 21 October 2016 and 30 May 2017, together with the costs thrown away by reason of the amendments to the Notice of Appeal, such costs to be as agreed or assessed on an ordinary basis. 3. Otherwise, each party is to pay their own costs.

I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Principal Registrar

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 14 August 2019 - Typographical error corrected, party name 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: 14 August 2019