Solicitors:
Lazarus Legal (Respondent/Costs Applicant)
P Dobrich & Co. Lawyers (Appellant/Costs Respondent)
File Number(s): AP 16/46495
Decision under appeal Court or tribunal: NSW Civil and Administrative Tribunal
Jurisdiction: Consumer and Commercial Division
Date of Decision: 21 September 2016
Before: F Holles, General Member
File Number(s): COM 15/60492
[2]
Reasons for Decision
In our decision delivered 9 March 2017, Edwards v CohenHandler Pty Ltd [2017] NSWCATAP 53, we dismissed an appeal by the appellants, Mr and Mrs Edwards, against an order for costs made by the Consumer and Commercial Division of the Tribunal on 21 September 2016 in favour of the respondent, CohenHandler Pty Ltd.
The costs decision was the Tribunal's second decision in the matter. In its first decision - its substantive decision made 1 April 2016 - the Tribunal had dismissed a consumer claim brought by Mr and Mrs Edwards against CohenHandler on the ground of lack of jurisdiction. There was no appeal by Mr and Mrs Edwards against that decision.
However they did appeal the subsequent costs decision, essentially on two grounds: (1) the Tribunal, not having addressed costs in its substantive decision or the final orders made on 1 April 2016, had exhausted any jurisdiction to deal with the matter (because it was functus officio); and if that ground was not accepted, (2) the Tribunal exercised its discretion in a way that was affected by legal error. On the first point, we were satisfied that CohenHandler had foreshadowed a costs application, the Tribunal member had failed to deal with it in his substantive decision, and it was permissible for the Tribunal to deal with it after the event when the omission was drawn to the Tribunal's attention by the respondent, as it did . As to the second point, we were satisfied that the Tribunal's exercise of discretion was free of legal error (applying the principles enunciated by the High Court in House v R (1936) 55 CLR 499) and the reasons were not inadequate.
Our substantive decision in relation to the appeal was made on the papers, without an oral hearing. We noted in those reasons that the respondent to the appeal (CohenHandler) had included in its appeal submissions (27 January 2017) an application for costs. We also noted that the appellants (Mr and Mrs Edwards) had sought an order for costs as part of its notice of appeal. Their reply to the respondent's submissions (10 February 2017) included submissions in support of that application. We ruled that, in light of the outcome of the appeal, there could be no basis for the appellants' application, and it was dismissed. We set a timetable for the filing by the parties of submissions. We indicated that we would be inclined to make an order under s 50 of the Civil and Administrative Tribunal Act 2013 (NCAT Act) dispensing with a hearing, unless any party objected to that course, in which case we would arrange to hear and consider their objection. There has been no objection. We are satisfied that this is a matter that can be adequately determined in the absence of the parties, and according we dispense with a hearing and will dispose of the matter on the papers, as permitted by s 50.
The parties have filed submissions as follows: CohenHandler, the costs applicant - 21 March 2017; Mr and Mrs Edwards, the costs respondents - 24 March 2017; CohenHandler in reply on one point - 29 March 2017. In the reasons that follow we will refer to the respondent as the costs applicant (i.e. CohenHandler) and the appellant as the costs respondents (i.e. Mr and Mrs Edwards).
Adherence to Timetable: The cost applicant filed submissions its submissions a day late, as against the timetable set. We would not normally mention a delay of this magnitude in adherence to a directions timetable involving legal practitioners on both sides, but it was the subject of criticism in the costs respondents' submissions. We are satisfied by the explanation given by the applicant in its submissions in reply.
Primary Rule: As noted in our decision on the appeal, the primary rule in proceedings in the Tribunal is that each party bears its own costs of proceedings: NCAT Act, s 60(1). The primary rule applies to the present appeal proceedings.
Exception: There is an exception to the primary rule. Section 60(2) allows the Tribunal to award costs 'only if it is satisfied there are special circumstances warranting an award of costs'.
What may constitute 'special circumstances' for this purpose is the subject of a list of factors set out in sub-section (3), as follows:
(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.
It will be seen that the list is not a closed one. There are six specific factors followed by 'any other matter that the Tribunal considers relevant'.
[3]
Costs Applicant's Submissions
The costs applicant refers to the following matters as 'special circumstances': the relative strengths of the claims made by each of the parties to the appeal, focussing in particular on the weakness of the argument that the Tribunal was functus officio when it delivered its substantive decision (factor (c)), the nature and complexity of the appeal proceedings (factor (d)) and two special factors (under (g)).
The first of the special factors was one to which we referred in our principal decision, i.e. Appeal Panels have often taken account the fact that an adverse costs order was made at first instance against the party that has now lost the appeal.
The second referred to an opportunity given by the costs applicant to resolve the proceedings made soon after the costs respondents served the claim initiating the proceedings. The costs applicant described it as a Calderbank offer (so called after the title of the leading case on the subject); that is, an offer which, had it been accepted, would have resulted in a better outcome for the offeree than arose from the orders finally made, and thereby would have avoided unnecessary costs for the successful party.
In the court system, the Calderbank principles are employed to support a case for an indemnity (i.e. full) costs order as against the usual reasonable costs order to which a successful party is ordinarily entitled.
The costs respondents filed their claim in the Consumer and Commercial Division of the Tribunal on 9 November 2015. In response, the costs applicant's solicitor sent them a 6 page letter, with 34 numbered paragraphs, setting out its case in opposition to the application. The letter relied on arguments similar to those endorsed by the Tribunal below in its substantive decision. In the closing paragraphs, the solicitor said:
31. NCAT does not have jurisdiction to hear the Application given that the issues are the subject of Local Court proceedings, and the terms of clause 5(7) of Schedule 4 of the Act.
32. We assume that the Application will be dismissed, and the hearing on 3 December 2015 will be vacated. Please let us know if this assumption is incorrect.
33. As would be apparent, we have gone into significant detail in this letter, not only in an attempt to be of assistance to the Tribunal, but also to outline our reasoning in some to detail to [your clients] so they can more fully consider their position.
34. Given the matters outlined in this letter, should [your clients] maintain the Application and the Tribunal otherwise not dismiss it, CohenHandler reserves its right to seek costs under s 60 of the Act, with such costs to be assessed on an indemnity basis.
[4]
Costs Respondents' Submissions
The costs respondents rejected the costs applicant's claim that the points raised by the appeal were very weak, especially the question of jurisdiction to determine the costs issue. They rejected the claim that that proceedings were complex. They then dealt with the two additional factors relied upon as follows.
The costs respondents submitted that the appeal was not a second round of litigation in that way the expression has been used in some of the Appeal Panel cases where costs orders have been made against the unsuccessful party. It had only put in issue the second stage of the proceedings at first instance. They had not reagitated the main matter, the substantive decision. The costs respondents submitted that care should be taken not to assimilate this appeal to appeals that put in issue the main decision.
They contended that the primary question raised by the appeal was not an idle appeal. The noted that the orders made in the substantive decision were final on their face. The appeal had questioned responsibly the decision to revive the matter and consider the other party's costs application. It was not an issue free from doubt. The Tribunal's course of action had, they submitted, raised reasonably appealable matters.
They also questioned whether an offer in the nature of a Calderbank offer had ever been made. They argued, for example, that the letter did not have the features usually required of a 'Calderbank offer' such as the provision of a reasonable time period to the offeree of a reasonable period in which to consider the offer ahead of the proceedings commencing or continuing.
[5]
Consideration
We will deal first with the two additional factors raised by the costs applicant under heading (g) of s 60(3).
In litigation in the Tribunal especially cases with an element of commerciality, offers of compromise have been given weight in deciding whether there are special circumstances. For early examples in the predecessor Tribunal's retail leases jurisdiction, see Alessa Pty Limited v Total & Universal Pty Limited [2001] NSWADT 150; Citadin Pty Ltd (No. 2) v Eddie Azzi Australia Pty Ltd & General Pants Co Pty Ltd [2001] NSWADTAP 31; and more recently, Charalambous v Yeung (No 2) (RLD) [2014] NSWCATAP 1.
The costs applicant's letter of 12 November 2016 was a considered and closely reasoned attempt to bring the proceedings to an end, and foreshadowed an attitude to the issue of costs.
The reference in the letter to the issue of 'indemnity costs' is typical of a Calderbank offer made in the ordinary court system. The reference has less relevance to the present environment, where the base line rule is that a successful party is not entitled, merely by the fact of success, to a costs order. Something more must be present sufficient to amount to a 'special circumstance'. However, the costs applicant's basic point was clear enough. If the claim was withdrawn, there would be no 'special circumstances' application for costs, and if not withdrawn, the failure to withdraw the claim might be put forward as a 'special circumstance'.
In our view, the letter of 12 November 2015 is a minor factor favouring a costs order on appeal. The second special factor raised by the costs applicant is, we think, a stronger one.
While we agree with the cost applicant that the point agitated by the appeal was one that was not untenable, though we rejected it, it remains the case that the costs applicant was exposed to a second round of litigation albeit a second round restricted to the costs order of the Tribunal below.
While the statutory rule is that ordinarily each party must bear its own costs, the fact that the party successful at first instance has been taken to appeal, and the appeal has been unsuccessful does, we think, strengthen the respondent party's case for being awarded the costs of the appeal. There is a public interest in the finality of litigation, which is supported by leaving open the possibility of treating as a special circumstance the fact that the appeal has been unsuccessful.
In addition, while the functus officio ground of appeal may have raised a question of principle that was reasonably arguable, there were further grounds of appeal going to the member's exercise of discretion and the adequacy of the reasons that, in our view, were weak. Further, as we noted in our principal judgment, the way the argument was put on the exercise of the costs discretion and adequacy of reasons necessitated an examination of the substantive decision, thereby widening considerably the practical scope of the appeal. Consequently, it can be said, as the costs applicant did, that when the appeal entered those areas, it took on a level of complexity.
[6]
Conclusion
In our view, the factors to which we have referred amount to 'special circumstances', and warrant the making of a costs order in favour of the costs applicant.
In the order which follow we will return to referring to the parties as the appellants and the respondent.
[7]
Order
That the appellants pay the respondents' costs of the appeal, 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
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Decision last updated: 06 April 2017