Effective Building and Construction Pty Ltd v Jangoshian

The relevant history

1. The proceedings at first instance, insofar as they concerned the second respondent were concluded on 15 December 2021, with signed consent orders.
2. After the orders were made on 15 December 2021, the second respondent was excused from further appearance and did not participate further in the proceedings.
3. The appeal was lodged on 5 April 2022.The appellant did not put the orders or notations made on 15 December 2022 in issue.
4. On 14 April 2022, the second respondent filed a Reply to the Appeal, maintaining that: 1. he did not seek to be heard as to what proportion of its costs the other parties should each bear; and 2. he did not wish to be heard on the appeal and sought to be released subject to his costs of the appeal to be determined.
5. On 20 April 2022, the second respondent's solicitor appeared at a directions hearing. The parties were advised the second respondent could not formally make a submitting appearance as there is no relevant provision for this to occur in the legislation governing the Tribunal, but could ask to be relieved from further appearance, with costs determined at the conclusion, which is effectively the same thing.
6. Between 3 and 17 May 2022, the second respondent's solicitor attempted to negotiate release from the proceedings, save as regards appeal costs. No formal agreement was reached.
7. Between 18 and 20 May 2022, the appellant sought to have the matter relisted for timetabling and agreed to excuse, but not dismiss, the second respondent from the proceedings.
8. On 27 May 2022, counsel appeared for the second respondent at directions. Orders were made releasing the second respondent from further participation on the basis that its written submissions on costs would be considered by the Appeal Panel. The Appeal Panel relied on its power to determine its own procedure in that regard: Civil and Administrative Tribunal Act 2013 (NSW) (the Act), s 38(1).

Principles relating to costs of the appeal

1. The primary provision governing costs in relation to proceedings in the Tribunal is s 60 of the Act. Pursuant to that section, each party to proceedings is generally to pay their own costs. However, pursuant to s 60(2) of the Act, the Tribunal may award costs if it is satisfied that there are special circumstances warranting it doing so.
2. Rule 38 of the Civil and Administrative Tribunal Rules 2014 (NSW) (Rules) varies the position in s 60 of the Act in respect of costs in the Consumer and Commercial Division in certain circumstances, and 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 - … (b) the amount claimed or in dispute in the proceedings is more than $30,000.
3. Rule 38A of the Rules deals with costs in internal appeals, and 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.
4. Neither active party thoroughly grappled in their submissions with the question of why r 38A applied, such that an award of costs could be made in the absence of special circumstances, but both active parties' submissions proceed on the basis it does apply.
5. As was determined in Allen v TriCare (Hastings) Ltd [2017] NSWCATAP 25, the "amount claimed" or the "amount … in dispute" in the appeal must also exceed $30,000.00 before r 38A of the Rules takes effect and alters the usual position set out in s 60 of the Act in respect of the appeal.
6. That would be correct on the assumption that the second respondent's costs of the first instance proceedings exceeded $30,000, and the proportional liability of the appellant and first respondent to the second respondent, to the extent it remained in issue in the appeal, still exceeded that sum.
7. As the parties did not put this in issue, we assume they have satisfied themselves that this is the case and will proceed on that basis. In any event, appeal proceedings of this nature are sufficiently unusual to be considered "special" for the purposes of s 60 and costs would be warranted, if they are found to be appropriate, for the same reasons we deal with below.
8. Each application for costs must be determined on its own merits and the central and overriding principle in any order as to costs is that of doing justice between the parties in each particular case: Moseley v AB (No 2) [2017] NSWSC 1812 at [65] - [66].
9. The effect of r 38A is to provide "a wide discretion to make an order for costs. It does not specify the factors that must be taken into account in exercising the discretion, although the discretion to make such an order must be exercised judicially: Carlson v ARA Engine Reconditioning Pty Ltd (No 2) [2020] NSWCATAP 39 (Carlson) at [32].
10. The starting point where proceedings have been heard and determined on the merits and r 38A applies is the common-law principles that costs follow the event as "the purpose of making a costs order is to provide compensation to the party in whose favour the order is made for the expense the party has been put to in prosecuting or defending legal proceedings." Carlson at [33].
11. In BVT Constructions Pty Ltd v Allen [2017] NSWCATAP 186 at [67] the Appeal Panel noted the following principles relevant to the exercise of the discretion (also cited in Carlson at [34]): 1. the starting point is that a successful party should be entitled to costs; 2. an award of costs is by way of an indemnity [we interpolate, without criticism of this description which is undoubtedly correct (Latoudis v Casey; (1990) 170 CLR 534; [1990] HCA 59 per Mason CJ at [13]), to note that we would prefer to describe an award of costs as compensatory to avoid confusion between ordinary and indemnity costs] and not a punishment; 3. there is no absolute rule, absent disentitling conduct, that a successful party is to be compensated by the unsuccessful party; 4. the factors to be considered do not constrain the general discretion; 5. relative success and time taken to determine them may be relevant; 6. the nature of the proceedings is relevant; 7. the proper exercise of the discretion requires a decision maker to do justice between the parties and to exercise the discretion having regard to relevant considerations and in a manner which is not arbitrary and capricious.

The second respondent's submissions

1. The second respondent submits that he succeeded at first instance and should be indemnified in the interests of justice, noting that the matter concluded for the second respondent on 15 December 2021 with orders for a work order and his costs to be paid by the other parties. That successful outcome was undisturbed by the appeal.
2. The second respondent submits that the appellant "joined" him as a party to the appeal, the effect of which was that he incurred further legal expenses on the appeal that will not be covered by the orders of 15 December 2021, including the preparation of a reply, correspondence, appearances at two directions hearings, and preparation of submissions on costs. He complains that the other parties should have "released" him from the appeal.
3. He submits that it is fundamentally unjust that he should bear his costs related to the appeal, in which the only issue was what proportion of his first instance costs the other parties should bear.
4. He submits that every dollar he is required to spend on legal expenses on the appeal has the effect of diluting the overall value of the costs orders at first instance, which was not the ultimate issue in dispute.
5. Even if the second respondent was to obtain an ordinary costs order on the appeal, there would still be a sum for which he would be out of pocket. Accordingly, justice in the circumstances not only requires that his costs of the appeal be paid by the other parties, but that it be on an indemnity basis.
6. He submits his early release was contemplated by both the appellant, with his costs being in the cause (affidavit of his solicitor, Meredith Ziegler, dated 26 July 2022 at p 39), and the first respondent (ibid, at p45) with his costs reserved pending the outcome. Unfortunately, it was not until the matter was brought before the Tribunal for a second Directions Hearing that he was able to be released.
7. Had the second respondent been released earlier with a sensible order for its costs, his costs would have been de minimus. The unnecessary additional costs further warrants an indemnity costs order, rather than an ordinary costs order.
8. The second respondent seeks an order that the other parties pay his costs of the appeal on an indemnity basis, or alternatively on the ordinary basis in such proportion as the Appeal Panel considers just in all the circumstances.

The appellant's submissions

1. The appellant notes that the second respondent was a necessary party to this Appeal and that, prior to these most recent submissions, it was his position that he should not have been a party to the appeal. The appellant submits that the agitation of this untenable position has caused the appellant additional costs and indeed would have been the reason for the second respondent being occasioned costs.
2. The reason the second respondent had to be a party was that the appellant sought a variation of the order as to by whom and in what proportion the second respondent's costs should be paid.
3. The appellant notes that it originally attempted to file the Notice of Appeal without the second respondent named as a party. Properly, this was rejected by the Registry, which required each other party affected by the order to be listed as a respondent. However, in all the correspondence with the second respondent's solicitor, it was made clear that his involvement in the proceedings was limited to being a necessary party. Further, no stay of the previous orders was sought. In any event, the second respondent only involved himself in the appeal purely to seek costs. This was of itself an unreasonable position to take, for a necessary party who did not need to take part in the appeal process.
4. It was inevitable that the Appeal Panel would have to make some further order in relation to the determination of costs. This was because on the third and final of day hearing, being 15 December 2021, (the crucial day in relation to this appeal) was not recorded or transcribed due to a technical error within the Tribunal. This was only confirmed to the parties on 13 May 2022. This unfortunately led to difficulties with the appeal and the inevitable result appeared to be that the matter would have to be remitted for reconsideration notwithstanding that the non-recording of the proceedings was not the fault of any party.
5. The second respondent's application for costs, whether on an indemnity basis or the ordinary basis is thoroughly unmeritorious. Indeed it is open to the Appeal Panel to award costs of this application against the second respondent. Quite simply the application should not have been brought.
6. The appellant submits that applications such as the present one for costs ought not to be made. It is submitted that because of order 4 made on 14 July 2022, at a time the second respondent knew the outcome of the appeal, it ought to have been plain to those advising the second respondent (in circumstances where the second respondent had already filed costs submissions on the basis that he was not a necessary party) that he should refrain from bringing this application.
7. The appellant submits that the second respondent was not the 'the successful party' for the purpose of rr 38A and 38 of the Rules. He was a 'necessary party' to this appeal and only incurred any significant costs because of his own unsuccessful choices. In the lengthy submissions filed by the second respondent there is not the slightest suggestion that he was successful on appeal, nor could there be. Further, there is no longer any suggestion that he was wrongly joined in the appeal.
8. These concessions were belatedly made. it was wrong for the second respondent to make a further application for costs. On that basis while the Tribunal has a wide discretion, it is open to the Appeal Panel to make a cost determination against the second respondent to do justice between the parties for the reasons stated above.
9. In circumstances where the second respondent has achieved no success on the appeal and achieved increasing of costs by himself, there is no basis to award him costs. The question does however arise about the conduct of the second respondent as a basis for making a costs order against him: Bright Build Pty Limited v The Owners - Strata Plan No 94514 [2021] NSWCATAP 163 at [93] and [94].
10. The application is so unmeritorious that is it submitted that the second respondent should pay the costs of this costs application, but limited to the costs after the Appeal Panel order made on 14 July 2022. However, these costs should be on an indemnity basis.

Determination

1. There is no doubt that the second respondent was required to be considered as a party to the appeal: Rules, r 29(b). We also accept that the lack of a formal process for a party to lodge a submitting appearance may have contributed to confusion between the parties as to how the issue of the second respondent wishing to, in effect, submit save as to costs should be resolved: c.f. Uniform Civil Procedure Rules 2005 (NSW), r 6.11.
2. However, there appears to have been an unnecessarily involved process engaged in by the parties to resolve the issue. It was, in truth, a simple matter resolved by the Appeal Panel at a directions hearing on 27 May 2022, wherein the Appeal Panel determined, without requiring a formal application, that: 5 The second named respondent, Rae Palma, is excused from the hearing of the appeal on the basis that written submissions from that party will be considered by the Appeal Panel.
3. There is no prima facie rule that a submitting party will never be ordered to pay costs. What is called for, in all cases, is the principled exercise of the costs discretion: Seller v Jones [2014] NSWCA 19 at [55] and [59]. As a corollary to that, there can be no prima facie rule that a submitting party will always receive their costs. "The discretion […] is subject to the qualification that it must be exercised judicially "in accordance with established principle and factors directly connected with the litigation": Lou v IAG Limited t/as NRMA Insurance [2019] NSWCA 319, per Payne JA (Gleeson JA agreeing) at [42], citations omitted. "Among the fetters on the discretion to award costs are [where] [t]he usual rule is that costs follow the event, unless it appears to the Court that some other order should be made": ibid.
4. Here, the second respondent was required to be on the record, and could not consent to the appeal being allowed. His consent was, however, required before the appellant could obtain the relief eventually achieved of having the orders at first instance varied by consent.
5. We also take into account that the second respondent indicated his submitting appearance at the earliest opportunity, and did so even though the outcome of the appeal was not strictly irrelevant to him as the capacity of the appellant and first respondent to contribute to his costs at first instance may not have been the same. We also take the view that the "event", for the purpose this appeal was success from the appellant's perspective, as his material rights remained largely unaffected.
6. We accept though, that once the second respondent's ability to "submit" in the appeal save as to costs was clear, any further costs incurred by him in the period leading up to the hearing of the appeal (other than in making it clear that he sought costs by his submissions of 23 June 2022) were unnecessarily incurred in the circumstances. This would include any subsequent correspondence engaged in as to whether he had been properly "joined" to the appeal.
7. In respect of the costs incurred by making and prosecuting the application, the affidavit material relied upon by the second respondent was somewhat more prolix than necessary to determine the application, but not sufficiently so as to require our intervention.
8. In respect of the second respondent engaging in assessing the proposal of the other parties to vary the orders at first instance and taking advice leading to providing his consent on 14 July 2022, we accept the submission that those costs ought be payable on the indemnity basis to avoid a situation where his legal expenses would have the effect of diluting the overall value of the costs order at first instance.
9. The appellant made no submission as to how any costs awarded to the second respondent should be apportioned between it and the first respondent. The first respondent did not engage on costs at all. We infer this may be because the appellant is indemnifying the first respondent in some way, but do not need to determine the issue or have the evidence to do so. It seems to us that, in the absence of submissions to the contrary, the costs ordered should be borne in the same proportion eventually agreed to at first instance, being 70% by the first respondent and 30% by the appellant.

Orders

1. In the exercise of our discretion, we will order that: 1. A hearing of the application for costs is dispensed with. 2. The first respondent is to pay 70%, and the appellant is to pay 30% of the second respondent's costs of the appeal as follows: 1. On the ordinary basis: 1. from institution of the appeal to 27 May 2022 (inclusive); and 2. of the submissions on costs dated 23 June 2022. 1. On the indemnity basis for the legal services received on 14 July 2022.

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 December 2022