Feng v OzWood

Power to award costs

1. Section 60 of the NCAT Act creates the general rule that each party to proceedings is to pay their own costs: s 60(1). We may only order costs "if satisfied that there are special circumstances warranting an award of costs (emphasis added)": s 60(2). Section 60(3) sets out a non-exhaustive list of factors that may be taken into account in deciding whether there are special circumstances warranting an award of costs. These include: that the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance: s 60(3)(e).
2. The term "special circumstances" is not defined by the NCAT Act. It has been interpreted to mean circumstances that are out of the ordinary but not necessarily extraordinary or exceptional. The discretion to award costs must be exercised judicially having regard to the underlying principle that parties to proceedings in the Tribunal are ordinarily to bear their own costs. (See eMove Pty Ltd v Naomi Dickinson [2015] NSWCATAP 94 at [48]; CPD Holdings Pty Ltd t/as The Bathroom Exchange v Baguley [2015] NSWCATAP 21 at [23]-[31]; Nguyen & Anor v Perpetual Trustee Company Ltd; Perpetual Trustee Company Ltd v Nguyen & Anor (no 2) [2016] NSWCATAP 168 at [16].)

Submissions on costs

1. OzWood contends that "special circumstances" exist warranting the exercise of the power to order costs. It asserts that the appeal lacked substance and had such little prospects of success it should "NEVER have been filed" (emphasis in the original). It contends that Mr Feng's claim that the Harris report satisfied the requirement to be "new" (within the meaning of cl 12(1)(c) of Sch 4 to the NCAT Act) is fanciful given that it was a report of the type that could readily have been obtained for the original proceedings. Further, OzWood contends that it has been subjected to "litigation harassment", alleging that Mr Feng sent 104 complaint emails to its staff.
2. Not surprisingly, Mr Feng opposes the application for costs. Pointing out that his client was self-represented in the proceedings before the Tribunal, the solicitor for Mr Feng, Mr Fraser, contended that his client's failure to obtain an expert report to support his claim that the defective floorboards were attributable to the poor workmanship and lack of care and skill exercised by OzWood, reveals Mr Feng's naiveté and lack of appreciation of the legal processes. He contends that it would be unreasonable to expect a self-represented party to have the capacity to identify the need to provide evidence to support their claim. In those circumstances, he contends that Mr Feng ought not be penalised for his inability to present his case in a manner that might reasonably be expected of a competent legal practitioner.

Was the appeal "lacking in substance" and, if so, should the discretion to award costs be exercised?

1. The question we must decide is whether, as asserted by OzWood, the appeal was "lacking in substance" and, if so, whether the discretion to award costs should be exercised.
2. The term "lacking in substance" is not defined by the NCAT Act. Commenting on the meaning of that term in an equivalent but not identical statutory provision to s 60(3)(e), in The Owners Corporation of Strata Plan 4521 v Zouk & anor. [2007] NSWCA 23, the Court of Appeal concluded at [45], that the term "lacking in substance" should be construed to mean "not reasonably arguable". We adopt that meaning.
3. As Mr Feng correctly points out, where, as here, it is asserted that special circumstances are established on the grounds that the proceedings lack substance, the relevant proceedings are the appeal proceedings, not the proceedings at first instance: BPU v NSW Trustee and Guardian (Costs) [2016] NSWCATAP 87 at [28].
4. That the appeal was ultimately unsuccessful does not establish that the appeal was not reasonably arguable. Here, however, a combination of factors leads us to conclude that was the case. First is the fact that the appeal was grossly out of time, together with the absence of any adequate explanation for Mr Feng's delay in bringing the appeal. Having regard to the length of the delay, the explanation proffered for that delay and the lack of merit in the sole ground of appeal, it is difficult to see on what basis it could be argued that the discretion to extend time could properly be exercised. Second, Mr Feng failed to address or adequately address, on what basis the Harris report could be said to satisfy one of the pre-conditions to the exercise of the power to grant leave to appeal under cl 12(c) of Sch 4 to the NCAT Act, namely that the proposed evidence be "new". While the Harris report was undoubtedly probative of the issues in dispute and therefore "significant", it could not reasonably be argued that a report of that type was not reasonably available at the time the proceedings under appeal were being dealt with.
5. The conclusion that the appeal was not reasonably arguable does not dispose of the question of whether the power to award costs should be exercised. The presumption underlying s 60 of the NCAT Act is that each party will bear their own costs. Where special circumstances are found to exist, s 60 does not mandate that costs be awarded. It simply enlivens the discretion to do so. That discretion must be exercised having regard to the "guiding principle": to facilitate the just, quick and cheap resolution of the real issues in the proceedings: s 36(2) of the NCAT Act. It requires a balance to be struck between the "chilling effect" of too readily ordering costs against unsuccessful appellants and the need to ensure that parties conduct their cases in such a way that costs are not unnecessarily incurred by bringing demonstrably unmeritorious appeals.
6. We have decided in this appeal to exercise the discretion to award costs. While self-represented in the original proceedings, Mr Feng had the advantage of legal representation in the appeal. In those circumstances, bringing an appeal which was grossly out of time and was demonstrably lacking in substance, in our view, warrants the exercise of the discretion to make an order for costs.

Should costs on an indemnity basis be awarded?

1. In its initiating application, OzWood sought an order for costs on an ordinary basis. In its submission in reply, it sought an order for costs on an indemnity basis fixed in the sum of $9470. OzWood neither sought, nor was given leave to amend its initiating application. As a consequence Mr Feng was not given notice of that application. In those circumstances it would amount to a denial of procedural fairness to consider the costs revised application. We decline to do so.

Should fixed costs be awarded?

1. OzWood urges us to exercise the power conferred by s 60(4) of the NCAT Act to fix costs in the sum of $6,540 (ordinary costs). In exercising that power the Tribunal is not required to perform the assessment of costs in the same way as an assessor. Rather the Tribunal arrives at an estimate of the proper costs to be allowed by examining, on the basis of particulars provided, whether the quantification put forward by the successful party is logical, fair and reasonable: Sherborne Estate (No 2): Vanvalen & Anor v Neaves & Anor; Gilroy v Neaves & Anor [2005] NSWSC 1003 at [38]. Apart from the bald assertion that fixing costs would be fair to both parties, we have been provided with no material, less still particulars, to assist us to determine whether the estimate of costs of $6,540 is logical, fair and reasonable. For that reason, we decline to exercise the power to fix costs.
2. In addition, given that a significant proportion of OzWood's submission in reply on the issue of costs was devoted to the claim for indemnity costs and, also, raised issues that had not been ventilated in OzWood's initiating submissions in support of its application for costs, we have decided to exclude from the costs order, the costs of preparing those submissions.

Orders 1. Mr Feng is to pay Ozwood (Australia) Pty Ltd on the ordinary basis, as agreed or assessed, the costs of and incidental to appeal proceedings AP 19/34504, excluding the costs of and incidental to the preparation of submissions of Ozwood's application submissions in reply.

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: 12 March 2020