Finch v Huang

NCAT Appeal Panel|2023-07-06|Before: Community Association DP

Introduction

This decision concerns whether the Appellant should be ordered to pay the legal costs of the appeal incurred by the Respondent, as well as certain specified expenses also incurred by the Respondent. The appeal was withdrawn by the Appellant before the Appeal Panel published its decision with respect to the appeal and, as a result of the withdrawal, the appeal was dismissed by an order made under s 55(a) of the Civil & Administrative Tribunal Act 2013 (NSW) (the NCAT Act).
In order to understand the respective contentions of the parties, it is necessary to set out the relevant background chronology as follows: 1. The Respondent to this appeal had commenced proceedings in the Consumer & Commercial Division of the Tribunal seeking to invoke the Tribunal's jurisdiction to make orders under the Dividing Fences Act 1991 (NSW) (the DF Act). On 20 September 2022, the Tribunal at first instance published its decision and made orders essentially requiring the construction of a dividing fence. The respondent at first instance (now the Appellant) lodged a Notice of Appeal on 10 October 2022. 2. On 28 October 2022 the appeal proceedings came before the Tribunal for the purposes of making directions. The directions included an order that leave be given to the Respondent to be legally represented. Directions were made for the Appellant to file and serve by 18 November 2022 its material in support of the appeal and the Respondent was the subject of a similar direction to be complied with by 2 December 2022. 3. The record of the directions includes the record that the orders made at first instance were stayed until finalisation of the appeal. However, the Respondent was given permission to arrange the installation of a temporary fence on the boundary between the parties' properties on certain conditions, including that the installation of that fence be at her "own initial expense". The record also stated that determination as to which of the parties should pay the cost of the temporary fence on a final basis is reserved to the Appeal Panel determining the appeal. 4. The hearing of the appeal occurred on 20 February 2023. According to the Respondent's submissions on costs that hearing was adjourned "mid-hearing" so as to permit the Appellant to make an application for recusal of the Appeal Panel. Over the objection of the Respondent, the hearing was adjourned with a timetable set for the service of submissions relating to the recusal application and was relisted for hearing of the remainder of the appeal on 31 March 2023. 5. On 24 February 2023 the Tribunal's registry emailed the Respondent. The email stated that the Appellant had made a request to withdraw the application and requested the Respondent to advise the Tribunal by 27 February if the Respondent had any objection to the matter being withdrawn. 6. On 25 February 2023 the Respondent emailed the Appellant's solicitor seeking clarification as to whether the withdrawal referred to by the Tribunal in its email was limited to withdrawing the recusal application or whether it constituted an application to withdraw the substantive appeal. On 27 February 2023 the Respondent emailed the Tribunal, explaining that the Respondent was unsure whether the withdrawal was limited to the recusal application or extended to withdrawal of the substantive appeal. The Respondent sought a further one day extension (to 28 February 2023) to make submissions. The Respondent also stated that she objected to the application being dealt with on the papers and requested an oral hearing for the purpose of dealing with the substantive appeal (assuming that the withdrawal was limited to the recusal application) or for the purpose of dealing with lifting the extant stay orders (if the withdrawal extended to the substantive appeal) and finally for the purpose of considering a proposed costs application. The Respondent emailed again to the Tribunal on 28 February stating that she had not received a response from the Appellant's solicitor and that she objected to the decision being made on the papers. 7. On 8 March 2023 the Tribunal made orders for the appeal to be dismissed in accordance with s 55(1)(a) of the NCAT Act as the Appellant had withdrawn the application. The stay order was lifted and directions were made for the parties to make submissions with respect to the Respondent's costs application. In addition, by consent, the Tribunal made an order dispensing with a hearing in relation to the application for costs pursuant to s 50(2) of the NCAT Act and ordered that the question of costs is to be decided on the papers without an oral hearing. 8. Following the above directions, the parties lodged written submissions.

Respondent's Cost Submissions

The Respondent's cost submissions are summarised in the following paragraphs.
The Respondent submitted that the principles relating to whether costs ought to be awarded in circumstances where a party has withdrawn their appeal were set out in D Constructions Pty Ltd v Walsh (2020) NSWCATAP 91. In that case, the Appeal Panel determined that where one party effectively capitulates or surrenders during the course of a proceeding such that the proceedings are brought to an end without the merits of the proceedings being determined, that may, depending upon specific circumstances, qualify as special circumstances warranting an award for costs. The Respondent's submissions acknowledged that an order for costs requires the Appeal Panel to find that special circumstances exist warranting such an award: see s 60 of the NCAT Act.
We interpose here to comment that the D Constructions case did not involve the necessity to find the existence of special circumstances. That was because rules 38 and 38A of the Civil & Administrative Tribunal Rules 2014 (the Rules) applied, because the amount in issue between the parties exceeded $30,000. Nevertheless, the Appeal Panel in that case made statements of principle concerning the awarding of costs where the Appellant effectively withdraws the appeal and is said to have surrendered or capitulated. Paragraphs 17 to 35 of the D Constructions decision set out principles and reasoning which are relevant to determination of the Respondent's application. Those paragraphs state: 17 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. 18 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. 19 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. 20 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]. 21 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." 22 Accordingly, it is not necessary nor appropriate for us to try to discern a clear hypothetical winner in this case. 23 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. 24 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." 25 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]. 26 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. 27 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). 28 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. 29 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. 30 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. 31 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. 32 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. 33 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. 34 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. 35 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."
The Respondent also relied upon the Appeal Panel decision in Shoal Bay Development Pty Ltd v Community Association DP 270468 [2020] NSWCATAP 115 where the Appeal Panel held that the "main consideration" must be s 60 of the NCAT Act and the consideration of whether "special circumstances" exist under that section. The Appeal Panel agreed with the Tribunal at first instance that the withdrawal of the application at a late stage was out of the ordinary and constituted a special circumstance.
The Respondent further submitted that the late withdrawal of the appeal is highly suggestive of the special circumstances required to ground an order for costs against the Appellants. The Respondent relied upon the Appeal Panel decision in Rodny v Stricke [2020] NSWCATAP 20. In that decision the Appeal Panel held that the withdrawal of an application which has been the subject of lengthy preparation and the incurring of significant costs shortly before the hearing is a matter that constitutes special circumstances warranting an order for costs (see [112]).
The Respondent's submissions place emphasis upon s 60(3)(a). It is convenient to set out the whole of the provisions of s 60, which provides as follows: 60 Costs (1) Each party to proceedings in the Tribunal is to pay the party's own costs. (2) The Tribunal may award costs in relation to proceedings before it only if it is satisfied that there are special circumstances warranting an award of costs. (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. (4) If costs are to be awarded by the Tribunal, the Tribunal may-- (a) determine by whom and to what extent costs are to be paid, and (b) order costs to be assessed on the basis set out in the legal costs legislation (as defined in section 3A of the Legal Profession Uniform Law Application Act 2014) or on any other basis. (5) In this section-- "costs" includes-- (a) the costs of, or incidental to, proceedings in the Tribunal, and (b) the costs of, or incidental to, the proceedings giving rise to the application or appeal, as well as the costs of or incidental to the application or appeal.
The Respondent submitted that the Appellant unnecessarily disadvantaged the Respondent in that the Appellant put the Respondent to the expense of briefing counsel to prepare for the appeal (including providing written submissions) and attend the appeal. The late withdrawal including the ambiguity in the Appellant's communication indicating that he wished to withdraw the application put the Respondent to further expense.
In conclusion, the Respondent submitted that the circumstances of the withdrawal constitute special circumstances under s 60(3)(a) and that the conduct of the Appellant "would support a finding that such an award of costs ought to be made on an indemnity basis: Mendonca v Tonna [2017] NSWCATAP 176. The submissions did not elaborate upon precisely what was relied upon from the Mendonca decision. That case described various bases for the awarding of indemnity costs. The Respondent's submissions do not identify any particular basis, but it is assumed that the Respondent's submission is to the effect that the Appellant's conduct unnecessarily disadvantaged the Respondent by the lodgment of the appeal and its subsequent late withdrawal.
As is stated in the Mendonca case indemnity costs are awarded only in limited circumstances [59]. The discretion to do so must be the subject of careful reasoning [59] and caution should be exercised in making such an award.
Finally, the Respondent's submissions state that the Appellant should also pay an amount of $802.10 for costs incurred in erecting and maintaining the temporary fence. The evidence provided for that amount was contained in an affidavit of the Respondent sworn 13 March 2023.

Appellants Submissions

The Appellant's submissions take the form of an affidavit affirmed on 22 March 2023 sworn by the Appellant and a statutory declaration of the Appellant's solicitor also dated 22 March 2023.
The affidavit of the Appellant makes wide-ranging complaints concerning the conduct of the hearing of the appeal. Those complaints have not been the subject of any evidence (for example, the provision of a transcript), and accordingly it is not appropriate to consider that they have merit. Further, the Appellant has made a statement to the effect that at the directions hearing on 28 October 2022 the relevant member made stay orders "on the basis that the Respondent is not and will not be legally represented". This would appear to be directly contrary to the record of the orders made on that occasion (referred to earlier).
Part of the submissions put forward by the Appellant in opposition to the Respondent's application for costs concerns the conduct of the proceedings at first instance. It is not appropriate for the circumstances of the conduct of the proceedings at first instance to be considered. This is because the Appellant has withdrawn the appeal.
The statutory declaration of the Appellant's solicitor stated that he was of the understanding that the "paramount issue for the hearing, at an appeal level, was to give grounds to the appeal and allow fresh evidence or additional evidence to be heard by the Tribunal at first instance". The basis for that belief is not stated and nor is there an adequate description given in the submissions as to why it could be thought that the Appeal Panel might make an order for the proceedings at first instance to be reheard with fresh or additional evidence.
The solicitor's further submissions were to the effect that the "Appeal Panel's member's behaviour negatively impacted the Appellant's ability to be heard fairly and objectively". That is a serious accusation and one that should not generally be made without the provision of supporting evidence. None has been provided.
The solicitor's further submission was that the Respondent had not discharged the onus that a special circumstance exists.

Respondent's Costs Submissions in Reply

The Respondent's submissions in reply were to the effect that the Appellant acted unreasonably by having the appeal hearing adjourned part heard for a recusal application and then abandoning that application and withdrawing the appeal.

Consideration

The provisions of s 60 of the NCAT Act have been set out earlier in this decision. It is clear that the general position in the Tribunal, is that each party should pay their own costs. However, where there are special circumstances warranting an award of costs, the Tribunal may make such an award. Section 60 sets out, on a non-exclusive basis, circumstances that may be relevant to finding the existence of special circumstances. Even if there are special circumstances, the Tribunal must also find that such circumstances warrant an award for costs. This is apparent from the wording of s 60(2). The meaning of the term "special circumstances" has been determined by many appeal panel decisions to mean circumstances that are out of the ordinary but not necessarily extraordinary or exceptional.
In this case the Respondent had leave to be represented from 28 October 2022 and has obviously incurred expense, up to and including the hearing on 8 March 2023 when the proceedings were formally dismissed and the stay lifted. Further costs have presumably been incurred in making this costs application.
The purpose of an award for costs is not to punish the losing party (in this case, the Appellant) but rather to compensate the successful party (in this case the Respondent) for the costs and expense it or they have incurred. In this case the Respondent, relying upon section 60(3)(a), has submitted that the conduct of the Appellant unnecessarily disadvantaged the Respondent.
In this case the question is whether the conduct of the Appellant on and after 20th February 2023 constituted unnecessary disadvantage. That conduct was the Appellant's application for an adjournment (which was granted) and the foreshadowed application for the Appeal Panel to recuse itself. Within four days thereafter, the Appellant elected to withdraw the application but in terms which were ambiguous. I am of the opinion that the Respondent was justified in seeking clarification as to whether the withdrawal was a withdrawal only of the recusal application or of the substantive appeal. The Respondent was entitled to make enquiry of the Appellant as to what was being withdrawn, but the Respondent was not favoured with a response from the Appellant or its representative.
Section 36 of the NCAT Act is in the following terms: 36 GUIDING PRINCIPLE TO BE APPLIED TO PRACTICE AND PROCEDURE (1) The "guiding principle" for this Act and the procedural rules, in their application to proceedings in the Tribunal, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. (2) The Tribunal must seek to give effect to the guiding principle when it-- (a) exercises any power given to it by this Act or the procedural rules, or (b) interprets any provision of this Act or the procedural rules. (3) Each of the following persons is under a duty to co-operate with the Tribunal to give effect to the guiding principle and, for that purpose, to participate in the processes of the Tribunal and to comply with directions and orders of the Tribunal-- (a) a party to proceedings in the Tribunal, (b) an Australian legal practitioner or other person who is representing a party in proceedings in the Tribunal. (4) In addition, the practice and procedure of the Tribunal should be implemented so as to facilitate the resolution of the issues between the parties in such a way that the cost to the parties and the Tribunal is proportionate to the importance and complexity of the subject-matter of the proceedings. (5) However, nothing in this section requires or permits the Tribunal to exercise any functions that are conferred or imposed on it under enabling legislation in a manner that is inconsistent with the objects or principles for which that legislation provides in relation to the exercise of those functions.
In my view, it was incumbent upon the Appellant or his representative to respond punctually to the Respondent's request. This is a requirement of the duty described in s36(3) set out above. A response to the effect that the Appellant intended to withdraw the whole of the appeal may then have led to the possibility of the parties reaching some consent orders, including an order for the lifting of the stay.
The decision of the Appellant to withdraw both the recusal application and the substantive appeal after the adjourned hearing and before the date of the proposed next hearing date (31 March 2023) can be fairly characterised as capitulation by the Appellant. The consequence has been that the Respondent has been unnecessarily put to expense in defending the appeal and, during the course of the appeal, in spending money on a temporary fence.
The Appellant in his affidavit dated 22 March 2023 stated that he has withdrawn the appeal "not because I want to but because of the conduct of the appeal and by the Appeal Panel members". That accusation, if supported by persuasive evidence, could have led to a successful recusal application and the resumption of the appeal before a differently constituted Appeal Panel. In the absence of any evidence and having regard to the decision to withdraw made only four days after the hearing, I am forced to conclude that the recusal application could not have been supported by evidence.
The withdrawal of the recusal application and the substantive appeal following a part-hearing is both unusual and, in my view, the Respondent has been unnecessarily disadvantaged in the sense of having been put to expense in both defending the appeal and taking steps to ensure that final orders were made for the lifting of the stay.
These circumstances are, in my opinion, of a kind which may be fairly construed as special circumstances warranting an order for costs of the appeal.
The Respondent sought indemnity costs but provided no basis for seeking such an order. In my view, there is no clear or obvious reason why indemnity costs should be ordered and were I inclined to do so, the result may be unfair to the Appellant who has not had an opportunity to consider a claim for indemnity costs supported by an appropriately particularised submission. The application for indemnity costs is rejected.
Finally, the Respondent seeks an order for payment of the sum $802.10 for costs incurred in erecting and maintaining the temporary fence. Such claim was foreshadowed by the nature of the order made by the Tribunal on 28 October 2022. It is reasonable to infer that the cost of the temporary fence was occasioned by the Appellant's successful application for an interim stay of the order permitting the Respondent to construct a dividing fence. Had there been no stay there would have been no need for a temporary fence. The Appellant has not made any submission opposing such an order.
A question arises as to whether the Tribunal has jurisdiction to make an order for payment of such costs. The DF Act does not appear to address the issue. Neither party did so. The DF Act provides that, generally, adjoining owners are liable to contribute in equal proportions to the carrying out of fencing work in respect of a dividing fence - s 7. Section 8 provides that, despite s 7, the adjoining owner is liable for up to the whole of the cost of the fencing work required to restore a dividing fence that has been destroyed, damaged or destroyed by a negligent or deliberate act of the owner or of a person who has entered the land concerned with the express or implied consent of the owner. Neither party provided evidence in connection with the application for the order which would have addressed the question of whether s 8 is engaged in the circumstances of this case. Section 9 deals with circumstances where a dividing fence has been damaged or destroyed and, in the circumstances, there is a need for urgent fencing work. Again, the provisions of s 9 have not been addressed by the parties.
Section 58 of the NCAT Act provides that the powers of the Tribunal include a power to make orders subject to such conditions (including exemptions) as the Tribunal specifies when making the order or other decision. It was possible for the Tribunal to grant the stay that was made on 28 October 2022 on the condition that the Respondent had leave to construct a temporary fence and on the further condition that the party finally paying the cost of that temporary fence would be determined on the basis that if the Appellant succeeded in his appeal, the Respondent would pay for the temporary fence and if the appeal was dismissed, then the Appellant would pay the cost of the temporary fence. Although the order made by the Tribunal was not expressed in terms expressly attracting the provisions of s 58, in substance that was the effect of that order. Accordingly, I am satisfied that the Tribunal had power to impose the conditions that I have described, including a condition that the party who was unsuccessful in the appeal would pay the cost of the temporary fence.
In the circumstances, the Respondent is entitled to the order for payment of $802.10.
Having regard to the reasons set out above, the following orders are made: 1. The Appellant is to pay the Respondent's costs of the appeal on the ordinary basis from 28 October 2022 in an amount agreed between the parties or, if not agreed, as assessed. 2. The Appellant is to pay the Respondent the sum of $802.10 within 14 days of the date of these orders.

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. 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 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: 06 July 2023

Administrative Tribunal Rules 2014(NSW)

Administrative Tribunal Act 2013(NSW)

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