This is an internal appeal under s 80(2) of the Civil and Administrative Tribunal Act 2013 (the NCAT Act) against a decision made in the Consumer and Commercial Division of the Tribunal on 5 August 2021.
The issue raised in the appeal is whether a costs order made in favour of the appellants against the respondent should be varied in two respects.
For the reasons set out below, we have decided to allow the appeal and vary the costs order.
[2]
Background
In this appeal, the appellants were the applicants at first instance, a building company (North Shore Homes Pty Ltd) was the first respondent, and a director of that company (Sam Nazha) was added as the second respondent. It is convenient to refer to those parties as the appellants, the company, and the respondent. The company is not a party to the appeal.
On 16 March 2018 the appellants lodged an application (HB 18/12924) against the company, alleging defective residential building work. The application against the company was a building claim brought under the Home Building Act 1989 (the HB Act). On 16 September 2019, that application was amended to add a claim against the respondent under Australian Consumer Law (ACL (NSW)). For completeness, there was also a cross-application by the company (HB 19/02877) which did not progress to a hearing. The appellants' claim against the company and their claim against the respondent were heard and decided on different dates.
On 7 December 2021, the Tribunal ordered the company to pay the appellants $481,445 plus costs. The company subsequently went into liquidation. The appellants made a Home Building Compensation Fund (HBCF) claim, in relation to which they received an insurance payout of $340,000, which amount was inclusive of costs.
The appellants' claim against the respondent was heard on 2 February 2021. The Tribunal made an order against the respondent in the sum of $221,344 on 8 June 2021.
In written submissions on costs dated 21 June 2021, the costs order sought by the appellants was:
That Sami Nazha pay the costs of the homeowners in HB 18/12924 & HB 19/02877 as agreed or assessed minus the sum of $79,899.
In other words, the appellant sought an order that the respondent pay the costs not only of their claim against him but also the costs of their claim against the company and the company's claim against them, with a deduction of $79,899 to allow for a portion of the proceeds of the HBCF payout.
On 5 August 2021 the home owners obtained an order for costs against the respondent in the following terms:
Sami Nazha must pay Aaron Gaskell and Serena Bourke's costs of and incidental to their case against him in HB 18/12924 on the ordinary basis less $79,899, such costs if not agreed to be assessed in accordance with the Legal Profession Uniform Law Application Act 2014.
In its reasons for decision at [22] the Tribunal noted that the appellants "elected to apply the insurance payout of $340,000.00 by directing $260,101 to the rectification of defects and $79,899.00 towards the payment of legal costs". It appears that the amount of $79,899 resulted from deducting the amount by which the appellants' claim against the company ($481,445) exceeded their claim against the respondent ($221,344), namely $260,101, from the insurance payout of $340,000 to give $79,899 as the imputed amount of the insurance payout referable to costs.
Accordingly, the appeal thus raises two issues. First, whether the costs order made against the respondent should have been confined to the appellants' case against the respondent. Secondly, whether the $79,899 deduction should have been applied to the costs order against the respondent.
[3]
Scope and nature of internal appeals
Internal appeals may be made as of right on a question of law, and otherwise with leave of the Appeal Panel: s 80(2) NCAT Act.
In Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 the Appeal Panel set out at [13] a non-exclusive list of questions of law:
1. Whether there has been a failure to provide proper reasons;
2. Whether the Tribunal identified the wrong issue or asked the wrong question;
3. Whether a wrong principle of law had been applied;
4. Whether there was a failure to afford procedural fairness;
5. Whether the Tribunal failed to take into account relevant (i.e., mandatory) considerations;
6. Whether the Tribunal took into account an irrelevant consideration;
7. Whether there was no evidence to support a finding of fact; and
8. Whether the decision is so unreasonable that no reasonable decision-maker would make it.
[4]
Submissions
In deciding the appeal, we have had regard to the following:
1. The Notice of Appeal lodged on 07 September 2021;
2. The Reply to Appeal lodged on 29 September 2021;
3. The appellants' outline written submissions dated 27 October 2021 and the oral submissions made during the hearing of the appeal;
4. The appellants' costs submissions at first instance, which were included in the appellants' bundle of documents;
5. The procedural directions made at callover; and
6. The Tribunal's reasons for decision, both in respect of the substantive claims against the respondent and in respect of the costs application.
The respondent did not file any submissions in response to the appeal in accordance with the procedural directions made at callover and there was no appearance by the respondent at the appeal hearing. We are satisfied that the respondent was notified of the hearing and that it was appropriate to proceed with the appeal hearing in the respondent's absence.
The appellants' written submissions suggested the company went into liquidation shortly after orders were made against it on 7 December 2020 and that the appellants had incurred costs of $325,000.
The respondent's Reply to Appeal contain the following contention:
The Tribunal did not err in the matters raised within that ground as stated. The relevant judgement is well ground in legal principle where parties have mixed success: see the case of Murphy v Lewkovitz; Lewkovitz v Murphy (No 2) [2021] NSWDC 516.
It is convenient here to note that Murphy v Lewkovitz; Lewkovitz v Murphy (No 2) was a case in which the parties had mixed success. This is unlike the present case where the appellant succeeded on both the claim against the company and the claim against the respondent.
[5]
Notice of Appeal
The Notice of Appeal was lodged on 2 September 2021, which is within the 28 day time period specified in cl 25(4) of the Civil and Administrative Tribunal Rules 2014 (the Rules).
[6]
Grounds of Appeal
The grounds of appeal specified in the Notice of Appeal are:
The Tribunal erred in treating the costs application against the Second Respondent as a proportionate claim rather than a joint and several claim.
Alternatively, the Tribunal erred in treating the costs application as a proportionate claim but made a costs order which reflected a joint and several claim, in that the Tribunal deducted the costs already recovered from the other party.
Alternatively, in making the costs award on a joint and several basis, the Tribunal erred in restricting any further costs payable to the Applicants, to costs in respect of the Second Respondent only.
The orders sought on the appeal are as follows:
1. Within 7 days, the Second Respondent must pay the Applicants' costs in HB 18/12924, as agreed or assessed (minus the sum of $79,899.00), or in the alternative;
2. Within 7 days, the must pay the Applicants' costs of an incidental to their claim against him in HB 19/12924, as agreed or assessed Second Respondent.
It is also contended that the Tribunal's decision was not fair and equitable:
In the alternative, the costs awarded to the Applicants was not fair and equitable as it deducted a fixed sum of $79,899 being costs already received from a different party - the First Respondent.
[7]
Consideration
On 5 August 2021, when the appellants obtained a costs order against the respondent, they already had a costs order against the company in respect of the appellants' claim against that company, being the costs order made on 7 December 2021.
The claim against the respondent was for misleading and deceptive conduct, contrary to the provisions of the ACL (NSW), while the claim against the company was based on breaches of the statutory warranties set out in the HB Act. Although both claims related to the same premises, they involved different causes of action and they were dealt with at separate hearings. There was no basis for obtaining an order against the respondent in relation to the claim against the company based on the HB Act.
As a result, there was no basis for obtaining a costs order against the respondent which included costs referable to the claim against the company or the company's claim against the appellants. By the time the Tribunal dealt with an application for costs in relation to the claim against the respondent, it had already made an order for costs against the company. It is reasonably clear from the oral submissions made by the appellants' solicitor, Mr Kaine, during the appeal hearing that the motivation for seeking what was described as a "joint and several costs order" was that the company had gone into liquidation and the appellants had incurred more costs than notionally provided for in the insurance payout. This is not an appropriate basis for the costs order the appellants sought from the Tribunal. In our view the contention that there should have been a joint and several costs order against the respondent was correctly rejected when the costs order against the respondent was made on 5 August 2021.
However, the insurance payout obtained by the appellants related to the claim against the company and not to the claim against the respondent. Just as there was no basis for attributing the burden of the costs of the claim against the company on the respondent, there was no basis for providing the respondent with the benefit of the insurance payout obtained by the appellants in respect of their claim against the company.
It is understandable that the costs order of 5 August 2021 was made in that form as it correctly confined the costs order sought to the claim against the respondent. However, in carrying over the deduction of $79,899 the respondent was given the benefit of a deduction to which he was not entitled.
The appellant sought, in the alternative, to have the deduction removed on the ground that it was not fair and equitable, which is a basis that would require leave. However, we are satisfied that the inclusion of the deduction was an error of law by reason of the Tribunal taking into account an irrelevant consideration, namely the proceeds of an insurance policy which was not relevant to the appellants' claim against the respondent.
We have accordingly allowed the appeal and varied the Tribunal's order.
It remains to consider the costs of the appeal. We conclude that s 60 of the NCAT Act applies to those costs: see RBV Builders Pty Ltd v Chedra (No 2) [2021] NSWCATAP 393 at [24] to [42]. This means that costs can only be awarded if special circumstances are established. There is nothing in the material provided on the appeal to suggest that special circumstances warrant an order for costs in this case. The parties are therefore to pay their own costs of the appeal. We have made orders that will apply in the event that an application for a different costs order is made.
[8]
Conclusion
For the reasons set out above, we make the following orders:
1. Appeal allowed.
2. Order 2 made on 5 August 2021 in proceedings HB 18/12924 is varied by deleting the words "less $79,899" so that it reads:
"Sami Nazha must pay Aaron Gaskell's and Serena Bourke's costs of and incidental to their case against him in HB 18/12924 on the ordinary basis, such costs if not agreed to be assessed in accordance with the Legal Profession Uniform Law Application Act 2014."
1. The parties are to pay their own costs of the appeal.
2. If either party seeks a different costs order, the following orders apply:
1. Order 3 above ceases to have effect.
2. Any application for a different costs order is to be filed and served, supported by evidence and submissions not exceeding five pages in length, within 14 days of the date of these orders.
3. Any response to an application for a different costs order is to be filed and serve, with evidence and submissions not exceeding five pages in length, within 14 days thereafter.
4. Any material in reply is to be filed and served within 7 days thereafter.
[9]
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: 15 December 2021