This is an application for costs by the respondent, Mr Podgoetsky, in respect of an internal appeal brought by the appellant, Global Abode Pty Ltd (Global Abode) which was dismissed on 12 January 2021 after the appeal was withdrawn by Global Abode. Mr Podgoetsky consented to the withdrawal of the appeal but applied for an order for costs in the sum of $2,626.80.
[2]
Procedural History
In proceedings HB19/22752 filed in May 2019, Global Abode claimed $108,085.55 in respect of works and alleged approved variations under a home building contract between it and the homeowner, Mr Podgoetsky. In proceedings HB 19 /39527 Mr Podgoetsky claimed $94,844.94 from Global Abode in respect of alleged defective works performed under the contract.
On 16 November 2020, the Tribunal Member dismissed each application. The Tribunal Member noted a provisional view that there should be no order as to costs and made orders permitting any party to challenge that provisional view and apply for costs (Principal Decision).
Mr Podgoetsky subsequently applied to the Tribunal for an order for costs. Submissions were exchanged between the parties in relation to the issue of costs and, on 6 January 2021, the Tribunal decided that each party was to bear its or his own costs (Costs Decision).
Global Abode lodged a Notice of Appeal on 14 December 2020, which was within the permitted 28 day period to lodge an appeal following the Principal Decision.
In its Notice of Appeal, Global Abode challenged the order made by the Tribunal Member that proceedings HB 19/22752 be dismissed. The Notice of Appeal listed four grounds of appeal in relation to the Principal Decision. Global Abode sought leave to appeal, contending that the Principal Decision was not fair and equitable and was against the weight of evidence. Global Abode also sought an order that "In the event that any costs order be made, that the costs order be set aside".
The Notice of Appeal was listed for directions on 12 January 2021. On that date, Global Abode notified its intention to withdraw the appeal. The Appeal Panel dismissed the appeal and made directions for the exchange of evidence and written submissions in relation to Mr Podgoetsky's application for costs. The parties did not oppose the issue of costs being determined on the basis of the written submissions and evidence provided.
[3]
Evidence and Submissions
In support of his application for costs, Mr Podgoetsky provided a copy of a tax invoice from his solicitors dated 12 January 2021 in the sum of $2,626.80. The narration in the tax invoice referred to attendances to read the appeal documents and consider the issues, meet with the client, draft a Reply to Appeal and draft and review emails including emails in relation to the withdrawal of the appeal. No Reply to Appeal was in fact lodged. The tax invoice appears to be based on legal work charged by a solicitor at an hourly rate of $520 an hour, plus GST, as well as legal work charged by a director of the solicitor company at an hourly rate of $620 an hour, plus GST.
Mr Podgoetsky submitted, correctly, that Rule 38 of the Civil and Administrative Tribunal Rules 2014 (NSW) (NCAT Rules) permitted the Tribunal to award costs in the Consumer and Commercial Division in the absence of any special circumstances if the amount claimed or in dispute in the proceeding is more than $30,000. The amounts claimed in the proceedings before the Tribunal Member were for more than $30,000.
Mr Podgoetsky submitted that the Appeal Panel should make a fixed sum costs order in the amount of $2,626 80. He referred to the decision of the Appeal Panel in 203 Castlereagh Street Pty Ltd v Skybloo Holdings Pty Ltd [2017] NSWCATAP 29, which identified principles concerning when a fixed sum costs order might be made. In that case, the Appeal Panel noted that a fixed sum costs order was a departure from the usual process by which costs are assessed in accordance with the statutory procedures. It was held that a fixed sum costs order may be appropriate where:
1. the sum of costs in question is relatively modest;
2. the party obliged to pay the costs would not be able to meet a liability of the order likely to result from the assessment;
3. the assessment of costs would be protracted and expensive; and/or
4. the case was complex.
The Appeal Panel in Skybloo also held that the power to make a fixed sum costs order should only be exercised when the Tribunal considers that it can do so fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available. The Appeal Panel held, at [41], that the types of supporting materials usually required include:
1. the timing and nature of costs incurred, including details of the work done, the hours worked and the hourly rates actually charged;
2. the rates at which other lawyers charge; and
3. the amount likely to be recoverable on assessment if that took place, which might be established by evidence from a costs assessor.
Mr Podgoetsky submitted that the Appeal Panel should make a fixed sum costs order in this case because, among other things, the amount claimed was relatively small, the costs incurred were reasonable and justifiable, and an assessment of costs would be cumbersome and expensive in comparison to the amount claimed.
Global Abode submitted that at the time the appeal was commenced, the Costs Decision was yet to be determined and Mr Podgoetsky was asserting an entitlement to significant legal costs. It was submitted that an appeal was commenced to preserve Global Abode's right of appeal in relation to the decision at first instance and in respect of the future costs determination. Global Abode submitted that the decision to withdraw the appeal was made at the earliest opportunity after receiving the Costs Decision.
Global Abode referred to section 60 of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act) and submitted that there were no special circumstances warranting an order for costs as identified in that section.
Global Abode submitted that the appeal was not frivolous or vexatious. It submitted that there were reasonable prospects of setting aside the Principal Decision if the appeal were to proceed but that a commercial view was taken to withdraw the appeal in light of the Costs Decision.
Global Abode did not engage with Mr Podgoetsky's submission that section 60 of the NCAT Act did not apply by virtue of the NCAT Rules.
Global Abode opposed the making of a fixed sum costs order. It submitted that Mr Podgoetsky had not provided a copy of any costs agreement or a detailed description of the work undertaken. It submitted that the amounts charged were excessive and that the Appeal Panel did not have sufficient information to determine whether or not the professional fees charged were fair, reasonable or properly incurred.
[4]
Consideration
Rule 38A (1) of the NCAT Rules, relevantly, applies to an internal appeal lodged after 1 January 2016, if the provisions that applied to the determination of costs in the proceedings of the Tribunal at first instance differed from those set out in section 60 of the NCAT Act. Rule 38A (2) provides that, despite section 60 of the NCAT Act, the Appeal Panel for an internal appeal to which rule 38A applies must apply the first instance cost provisions when deciding whether to award costs in relation to the appeal. That means that if the amount in dispute in the appeal exceeds $30,000.00, where that was also the case in the proceedings below, there is no need for us to find that there are special circumstances warranting an order for costs.
Rule 38 of the NCAT rules applied to the determination of costs in the first instance proceedings in the Consumer and Commercial Division, because the amount claimed was more than $30,000. Rule 38(2) provides that, despite s 60 of the NCAT Act, the Tribunal may award costs in proceedings to which rule 38 applies even in the absence of special circumstances.
In this case, the combined effect of rule 38 and 38A of the NCAT Rules is that, despite section 60 of the NCAT Act, the Appeal Panel may award costs in relation to the appeal even in the absence of special circumstances.
In D Constructions Pty Ltd V Walsh [2020] NSWCATAP 91, the Appeal Panel identified the principles which apply in relation to costs in an internal appeal from a decision in the Consumer and Commercial Division when s 60 of the NCAT Act is inapplicable. We gratefully adopt the principles there set out. In summary, in these circumstances, common law principles apply. When there has been a hearing on the merits, the usual common law principle is that costs follow the event. If there has been no hearing on the merits, it will rarely be appropriate to determine hypothetically who would probably have won a case. If there has been no hearing on the merits because the parties reach a settlement, then, if the parties have acted reasonably, the proper exercise of the costs discretion will usually mean that no order as to costs will be made. If there has been no hearing on the merits because one party in effect capitulates or surrenders to the other, the usual order is that the capitulating or surrendering party pays the costs. Capitulation can take different forms, but withdrawing proceedings is sometimes a form of capitulation.
In this case, both parties were legally represented. There was no settlement of the proceeding. It is not appropriate to determine hypothetically who would probably have won the appeal. Global Abode made a tactical decision to lodge a Notice of Appeal and subsequently made a further tactical decision to withdraw it. The Notice of Appeal related to the Principal Decision as well as the issue of costs. These circumstances are more akin to a capitulation by Global Abode and we consider the proper exercise of our discretion is to make an order for costs in favour of Mr Podgoetsky.
We are, however, not persuaded that it is appropriate to make a fixed sum costs order. Although the sum of costs in question is relatively modest, we consider that we are not in a position to act fairly between the parties in making a fixed sum costs order on the materials which have been made available by Mr Podgoetsky. We are not able to judge if the amount claimed is reasonable in the circumstances. In particular, there is no evidence of the kind adverted to in Skybloo of the rates which other lawyers charge for work of this nature or the amount likely to be recoverable on assessment if that took place.
In these circumstances we consider that the appropriate order is that Global Abode is to pay Mr Podgoetsky's costs of the appeal, as agreed or assessed in accordance with s 60(4) of the NCAT Act.
[5]
Order
1. The appellant is to pay the respondent's costs of the appeal on the ordinary basis as agreed or, if not agreed, as 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).
[6]
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: 26 March 2021