GPM Constructions Pty Limited v Baker

What provisions apply to the costs application?

1. The general rule in relation to costs in the Tribunal is that unless special circumstances are established, the parties pay their own costs: s 60(1) of the NCAT Act.
2. However, r 38 of the Civil and Administrative Tribunal Rules 2014 (the Rules) modifies the application of s 60 such that in proceedings before the Consumer and Commercial Division the Tribunal may award costs in the absence of special circumstances warranting such an award if the amount claimed or in dispute in the proceedings is more than $30,000. Rule 38A modifies the position in respect of appeals by directing that the Appeal Panel must apply the first instance costs provisions when deciding whether to award costs in relation to the internal appeal.
3. In Allen v TriCare (Hastings) Ltd [2017] NSWCATAP 25 the Appeal Panel found at [57]: Adapting these principles to the circumstances of the present appeals and having regard to the specific wording of r 38, it appears to us that in applying r 38(2)(b): The determinative factor is the amount in dispute in each appeal, not the amount in dispute in the proceedings at first instance; The phrase "in dispute" is to be construed as meaning truly in dispute or at issue or, inversely, not unrealistically in dispute; Whether "the amount … in dispute" in each appeal is more than $30,000 depends on whether there is a realistic prospect that in each appeal the wealth of the appealing party would be changed by more than $30,000 or, put another way, whether the right claimed by the appealing party, but denied by the decision at first instance, prejudices that party to an amount in excess of $30,000;
4. The amount in dispute on appeal was more than $30,000 as GPM sought on appeal to "prejudice" Ms Baker by the relief sought by an amount in excess of $30,000. Accordingly, by operation of r 38 (2)(b) costs may be awarded in the absence of special circumstances being shown.

Should GPM be ordered to pay Ms Baker's costs of the appeal?

1. Rule 38(2)(b) gives us a wide discretion to make an order for costs. It does not specify the factors we must take into account in exercising the discretion, although the discretion must be exercised judicially. In Thompson v Chapman [2016] NSWCATAP 6, the Appeal Panel discussed the exercise of the discretion, stating at [69] to [72]: 69. The starting point in exercising such discretion is that the "usual order for costs" is that a successful party should be entitled to an order for costs in their favour: see Latoudis v Casey[1990] 170 CLR 534 per Mason CJ at 554 and Oshlack v Richmond River Council per McHugh J at 97. 70. The reason for such an order is that it is appropriate for the party who incurred costs caused by the other party in litigation to be reimbursed. Further, an award of costs is by way of an indemnity to the successful party and not as punishment of the unsuccessful party: see Latoudis v Casey per Mason CJ at 543 and McHugh J at 567 and in Oshlack v Richmond River Council per Brennan CJ at 75. 71. Where there is a general discretion for costs there is no absolute rule that, absent disentitling conduct, a successful party is to be compensated by the unsuccessful party nor is there any rule that a successful party might not be ordered to bear the costs of an unsuccessful party: see Oshlack v Richmond River Council per Gaudron and Gummo JJ at 88 and Kirby J at 121 - 123. 72. The factors to be considered in awarding costs in a particular case are not to be confined as to do so would constrain the general discretion. However it is clear from the authorities that factors that might influence whether the usual order for costs should apply and, if so, to what extent include: (1) Whether, by reason of the relative success of the parties on different issues and the time taken to determine those that an order for costs based on issues should be made: see for example Bostick Australia Pty Ltd v Liddiard (No 2) [2009] NSWSCA 304; and (2) Whether, by reason of the nature of the proceedings the usual rule should otherwise be displaced in whole or in part: see Oshlack v Richmond River Council per Gaudron and Gummo JJ at 41 - 44.
2. Ms Baker was successful on the appeal. The appeal was dismissed. We see no reason why the usual rule in relation to costs should be displaced either in whole or in part. Accordingly, we find that the discretion to make an order for costs should be exercised in favour of the appellant.

On what basis should the costs order be made?

1. There is no dispute in this appeal that the power to award costs includes a power to make an order that they be assessed and paid on an indemnity basis. Rather, the issue is whether a special order for costs should be made and, if so, from when and in respect of what costs.
2. Ms Baker seeks an order that costs be paid on an indemnity basis. Ms Baker relies on two offers of settlement made by her through her solicitors' letters dated 23 November 2017 to GPM's solicitors. The first offer related to the substantive appeal proceedings (the appeal offer) and the second offer related to the stay application (the stay offer). GPM did not accept the appeal offer and responded with a counter-offer dated 24 November 2017 (the counter-offer). GPM did not respond to the stay offer.
3. Whether the failure to accept an offer of settlement enlivens the jurisdiction to award indemnity costs or not was recently considered by the Appeal Panel in Mison v Bennett Property (NSW) Pty Ltd [2018] NSWCATAP 138 as follows: 30. There is no presumption that a party who rejects an offer of compromise and does not obtain an outcome more favourable than the offer will be ordered to pay indemnity costs from the date of the offer: Leichhardt Municipal Council v Green [2004] NSWCA 341 at [19] (Santow JA, Stein AJA agreeing). In Miwa Pty Ltd v Siantan Properties Pte Ltd (No. 2) [2011] NSWCA 344 at [8], Basten JA identified two questions relevant to whether costs should be awarded on an indemnity basis. They are whether: 1. there was a genuine offer of compromise; and 2. it was unreasonable for the offeree not to accept it. 31. In relation to the first issue, for an offer of compromise to be valid, an offer must involve "a real and genuine element of compromise": see, for example, Prosperity Advisers Pty Ltd v Secure Enterprises Pty Ltd [2012] NSWCA 192 at [109] (Prosperity Advisers); Miwa Pty Ltd v SiantanProperties Pte Ltd (No 2) [2011] NSWCA 344 at [9]; Barakat v Bazdarova [2012] NSWCA 140 at [51(e)]. 32. Whether a settlement offer is "real" or "genuine" does not depend on the intentions of the party making the offer. As stated by Giles J in Hobartville Stud Pty Ltd v Union Insurance Co Ltd(1991) 25 NSWLR 358 at 368: Compromise connotes that a party gives something away. A plaintiff with a strong case, or a plaintiff with a firm belief in the strength of its case, is perfectly entitled to discount its claim by only a dollar, but it does not in any real sense give anything away, and I do not think that it can claim to have placed itself in a more favourable position in relation to costs unless it does so. 33. Further, an offer of compromise must not be derisory, requiring capitulation by the party to whom it is addressed: Prosperity Advisers at [109]. In view of this, an offer to accept payment of the claim in full would not usually qualify as an offer of compromise: Richardson v Hough[1999] NSWSC 448.
4. In Miwa Pty Ltd v Siantan Properties Pte Ltd (No. 2) [2011] NSWCA 344, Basten JA (with whom McColl and Campbell JJA agreed) adopted the non-exclusive list of factors identified by the Victorian Court of Appeal in Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435 at [25]: 1. the stage of the proceeding at which the offer was received; 2. the time allowed to the offeree to consider the offer; 3. the extent of the compromise offered; 4. the offeree's prospects of success, assessed as at the date of the offer; 5. the clarity with which the terms of the offer were expressed; 6. whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejecting it.

The Appeal Offer

1. The substance of the offer from Ms Baker made on 23 November 2017 was that she offered to settle the appeal on the following terms: 1. the appeal is dismissed; 2. no order as to costs, with the intent that each party bear its own costs of the appeal; and 3. the respondent agrees to accept the amount of $205,000 in full and final settlement of the order set out in paragraph 202 of the Tribunal's Reasons for Decision dated 16 October 2017.
2. The offer stated that it was open for acceptance until 12.00 noon on 27 November 2017. The appeal offer advised that the respondent estimated that her costs incurred to date were in excess of $8,000 excluding GST.
3. The amount of the money order set out at [202] of the Decision at first instance dated 16 October 2017 was $210,634.32. There was no offer to compromise costs of the proceedings at first instance. As such, the compromise offered in respect of the proceedings at first instance was only $5,634.32. If one assumes the amount of ordinary costs of the appeal proceedings that would be foregone by Ms Baker if the offer was accepted was in excess of $8,000 the appeal offer involved a monetary compromise which was, according to its terms, at least $13,634.32.
4. In our opinion, when looked at in the context of a compromise in respect of the proceedings at first instance, there was little compromise.
5. Further, while an existing entitlement to costs can be taken into account: see Tati v Stonewall Hotel Pty Ltd (No 2) [2012] NSWCA 124 at [11], in the present case the only offer made was in respect of costs of the appeal for which there was no present entitlement. As such this part of the offer presupposed that the appellant would succeed in the appeal.
6. As to the question of whether the failure to accept the offer was unreasonable, we will deal with some of the relevant factors in turn.
7. We accept that the terms of the offer were expressed with sufficient clarity and the offer also foreshadowed an application for indemnity costs in the event of the appellant rejecting it. The stage of the proceeding at which the offer was received was only shortly after the appeal was submitted.
8. The time allowed to the offeree to consider the offer was fairly short, but in the circumstances, this is not a factor of particular significance. The effect of the offer of compromise was to point out to GPM that, in the view of Ms Baker, there were really little prospects of success and that the appeal should in general not have been instituted given the low prospects of success. In those circumstances, a short time frame should not have necessarily prejudiced GPM and we note no complaint in this regard was made in the counter-offer forwarded by GPM on 24 November 2017.
9. Ultimately, however, in our opinion, we do not think it was unreasonable for GPM not to accept the offer. The offer did not confer a significant benefit on GPM in return for giving up an appeal. The appeal raised many detailed, complex and, in some instances, novel issues which in our opinion were reasonably arguable.
10. The appeal offer estimated the amount of costs of the appeal that would be foregone by Ms Baker if the offer was accepted as exceeding $8,000.There is a difficulty with this part of Ms Baker's offer. The appeal offer simply stated that Ms Baker's costs to date exceeded $8,000. The appeal offer does not disclose an estimate of the likely party/party costs or the basis for the statement that $8,000 for the amount of costs would be the likely amount for party/party costs. Further, having regard to the proximity of the date of the offer to the date the appeal was filed, it is difficult to see how such a substantial sum might otherwise have been incurred in that short time.
11. Consequently, Ms Baker was entitled to view the assertion as to costs foregone in the sum of in excess of $8,000 as essentially unsupported by any documentation or reasoning. The matter had only progressed eight working days since service of the notice of appeal. This is particularly so when one appreciates that the compromise offered in respect of costs of the appeal was made on the assumption the appeal would fail.
12. These matters tend against viewing the appeal offer as offering any significant compromise.
13. Finally, we do not agree with the proposition of Ms Baker that GPM must have appreciated, or properly advised should have appreciated, that the appeal was doomed to fail. As we stated above, it could not be said that the appeal was unarguable. In this regard, we do not accept that, at the time the appeal offer was made the appeal "was hopeless and needed to be 'strapped up'". The issue concerning the operation of s 48MA is illustrative of the point that the appeal was reasonably arguable. The fact the appellant ultimately lost on this issue and was unsuccessful in the appeal does not alter this fact.
14. In these circumstances, it was not unreasonable for it to reject the offer and, as such, no order for indemnity costs should be made on the basis of the appeal offer.

The Stay Offer

1. On 23 November 2017 Ms Baker's solicitors corresponded with GPM and offered to resolve GPM's stay application on the following terms: "(a) the appellant undertakes to conduct the appeal with due dispatch; (b) the respondent undertakes not to carry out the rectification works the subject of the Tribunal's decision of 16 October 2017, pending the outcome of your client's appeal; (c) the appellant pays our client the sum of $210,634.32 on or before 30 November 2017; (d) the respondent undertakes to deposit the above sum into her bank account and not to dissipate the sum pending the outcome of the appeal; (e) the orders set out in paragraphs 203 and 204 of the Tribunal's Decision are stayed pending the outcome of the appeal; (f) the appellant's stay application is otherwise dismissed; (g) the costs of the appellant's stay application are costs in the appellants appeal."
2. The offer was said to be open for acceptance until 12.00 noon on 27 November 2017. GPM's stay application was listed for hearing on 28 November 2017. The stay application was heard by Deputy President Westgarth on 28 November 2018. The Deputy President did not order any stay but rather ordered that "on the undertaking of Ms Baker, money to be received will be kept in a bank account and preserved pending the appeal". No order was made as to costs.
3. The Tribunal enjoys a wide discretion for considering a stay application. In our opinion, it has not been demonstrated that the stay application was not reasonably arguable or that it was unreasonable to refuse the offer in such circumstances. Further, it is not obvious that the outcome of the stay application was more favourable than the stay offer. As is evident from the orders made, the stay application was dismissed on terms that money be held pending determination of the proceedings and that Ms Baker not otherwise carry out rectification work pending a determination of the appeal against the refusal of the Tribunal to make a work order.
4. In such circumstances, we do not propose to make any different order in respect of the stay application, including any order for costs to be paid on an indemnity basis.
5. The appellant says that the appropriate order is as originally proposed by the Appeal Panel in its reasons dated 21 May 2018. In the result, the Appeal Panel should make an order that the appellant is to pay the costs of the respondent of and incidental to the appeal, such costs to be agreed or assessed on an ordinary basis.

Orders

1. The Appeal Panel makes the following orders: 1. The hearing on costs is dispensed with in accordance with s.50(2) of the Civil and Administrative Tribunal Act 2013. 2. The respondent's application for indemnity costs is dismissed. 3. The appellant is to pay the costs of the respondent of and incidental to the appeal, such costs to be agreed or assessed on an ordinary basis.

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. Principal 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: 05 July 2018