Following our decision on 1 December 2021 dismissing the appeal in these proceedings (GWH Build Pty Ltd v The Owners Strata Plan 96788 [2021] NSWCATAP 388), (the Principal Decision) the respondent (the Owner) has applied for an order in relation to its costs of the appeal. It seeks an order that the appellant (the Builder) pay the respondent's costs of and incidental to the appeal:
1. On an ordinary basis as agreed or assessed until 15 June 2021 and on an indemnity basis as agreed or assessed from 16 June 2021; or
2. Alternatively, on the ordinary party/party basis as agreed or assessed.
The Builder agrees that an order should be made that it pay the Owner's costs of the appeal on the ordinary basis, as agreed or assessed: see [3], [4] and [15] of its written submissions dated 31 December 2021. It submits that in the circumstances there is no reason to depart from the general principle that "ordinary costs should follow the event".
Accordingly, the only issue concerning the costs of the appeal is whether the Owner should be awarded costs on an indemnity basis from 16 June 2021.
Even though the Builder did not expressly say so, in submitting that the general principle that ordinary costs should follow the event was applicable it follows that the Builder accepts that Rule 38 (2) (b) of the Civil and Administrative Tribunal Rules 2014 (NCAT Rules) is applicable to the question of the costs of the appeal, as was submitted by the Owner.
Accordingly, we approach our consideration of the costs of the appeal on that basis. Hence, there is no need for the Owner to establish that there are "special circumstances" that warrant departure from the general rule in s 60 of the Civil and Administrative Tribunal Act 2013 (NSW) that each party to bear their own costs of proceedings in the Tribunal.
The date of 15 June 2021 in the costs orders now sought by the Owner is the date of expiry of a Calderbank offer contained in a letter from the Owner's solicitors to the Builder's solicitors dated 11 June 2021 (the Calderbank Offer). In the Principal Decision the Owner achieved a better result than what it proposed in the Calderbank Offer. The Owner also points to what it says was unreasonable conduct by the Builder in respect of the pursuit of its appeal.
In the Principal Decision we dismissed an appeal by the Builder from costs orders made on 27 April 2021 that the Builder pay the costs of the Owner of the proceedings at first instance on an ordinary basis up until 6 August 2020 and from 7 August 2020 on an indemnity basis. Those orders were made in favour of the Owner because at the hearing of the claims made in those proceedings on 17 February 2021 the Builder accepted that a work order as sought by the Owner should be made, yet until that time the Builder had resisted that claim and had rejected an offer from the Owner made that the matter be resolved by the making of a work order and for costs to be determined by the Tribunal on the papers. That offer had been in a letter from the Owner's solicitors dated 6 August 2020. The Tribunal found that this was an offer on the same terms as the Builder eventually agreed to at the hearing on 17 February 2021. There was no challenge to that finding on the appeal.
Both parties have said in their written submissions in respect of the costs of the appeal that they agree that the question of these costs should be determined on the papers. We agree with their submissions in that regard and consider that the issues can be adequately dealt with on the basis of these written submissions. Accordingly, pursuant to s 50 (2) of the Civil and Administrative Tribunal Act 2013 (NSW) we will order that a hearing of this costs question be dispensed with.
These reasons should be read in conjunction with the Principal Decision.
[2]
The Owner's submissions
At the forefront of the Owner's submissions was its contention that the Builder unreasonably failed to accept the Calderbank Offer, as well as earlier offers made by the Owner. The Owner pointed to the fact that the Calderbank Offer made an offer to resolve the appeal on exactly the same terms as the Builder, ultimately, accepted at the hearing of the appeal. Given this, so it submitted, the Builder should have been able to quickly and readily accept the Calderbank Offer.
The Owner submitted that the Builder acted unreasonably in refusing to resolve the proceedings on multiple occasions which resulted in the Owner incurring unnecessary legal costs, particularly in light of the fundamental deficiencies of the appeal.
As to the deficiencies of the appeal, the Owner submitted that the appeal was entirely misconceived and had no tenable basis in law or fact. It submitted that it was put to the task of responding to the appeal, including to issues that were ultimately withdrawn at the hearing. It submitted that it was obliged to deal with 900 pages of material put forward by the Builder on the appeal, the overwhelming majority of which was almost entirely irrelevant.
The Owner submitted that despite putting the Builder on notice of the various deficiencies and errors in the Builder's submissions on appeal and inviting settlement, the Builder failed to address those concerns and maintained its appeal. As a consequence, as submitted by the Owner, it has unfairly incurred significant costs.
[3]
The Builder's submissions
As to the Calderbank Offer, the Builder submitted that it was not unreasonable for it not to accept the Calderbank Offer in circumstances where the offer did not provide anything approaching a reasonable period for consideration. This was, particularly, so given that Monday, 14 June 2021 was a public holiday and where no final hearing was imminent.
The Builder submitted that it rejected the Owner's submissions going to unreasonable conduct. It submitted that the appeal was heard and argued in relatively short compass over one afternoon and was conducted succinctly in an inappropriate manner by Counsel for the Builder, who made appropriate concessions where the situation called for it.
The Builder submitted that there was no reason to depart from the general principle that ordinary costs should follow the event.
[4]
Facts concerning offers from the Owner
The Builder commenced its appeal on 25 May 2021.
The Calderbank Offer was sent by the Owner's solicitors to the Builder's solicitors on Friday, 11 June 2021. The letter contained an offer to resolve the appeal on the basis that the Tribunal's orders as to costs be amended so that the order became an order that the Builder pay the Owner's costs of the proceedings, as agreed or assessed, on an ordinary party/party basis with no order as to indemnity costs and that each party bear their own costs of the appeal.
The Calderbank Offer stated that it remained open for acceptance until 5 p.m. on 15 June 2021, noting that the appeal was listed for call over at 11 a.m. on 16 June 2021. The offer also stated that if the Owner achieved a result on the appeal equivalent to, or better than, the offer then the offer would be relied upon in support of an application for the costs of the appeal, including an application for costs on an indemnity basis.
It was also stated in the letter that "your client's expectation to costs is completely misguided and simply put, ridiculous. Similarly, there is no basis or reason why each party should bear their own costs." Some short reasons were given as to why it was considered that the appeal did not have any real prospects of success.
In a letter to the Owner's solicitors sent by email at 2.22 p.m. on 15 June 2021, the Builder's solicitors stated that the Calderbank Offer was not a proper offer because it did not provide sufficient time to obtain instructions before it expired. The Owner's solicitors replied in an email sent at 2.58 p.m. on 15 June 2021 and requested that the Builder inform the Owner how long it would need to respond to the Calderbank Offer and asked why additional time was required.
As far as we are aware, there were no further communications between the parties about the Calderbank Offer.
Prior to the commencement of the appeal and the making of the Calderbank Offer, on 29 April 2021, the Owner's solicitors sent an offer on a "without prejudice save as to costs" basis to accept a specific amount in satisfaction of the costs orders the Tribunal had made, with a view to avoiding a costs assessment. It was said that the offer represented a discount to actual costs incurred which was consistent with those usually applied with respect to ordinary party/party costs and indemnity costs assessments, along with an additional discount made in an attempt to finalise the dispute.
By letter dated 18 May 2021, the Builder's solicitors made a counter-offer of a lesser sum, also on a "without prejudice save as to costs" basis, with a view to resolving the matter and avoiding the costs of an appeal which they said they had been instructed to lodge.
The Owner's solicitors responded to the counter-offer by a letter dated 19 May 2021. This rejected the counter-offer and offered on a "without prejudice save as to costs" basis a lesser sum than the amount offered in the letter of 29 April 2021 in full and final satisfaction of the Owner's costs in the proceedings.
The Owner relies upon these earlier offers made prior to the Calderbank Offer in its submissions. However, there is no way of knowing whether the Owner's will have achieved a better outcome on the appeal than the offers made in their solicitors' letters of 29 April 2021 and 19 May 2021, nor do we have any basis for assessing whether it was unreasonable for the Builder not to accept these offers for the payment of specific amounts made prior to the Calderbank offer.
[5]
Consideration
In our opinion, the Calderbank Offer did not give the appellant a reasonable time for consideration. A little over one business day for consideration was insufficient, all the more so in circumstances where no date for the hearing of the appeal had yet been assigned or dates for the provision of written submissions. That problem was not cured by doing nothing more than inviting the appellant to indicate how long it needed. The appellant ought to have responded to that invitation but that alone, in our opinion, is not sufficient to lead to an indemnity costs order against it. Accordingly, we agree with the appellant that there was no unreasonable refusal to accept this offer.
However, that is not the end of the matter so far as indemnity costs is concerned. As appears from the Principal Decision, such an award could be made where unnecessary costs result from the making of groundless contentions.
From the commencement of its appeal up until the hearing of the appeal, the Builder challenged the whole of the costs order made by the Tribunal on 27 April 2021. Furthermore, it sought an order that the Owner pay the Builder's costs of the proceedings at first instance, alternatively that each party pay their own costs of those proceedings.
The Builder supported these positions by submissions that included the following contentions:
1. It was not controversial that both parties had as a primary position that a work order should be made, the issue was the scope of that order: at (10) and (30) (a).
2. Because there had been no hearing on the merits there was no basis upon which a costs order could be made: at (6) and (11). However, the appellant also pointed to the decision of Burchett J in One.Tel Ltd v Deputy Commissioner of Taxation [2000] FCA 270; (2000) 101 FCR 548 (at 553) where the court referred to the award of costs to a successful party which is commonly made against a party who effectively surrenders to the other: at (18). However, the appellant maintained the position that it was the successful party and resisted the plain fact that it had, effectively, surrendered at the hearing on 17 February 2021; at (30).
3. The Tribunal was wrong to conclude that Regulation 38 was engaged.
The submission about Regulation 38 was made in circumstances where the evidentiary material served (an expert's report put forward by the Owner) costed the rectification work at an amount of $167,195.19 and there was clear of authority from the Appeal Panel of the Tribunal that in a case such as this, where the Tribunal could make a money order instead of a work order, Rule 38 (2) (b) was applicable (The Owners Strata Plan 63341 v Malachite Holdings Pty Ltd [2018] NSWCATAP 256).
These submissions by the appellant were groundless and were not pursued at the hearing of the appeal. Clearly, these submissions led to the respondent incurring some portion of its costs, although it seems to us that they were quite readily refuted and, hence, should not have led to a sizeable portion of those costs. In any event, the respondent did not frame its application for indemnity costs by reference to costs resulting from particular submissions.
We also note that the respondent does not seek indemnity costs, on any basis, for any period prior to 16 June 2021.
As was noted in the Principal Decision, despite the terms of the Notice of Appeal and the written submissions from the Builder, at the hearing of the appeal the only aspect of the costs orders that was challenged was the part of those orders that awarded indemnity costs to the Owner from 7 August 2020. At the hearing of the appeal, the Builder accepted that the Owner should be awarded its costs of the proceedings on the ordinary basis.
So far as the indemnity costs component of the Tribunal's orders was concerned, there were two contentions that were advanced at the hearing of the appeal as follows:
1. The Tribunal had erred in law in treating the 6 August 2020 letter as a Calderbank offer when the letter was, plainly, not an offer of compromise;
2. The Tribunal had erred in finding that the Builder had unreasonably prolonged the proceedings and that it failed to find, to the contrary, that the Owner had acted unreasonably in pressing ahead with the proceedings after 6 August 2020 and incurring legal costs, in circumstances where the parties had reached an enforceable agreement for the Builder to carry out the required rectification works and the only dispute between them concerned the question of costs.
In the Principal Decision we rejected each of these contentions: at [18] to [27]. In short, we concluded that the Tribunal had not approached the question on the basis that the 6 August 2020 letter was a Calderbank offer and that it was reasonably open to the Tribunal to find that the Builder had acted unreasonably by failing to accept the offer in the 6 August 2020 letter and that this warranted the indemnity costs order that the Tribunal made.
We do not regard the challenge to the indemnity costs element of the Tribunal's orders as untenable or completely lacking any substance, although the challenge had low prospects of success.
We also agree that the appellant, by its Counsel, conducted itself reasonably and efficiently at the hearing of the appeal.
Having regard to all these factors, we order that the appellant is to pay the respondents' costs of and incidental to the appeal, as agreed or assessed, on the ordinary basis.
[6]
Orders
1. A hearing of the respondent's application for costs of the appeal is dispensed with.
2. The appellant is to pay the respondent's costs of and incidental to the appeal, as agreed or assessed, on the ordinary basis.
[7]
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: 21 March 2022