Harding v Horticultural Holdings Pty Ltd

Relevant law

1. In the Civil and Administrative Tribunal Act 2013 (CATA), the effect of s 60 is that each party is to bear their own costs unless there are special circumstances which warrant an order for costs. However, s 35 of the Act operates to make s 60 subject to Rule 38 of the Civil and Administrative Tribunal Rules 2014 which provides as follows: (1) This rule applies to proceedings for the exercise of functions of the Tribunal that are allocated to the Consumer and Commercial Division of the Tribunal. (2) Despite section 60 of the Act, the Tribunal may award costs in proceedings to which this rule applies even in the absence of special circumstances warranting such an award if: (a) the amount claimed or in dispute in the proceedings is more than $10,000 but not more than $30,000 and the Tribunal has made an order under clause 10(2) of Schedule 4 to the Act in relation to the proceedings, or (b) the amount claimed or in dispute in the proceedings is more than $30,000.
2. When rule 38 applies there is a general discretion to award costs and it is well established, by decisions such as News v Cotes [2019] NSWCATAP 186, Bonita v Shen [2016] NSWCATAP 159 and Thompson v Chapman [2016] NSWCATAP 6, that: (1) the starting point is that the usual order for costs should be in favour of the successful party, (2) the award is not to punish the unsuccessful party but to compensate the successful party for the costs incurred in the proceedings, and (3) departure from the usual order is permissible if the circumstances favour that course of action.
3. Simply stated, when rule 38 applies it is not necessary to establish special circumstances and the usual order is that costs follow the event (ie follow the outcome of the case) unless there is disentitling behaviour by the successful party: Latoudis v Casey [1990] HCA 59, Oshlak v Richmond River Council [1998] HCA 11.
4. As to how the amount of costs should be determined, s 60(4) of the CATA is relevant. That subsection is in the following terms: 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. There are three decisions rendered necessary when exercising the discretion provided by s 60(4): 1. By whom costs are to be paid. 2. Whether to determine the amount of those costs or to make an order for them to be assessed. 3. If the Tribunal decides to assess costs itself, what amount is to be paid.
6. The Appeal Panel decision in 203 Castlereagh Street Pty Limited v Skybloo Holdings Pty Limited [2017] NSWCATAP 29 (Skybloo) at [40] set out the circumstances in which it would be appropriate for the Tribunal to 'by-pass' the assessment process and determine the amount to be paid for costs. Those principles, omitting case citations, were expressed as follows: 1. A fixed sum costs order involves a departure from the usual process by which costs are assessed in accordance with the statutory procedures now relevantly found in the Legal Profession Uniform Law Application Act 2014 (NSW) (especially Pt 7 dealing with "ordered costs") and the Legal Profession Uniform Law (NSW); 2. A fixed sum costs order may be appropriate where: 1. the sum of costs in question is relatively modest; 2. a 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; 3. Sections 36(1) and (4) of the NCAT Act (which can be seen as equivalent to those in ss 56(1), 57(1)(d) and 60 of the [Civil Procedure Act 2005]) suggest that the following factors merit particular consideration: 1. the relative responsibility of the parties for the costs incurred; 2. the degree of any disproportion between the issue litigated and the costs claimed; 3. the complexity of the proceedings in relation to their cost; and 4. the capacity of the unsuccessful party to satisfy any costs liability. 4. An order for fixed sum costs should be based on an informed assessment of the actual costs, having regard to the information before the Tribunal. Furthermore, the approach taken to estimate the costs must be logical, fair and reasonable. This may involve an impressionistic discount of the costs actually incurred in order to take into account the contingencies that would be relevant in any formal costs assessment; 5. 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.
7. In Mendonca v Tonna [2017] NSWCATAP 176, the Appeal Panel, prior to noting (at [60]) that unreasonable refusal of a genuine offer of settlement was one circumstance in which indemnity costs may be awarded, said (at [59], omitting case citations): Indemnity costs are only awarded in limited circumstances. The discretion to do so must be the subject of careful reasoning and caution should be exercised in making such an award.
8. A claim for costs to be awarded on an indemnity basis is commonly based on what is commonly called Calderbank letter, being a letter that follows the practice established in the UK by the decision in Calderbank v Calderbank [1975] 3 All ER 333. That decision revealed a strategy employed in Family Court proceedings, as an alternative to paying money into court, of conveying an offer of settlement in writing to the other party, indicating an intention to rely on that letter to seek an order for costs if a better outcome was not later obtained at the hearing.
9. However, it is important to note that rejection of a settlement offer, such as that contained in a Calderbank letter, does not automatically result in an indemnity costs order: Jones v Bradley (No 2) [2003] NSWCA 258, Old v McInnes and Hogkinson [2011] NSWCA 410.
10. The principles that need to be considered, as established by cases such as SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323, Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 and Nu Line Construction Group Pty Ltd v Fowler [2012] NSWSC 816, are: (1) There must have been a real and genuine element of compromise. (2) The refusal must have been unreasonable. (3) The reasonableness in rejecting an offer must be considered at the time the offer is made and not with the benefit of hindsight.
11. Matters relevant to whether rejection of the offer was reasonable include: (1) the stage of the proceedings when the offer was made, (2) the time that was allowed for the offer to be considered, (3) the extent of the compromise offered, (4) the recipient's prospects of success at that time, (5) the clarity of expression of the offer, and (6) whether the offer foreshadowed a request for indemnity costs.
12. The principles said to be applicable to a Calderbank letter apply with equal force to the 3 May 2021 letter upon which the applicants base their claim for indemnity costs.
13. The Tribunal has the power to grant an extension of time, even after the time for compliance: s 41 of the CATA. Considerations relevant to the exercise of the discretion to grant an extension of time were set out Jackson v NSW Land and Housing Corporation [2014] NSWCATAP 22 (Jackson) at [22]: (1) Is there proof that strict compliance with the rules will work an injustice on the applicant? (2) In the context of a pending appeal, the expiration of the period for appeal gives a vested right to retain the decision in question with the consequences that the time for appealing should not be extended unless the proposed appeal has prospects of success. (3) It will usually be necessary to consider: (a) the length of the delay, ​​​​​​​(b) the reason(s) for the delay ​​​​​​​(c) the applicant's prospects of success, ie whether there is a fairly arguable case, (d) the extent of any prejudice suffered by the opponent(s). (4) If the explanation for the delay is less than satisfactory and/or if the opponent as a substantial case of prejudice, it may be necessary for the applicant to show substantial merit, not just that it is fairly arguable.

Applicants' submissions

1. As to the delay in the submissions as to costs, it was said that the applicants instructed their solicitor to prepare a submission and that, when they received what their solicitor had prepared, they assumed that submission had been filed. It was not until they followed up the status of the submission which they thought had been filed that they learned that no such application had been received by the Tribunal. The submission was then filed on 10 May 2022, prior to the time for compliance set by the Tribunal. It was noted that the respondent has been aware since March 2021 that an order for costs would be sought and the Tribunal notes that the question of costs was raised during the hearing and was referred to in the Tribunal's reasons published on 31 January 2022.
2. On the question of costs, it was noted that both parties had sought the assistance of a solicitor, even though leave for legal representation was neither sought nor obtained by either party.
3. Secondly, reference was made to a 3 May 2021 letter, sent by the solicitor advising the applicants to the solicitor advising the respondents, containing an offer to accept $49,696. Based on that letter, it was contended that any costs order should be made on the ordinary basis up to and including 3 May 2021 and on an indemnity basis thereafter.
4. Thirdly, the applicants sought an order for a fixed amount of $18,000 for costs at A14 (ie paragraph 14 of the submissions in MFI A), suggesting the total costs incurred were $19,255.10 and that costs of $3,762 had been incurred at the time when the 3 May 2021 settlement offer was made. It was suggested that a fixed amount of costs was consistent with the Tribunal's guiding principle of the just, quick, and cheap determination of the real issues between the parties, that the parties are unlikely to agree on the amount recoverable for costs and that, if an indemnity costs order were to be made, it would apply to $15,493.10 ($19,255.10 less $3,762) which is 80% of the amount claimed. It was also said that the solicitor's charges, which totalled $10,672, had already been discounted by $857.50. At A22, an amount of $17,000 was sought for costs.
5. Provided in support of the applicants' submissions were copies of the following documents: 1. 3 May 2021 letter, applicants' solicitor to respondent's solicitor, 2. 2 February 2022 letter, respondent's solicitor to applicants' solicitor, 3. tax invoices of the applicants' solicitor, 4. tax invoices of the applicants' expert, and 5. 10 March 2021 letter, applicants' solicitor to the respondent.

Respondent's submissions

1. The single page submission for the respondent suggested that, since the applicants had been awarded $84,650 and had paid $49,696 for their kitchen renovation, they were "in front" by $34,954 and that was still the case if allowance was made for their payment of the costs now claimed. It was suggested that the subject kitchen was still being used by the applicants and a copy of an advertisement for the house, which made favourable comments in relation to the kitchen. The situation of the applicants was contrasted with the impact of the proceedings on the respondent.
2. Four accompanying pages contained two photos of the subject property (one of the kitchen) and a two page summary of the property which included the words: "Magnificent gourmet kitchen featuring butler's pantry with built-in sparkling water..."
3. No submissions were made in relation to the application for an extension of time, the rejection of the 3 May 2021 letter which contained settlement offer, the request for the Tribunal to decide the amount payable in respect of costs, or the components of the amount claimed by the applicants.

Consideration

1. It is noted that the respondent's calculation overlooks (1) that allowance was made for the unpaid balance of the contract price in the amount awarded by the Tribunal, (2) the cost of rectification of the kitchen, and (3) that the respondent appears to have a claim against the sub-contractor who carried out work on behalf of the respondent.
2. Importantly, the respondent's submissions do not suggest any disentitling conduct with the result that the applicants are entitled to an order for costs on the ordinary basis since the amount claimed or in dispute exceeded $30,000.
3. Having regard to the relevant case law referred to above, the following matters are noted in relation to the settlement offer made in the 3 May 2021 letter: 1. The extent of the compromise could not be considered high when the offer sought a full refund of the amount paid by the applicants. 2. The offer was made prior to proceedings being commenced. 3. A copy of an expert's report was provided with the letter. 4. The basis of the intended claimed was sufficiently indicated. 5. Only seven days was provided for not only acceptance but also payment of $49,696. 6. While the offer did foreshadow an application for costs, it did not make any reference to indemnity costs and thus did not provide any warning that an order for indemnity costs would be sought if the offer was rejected.
4. By reason of (1) the provision of only seven days for consideration of the expert's report, consideration of the offer, its acceptance, and payment of $49,696 and (2) the absence of any reference to indemnity costs, the Tribunal does not consider the 3 May 2021 letter, which offered to accept a refund within seven days of the $49,696 the applicants had paid to the respondent, warrants an order for costs incurred after the date of that letter to be paid on an indemnity basis, assessed as at 3 May 2021 and not with the benefit of hindsight.
5. The Tribunal is satisfied that this is an appropriate case to by-pass the process where costs are assessed since: 1. the amount of costs is relatively modest, 2. both parties sought and obtained legal assistance, 3. the assessment process would only add time and cost, 4. the 2 February 2022 letter from the respondent's solicitor suggested the respondent "does not have assets to meet [the applicants'] claim". 5. the Tribunal is satisfied that it has the necessary materials available, and 6. it is considered that a fair and reasonable approach is available.
6. Working from the table at A13, the Tribunal allows: 1. 75% of the amount claimed for solicitor's costs, being a 25% impressionistic discount of the costs actually incurred to allow for the contingencies that would be considered in an assessment of costs, giving $8,004, and 2. Expert's fees and other expenses in full as the amounts claimed appear reasonable.
7. Adding $8,004, $8,120.86, $277, $140.24, and $45 gives $16,587.10 which the Tribunal rounds to $16,500. Allowing one calendar month for that amount ot be paid is considered reasonable.
8. In relation to the question of an extension of time, the Tribunal is satisfied that (1) the respondent was put on notice, both prior to and during the proceedings, that an order for costs would be sought, (2) the applicants have a strongly arguable case for costs being awarded, (3) the explanation provided is reasonable, and (4) it would be unjust to deprive a successful litigant from a costs order when the only real issue is what amount should be awarded, and (5) the delay which has arisen is no greater than if the application had been made shortly after the reasons were published and then proceeded to an assessment of costs.
9. An order extending the time for the provision of submissions as to costs by both parties is considered appropriate so that the issue can be decided on the merits.

Orders

1. Accordingly, for the reasons indicated above, the Tribunal makes the following orders: 1. The Tribunal dispenses with a hearing on the question of costs, pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013. 2. The time for the lodgement of the applicants' submissions on costs is extended to 10 May 2022. 3. The time for the lodgement of the respondent's submissions on costs is extended to 27 June 2022. 4. The respondent is to pay the applicants' costs which are determined to be $16,500, within one calendar month, ie on or before 30 July 2022.

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: 26 August 2022