Hendie v Ikona Developments Pty Ltd

The proceedings between the parties in the Tribunal

1. On 4 January 2021, the owner as the applicant commenced proceedings HB 21/00009 against the builder as the respondent by filing a home building application claiming relief under the HB Act.
2. In his amended points of claim dated 26 July 2021 the owner set out the relief he claimed including liquidated damages in the amount of $235,000.
3. On 27 March 2023, the Tribunal made a work order in respect of specified items to be carried out within 16 weeks (the work order), an order dismissing the balance of the proceedings and procedural orders in relation to the costs of the proceedings (collectively referred to as the 27 March 2023 orders), and published reasons for its decision.

The history of the appeal

1. On 24 April 2023, the owner as the appellant commenced proceedings 2023/00131235 against the builder as the respondent by filing: 1. a notice of appeal in which he appealed against the 27 March 2023 orders and sought an order that the builder pay him the amount set out in the amended points of claim within 28 days. 2. an application for stay of original decision pending appeal in which he sought a stay of the 27 March 2023 orders (the stay application).
2. On 4 May 2023, the owner filed his submissions in support of the stay application in which he submitted that the was seeking the following order: "The order of the Tribunal in HB20/40168 dated 25 July 2022 (amended 1 August 2022) requiring the Respondent (Owner) to pay the sum of $25,982.95 is stayed pending a determination and decision in this appeal."
3. On 12 May 2023, the Appeal Panel constituted by a Principal Member relevantly made the following orders: 1. leave is given to the builder to be legally represented (order 2); 2. without prejudice to the builder's right to object to new grounds of appeal raised out of time, the owner is to lodge with the Appeal Registry and give to the builder a copy of the amended Notice of Appeal by 26 May 2023 (order 4); 3. the stay application is dismissed as it was withdrawn (order 12); 4. the builder's costs of the stay application are reserved to the Appeal Panel determining the appeal (order 13).
4. On 6 June 2023, the owner filed an amended notice of appeal in which he sought leave to appeal and set out the following grounds of appeal: "1 The Tribunal erred by failing to give adequate consideration to the Homeowner's lay evidence as to the oral term of the Contract requiring the Builder to complete the work within a period of six months. 2. The Tribunal erred in finding that the delay damages pursuant to section 18B(1)(d) of the Home Building Act were not recoverable by the Homeowner. 3. The decision was not fair and equitable. 4, The decision was against the weight of evidence. 5. The Tribunal erred by failing failed to order the Builder to provide the requisite certification for the buildings works to the Owner. 6. The Tribunal unfairly applied a "global submission" in favour of the Builder, where no actual submission was made by the Builder (paragraph 73, page 21), denying the Homeowner procedural fairness and natural justice. 7. The Tribunal erred in failing to find that the Homeowner was entitled to Liquidated Damages (paragraph 126 to 143, page 40 to 48). 8. The Tribunal erred in finding that the Builder was entitled to its costs (paragraph 155, page 51 to 52) in circumstances where it had made extensive work orders against the Builder for the rectification of defects and the completion of uncompleted works within period of 16 weeks from the date of the decision and orders."
5. On 28 July 2023, the owner filed submissions containing an application for an adjournment of the appeal together with his affidavit sworn on 26 July 2023 and the affidavit of his solicitor, Ziv Ben Arie (Mr Arie), sworn on 28 July 2023 on the ground that the builder had failed to carry out the work order by 17 July 2023 and the owner proposed filing a renewal of proceedings application using an application to reinstate proceedings form (the adjournment application). In these submissions the owner advised that he was no longer pressing amended grounds of appeal 2, 5 and 7.
6. Subsequently on 28 July 2023, the Appeal Panel constituted by a Principal Member adjourned the adjournment application until the hearing of the appeal on 31 July 2023.
7. On 31 July 2023, we dismissed the appeal upon its withdrawal by the owner and made procedural orders for any costs application made by a party. We noted that the parties consented to a hearing of any application for the costs of the appeal being dispensed with.
8. On 14 August 2023, the builder filed the document entitled "Respondent's submissions on costs" in which it sought an order that the owner pay its costs of the appeal including the stay application and the adjournment application on the ordinary basis as agreed or assessed (the builder's appeal submissions).
9. On 17 August 2023, the owner filed the affidavit of Mr Arie affirmed on 17 August 2023 (the 17 August 2023 Arie affidavit).

Introduction

1. Before dealing with this issue, it is appropriate to set out the applicable statutory provisions and legal principles, and summarise the evidence and submissions of the parties.

NCAT Act

1. Section 60(1), (2) and (5)(b) of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act) relevantly provide that each party to an appeal is to pay the party's own costs and the Tribunal may award costs in relation to an appeal only if it is satisfied that there are special circumstances warranting an award of costs.
2. In proceedings commenced in the Consumer and Commercial Division, by reason of the operation of s 35 when read with par (a) of the definition of "procedural rules" and the definition of "Tribunal rules" in s 4(1) of the NCAT Act, s 60 is subject to the NCAT Rules.

NCAT Rules

1. Rule 38 of the Civil and Administrative Tribunal Rules 2014 (NSW) (NCAT Rules) relevantly provides: 38 Costs in Consumer and Commercial Division of the Tribunal (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 - … (b) the amount claimed or in dispute in the proceedings is more than $30,000.
2. Rule 38A of the NCAT Rules relevantly provides: 38A Costs in internal appeals … (2) Despite section 60 of the Act, the Appeal Panel for an internal appeal to which this rule applies must apply the first instance costs provisions when deciding whether to award costs in relation to the internal appeal.

General principles

1. The general principles concerning the awarding of costs under r 38 of the NCAT Rules were considered by the Appeal Panel in Vella v Mir (No 3) [2020] NSWCATAP 17 (Vella (No 3)). The Appeal Panel described the principles and their effect in the following terms at [28]-[33]: "[28] Clause 38 gives the Tribunal a wide discretion to make an order for costs. It does not specify the factors the Tribunal must take into account in exercising the discretion, although the discretion to make such an order must be exercised judicially: see, for example, Ruddock v Vadarlis [2001] FCA 1865 at [9]. [29] Where an application has been heard and determined on the merits and Clause 38 applies, the appropriate starting point for the exercise of the discretion is not that the parties are to pay their own costs. Rather, it is the well-established position at common law; that is, that the purpose of making a costs order is to provide compensation to the party in whose favour the order is made for the expense the party has been put to in prosecuting or defending legal proceedings. In general terms, this means that a party who is successful is entitled to an order for costs in its favour, subject to exceptions generally involving misconduct on the part of that party: Latoudis v Casey [1990] 170 CLR 534; Oshlak v Richmond River Council [1998] HCA 11. [30] In BNT Constructions Pty Ltd v Allen [2017] NSWCATAP 186 the Appeal Panel, having set aside a costs order made in the Consumer and Commercial Division, decided to re-exercise the costs discretion. Clause 38 was the applicable costs provision in that case. At [67] the Appeal Panel noted the following principles relevant to the exercise of the discretion: (1) the starting point is that a successful party should be entitled to an order for costs in his favour; (2) an award of costs is by way of an indemnity and not as punishment; (3) there is no absolute rule that, absent disentitling conduct, a successful party is to be compensated by the unsuccessful party; (4) the factors to be considered are not to be confined as to do so would constrain the general discretion; (5) the relative success of the parties on different issues and the time taken to determine them may be relevant; (6) the nature of the proceedings is relevant; (7) the proper exercise of the discretion requires a decision maker to do justice between the parties and to exercise the discretion having regard to relevant considerations and in a manner which is not arbitrary and capricious. [31] Generally, costs are awarded in favour of the successful party based on the outcome of the proceedings as a whole, without differentiating between particular issues on which the party may not have been successful. That said, a different costs order may be made if the losing party succeeds on significant issues: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [31]-[36]; Sydney Ferries v Morton (No 2) [2010] NSWCA 238 at [10]-[12]. The dollar amount of a particular claim does not determine its dominance in the proceedings. Rather, regard must be had to all of the work involved in prosecuting and defending the parties' various claims, including but not limited to the time taken up at the hearing. [32] In Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) (2011) 288 ALR 385, Campbell JA (with Macfarlan JA and Young JA agreeing) held at [107] that an issue or group of issues is "clearly dominant" when it is clearly dominant in the proceedings as a whole. In that case, the approach by counsel to analysing the percentage of costs between the parties - counting the proportion of paragraphs and pages devoted to each factual topic - was held at [84] to be "a highly artificial way of proceeding" which gave "a false air of mathematical precision". [33] In relation to separable issues, a successful party's entitlement to the whole of the costs of the proceedings should not be discounted to allow for another party's success in a separate issue that played a very minor part in the proceedings as a whole: Macourt v Clark (No 2) [2012] NSWCA 411 at [7]. Further, in Hawkesbury District Health Service Ltd v Chaker (No 2) [2011] NSWCA 30 at [14], the Court of Appeal held that the severability of one issue on which the successful party failed is not, without more, sufficient to warrant departure from the general approach. The exercise of discretion will often depend upon matters of impression and evaluation: Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 at [11]."
2. For the purpose of r 38A of the NCAT Rules the amount claimed or in dispute is the amount in dispute on appeal, not the amount in dispute in the proceedings at first instance: Allen v TriCare (Hastings) Ltd [2017] NSWCATAP 25 at [57].

Proceedings without a hearing on the merits

1. In Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 (Nichols) at [25] (Payne JA with Meagher JA at [13] agreeing) considered the principles governing an application for costs in a case which has been resolved without a hearing on the merits: "[25] The relevant principles governing an application for costs in a case which has been resolved without a hearing on the merits were summarised by McHugh J in Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 at 624-625; [1997] HCA 6: "In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order. In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence litigation. Thus, for example, in R v Gold Coast City Council; Ex parte Raysun Pty Ltd, [6] the Full Court of the Supreme Court of Queensland gave a prosecutor seeking mandamus the costs of the proceedings up to the date when the respondent council notified the prosecutor that it would give the prosecutor the relief that it sought. The Full Court said that the prosecutor had reasonable ground for complaint in respect of the attitude taken by the respondent in failing to consider the application by the prosecutor for approval of road and drainage plans. Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. This is perhaps the best explanation of the unreported decision of Pincus J in The South East Queensland Electricity Board v Australian Telecommunications Commission [7] where his Honour ordered the respondent to pay 80 per cent of the applicant's taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare. If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases." (footnotes omitted)
2. The circumstances set out in Nichols at [25] in which an award of costs is made in a case which has been resolved without a hearing on the merits may constitute special circumstances within s 60 of the NCAT Act: The Owners - Strata Plan 5319 v Price [2020] NSWCATAP 245 at [39]-[44].
3. In ONE.TEL Ltd v Deputy Commissioner of Taxation [2000] FCA 270; (2000) 101 FCR 548 (ONE.TEL) at [6] Burchett J observed: "[6] In my opinion, it is important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the Court's discretion otherwise than by an award of costs to the successful party."
4. The principles in ONE.TEL at [6] have been applied in the Tribunal: Knox v Bollen; Bollen v Knox [2018] NSWCATAP 106 at [47].

The builder's appeal submissions

1. In the builder's appeal submissions, the builder set out the factual background and the history of the appeal.

The 17 August 2023 Arie affidavit

1. In the 17 August 2023 Arie affidavit, Mr Arie gave the following evidence: 1. he set out the factual background and the history of the appeal; 2. on 7 August 2023, the owner as the applicant commenced proceedings HB 23/36256 against the builder as the respondent by filing a renewal of proceedings application dated 3 August 2023 in respect of the 27 March 2023 orders; 3. on 15 August 2023, the Registrar gave notice of a directions hearing for proceedings HB 23/36256 on 20 September 2023.

The builder's appeal submissions

1. In the builder's appeal submissions, the builder made the following submissions: 1. the owner was wholly unsuccessful in his appeal. In such circumstances, costs should follow the event; 2. the stay application was frivolous and doomed to fail for the following reasons: 1. the order of the Tribunal in proceedings HB 20/40168 was not in fact being appealed by the owner, and not capable of being appealed as it was an order made on 25 July 2022, some nine months prior to the appeal being lodged; 2. the owner's principle proposed order therefore could never have been made by the Appeal Panel as it is sought to stay a decision which was not being appealed; 3. in any event, the owner had paid the amount ordered in proceedings HB 20/40168, but for reasons unknown appears to have had "forgotten" or failed to provide proper instructions to his legal counsel that he had paid, so there was not even any utility in the application; 4. to the extent that the owner sought to stop the builder from seeking "to enforce the costs order" as indicated in the filed application, at the time of the stay application being filed and determined, no costs order had yet been made.

The 17 August 2023 Arie affidavit

1. In the 17 August 2023 Arie affidavit, Mr Arie had not made any submissions.

Consideration

1. We are satisfied that that the issues for determination in relation to the costs of the appeal can be adequately determined in the absence of the parties by considering their evidence and written submissions. Accordingly, we have decided pursuant to s 50(2) of the NCAT Act to make an order dispensing with a hearing in relation to the costs of the appeal.
2. We are satisfied that the amount in dispute in the appeal exceeds $30,000 and accordingly that r 38A of the NCAT Rules applies to the appeal.
3. Having regard to the principles in Nichols at [25] and ONE.TEL at [6], we are satisfied that the owner acted unreasonably in making the stay application for the reasons submitted by the builder. It follows that the principles in Vella (No 3) at [28]-[33] are applicable, and the owner should pay the builder's costs of the stay application as agreed or assessed under the applicable costs legislation.
4. Having regard to the principles in Nichols at [25] and ONE.TEL at [6], we are satisfied that the owner acted unreasonably in making the adjournment application. The fact that the builder had failed to carry out the work order and the owner wished to make a renewal application pursuant to cl 8 of Sch 4 of the NCAT Act did not constitute a proper reason for the adjournment of the appeal. It follows that the principles in Vella (No 3) at [28]-[33] are applicable, and the owner should pay the builder's costs of the adjournment application as agreed or assessed under the applicable costs legislation.
5. Having regard to the principles in Nichols at [25] and ONE.TEL at [6], we are not satisfied that the owner acted unreasonably in appealing against the 27 March 2023 orders or that even though he acted reasonably in appealing against the 27 March 2023 orders the builder was almost certain to have succeeded if the appeal had been determined on the merits. It follows that there should otherwise be no order as to the costs of the appeal.

Orders

1. We make the following orders: 1. a hearing of the respondent's application for the costs of the appeal is dispensed with; 2. the appellant is to pay the respondent's costs of the stay application filed on 24 April 2023 as agreed or assessed under the applicable costs legislation; 3. the appellant is to pay the respondent's costs of the adjournment application filed on 28 July 2023 as agreed or assessed under the applicable costs legislation; 4. the application of the respondent that the appellant pay its costs of the appeal is otherwise dismissed.

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: 14 September 2023