Hoare v Taylormade Residential Pty Ltd

Factual background

1. The plaintiffs ("the homeowners") engaged the defendant builder ("the builder") to construct a residence in Bensville on the Central Coast, pursuant to a contract dated 15 August 2015. On 22 August 2016, the builder advised practical completion. A dispute arose as to whether certain building works had been completed satisfactorily. The homeowners retained consultants who provided an expert report detailing defective work. On 2 August 2017, the Department of Fair Trading issued a Rectification Order of 30 items to be completed by the builder by 8 September 2017. However, prior to that date, the homeowners informed the Department that they did not want the builder to carry out any further works on the site. On 7 September 2017, the Department of Fair Trading advised the homeowners that it was no longer able to assist and advised them that they may take their dispute to NCAT.
2. The homeowners commenced proceedings in NCAT on 24 July 2018. The homeowners sought orders in accordance with the Rectification Order issued previously that "The builder rectify certain works pursuant to the [homeowners'] home … Pursuant to an order of the New South Wales Fair Trading dated 2 August 2017". The total amount "as claimed" on the application form was the nominal value of $1.
3. On 28 July 2018, the homeowners amended the claim, seeking an amount for the value of the work "in excess of $100,000". On 9 November 2018, NCAT Senior Member Ross made orders which included an order by consent for the work in the Rectification Order to be done and completed on or before 21 December 2018. He also allowed an amendment to the application to claim "in addition an amount of approx $21500 as consequential loss for legal costs and report fees incurred in an amount to be advised".
4. On 1 February 2019, Senior Member Ross acceded to a request by the homeowners for legal representation, since "The claim is a claim which exceeds $30,000. Legal representation is appropriate in these circumstances".
5. On 4 March 2019, General Member Hanstein made orders which included a note that the builder had "undertaken work in purported compliance" with the consent order of 9 November 2018 and that the parties disputed whether this work rectified the defects. Member Hanstein also noted that the hearing would address the issues of "what compensation, if any, the [homeowners] should receive for defective or incomplete work carried out by the [builder] including for any consequential loss".
6. On 1 November 2019, the parties attended a mediation facilitated by General Member Briggs ("GM Briggs"), after which consent orders were made ("the Consent Orders"). The Consent Orders directed the builder to rectify "18 windows and a ... timber deck" in accordance with specified conditions and a Schedule annexed to the orders. The Consent Orders also provided for inspections and a timeline for the filing of submissions for a determination of costs by NCAT on the papers, "on completion of the works". On 9 December 2019, the timetable was amended by GM Briggs under the power to correct errors in NCAT decisions set out in s 63 of the Civil and Administrative Tribunal Act 2013 (NSW) ("the Act").
7. The homeowners were dissatisfied with the work done by the builder pursuant to the Consent Orders and sought to have the matter returned to NCAT but did not make a renewal application. On 24 April 2020, Principal Member Rosser made directions ordering the parties to file and serve evidence and submissions. One of the issues in dispute was whether, in the absence of a Renewal Application, the proceedings could be renewed under cl 8 of Sch 4 of the Act.
8. On 15 May 2020, the matter was again listed for directions. Senior Member Thode ("SM Thode") determined that in the absence of a Renewal Application, NCAT was functus officio but for the question of costs. The parties agreed the question of costs should be determined by NCAT on the papers.

Law and legal principles

1. Section 60 of the Act provides that parties to NCAT proceedings are to pay their own costs, except in certain circumstances, as follows: "60 Costs (1) Each party to proceedings in the Tribunal is to pay the party's own costs. (2) The Tribunal may award costs in relation to proceedings before it only if it is satisfied that there are special circumstances warranting an award of costs. (3) In determining whether there are special circumstances warranting an award of costs, the Tribunal may have regard to the following - (a) whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings, (b) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings, (c) the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law, (d) the nature and complexity of the proceedings, (e) whether the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance, (f) whether a party has refused or failed to comply with the duty imposed by section 36(3), (g) any other matter that the Tribunal considers relevant. (4) 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) In this section - costs includes - (a) the costs of, or incidental to, proceedings in the Tribunal, and (b) the costs of, or incidental to, the proceedings giving rise to the application or appeal, as well as the costs of or incidental to the application or appeal."
2. Rule 38(2) of the Civil and Administrative Tribunal Rules 2013 (NSW) ("the NCAT Rules"), which applies to proceedings allocated to the Consumer and Commercial Division of NCAT, sets out an additional exception to the general principle in s 60 of the Act concerning an award of costs. Rule 38 provides as follows, the relevant part for these proceedings being r 38(2)(b) ("r 38(2)(b)"): "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 - (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."
3. On 29 September 2020, SM Thode handed down her decision ("the Tribunal decision"). In my judgment, I will refer to SM Thode in her capacity as the first instance decision-maker as "the Tribunal". Order 2 required the builder to pay the homeowners' costs of the proceedings, as follows: "2. The [builder] is to pay the [homeowners'] costs of the proceedings on the ordinary basis, as agreed or assessed as set out in the legal costs legislation as defined in section 3A of the Legal Profession Uniform Law Application Act 2014."

The Tribunal Decision

1. The Tribunal made the following observations about the dispute concerning the work to be done pursuant to the Consent Orders in its summary of the procedural history: "The parties entered into a consent work order. Ordinarily a consent work order would finalise the subject application before [NCAT]. An applicant who is the beneficiary of a work order is issued with the advice that in the event the respondent does not comply with the work order or the work is defective, the applicant may wish to file a Renewal application pursuant to Clause 8 Schedule 4 of the Civil and Administrative Act 2013 … For reasons not quite clear the application was not finalised when the work order was entered and the [homeowners], rather than filing a Renewal application, contacted [NCAT] citing original file No. HB18/82377 and informed [NCAT] that they were dissatisfied with the [builder's] performance of the work."

The NCAT Appeal

1. On 27 October 2020, the builder lodged an internal appeal with NCAT, seeking leave to appeal Order 2; that it be vacated and in its stead, there be "no order as to costs to the intent that [the parties] each pay their own costs of proceedings". The builder also sought a stay of Order 2 and costs of the internal appeal.
2. On 10 November 2020, the matter was listed for directions before Deputy President Westgarth. The Deputy President ordered the stay of Order 2. Orders were also made for the appeal to occur on the papers and setting a timetable for the hearing and filing of evidence and submissions.
3. The Appeal Panel, constituted by SM Molony, determined the builder's appeal on the papers and made orders on 24 June 2021. The Appeal Panel granted leave to appeal and allowed the appeal, setting aside Order 2 and in lieu ordering that there be "no order as to costs, with the intent that each party bear their own costs of the proceedings". There was no order as to the costs of the internal appeal.

The Appeal Panel decision

1. The Appeal Panel, at [11], set out a summary of the relevant conclusions of the Tribunal, as follows: "(1) Rule 38(2)(b) of the [NCAT Rules] provides that, if an amount claimed or put into dispute by an applicant in proceedings before the Consumer and Commercial Division of [NCAT] exceeds $30,000, then the Tribunal may award costs 'in the absence of special circumstances' which section 60 of [the Act] would otherwise require the Tribunal to find before making an order for costs. (2) As early as 28 July 2018 the homeowners amended their claim to seek the performance of work or alternately a money order exceeding $100,000. This was substantiated by the filing of expert report by the homeowners stating the 'cost of rectification for items 8, 11, 12 and 13 would exceed the value of $55,000'. (3) The homeowners intended to seek a work order and, in the alternative, damages for breaches of statutory warranties exceeding the sum of $30,000. It was the lodging of the substantive application which set in motion or commenced the proceedings and, 'it is that process that determines the amount in dispute' for the purposes of rule 38(2)(b) of the NCAT Rules. (4) Where there has been no determination of the issues, the cost of rectification to the builder is not determinative of the amount claimed or in dispute under rule 38. That cost is what, 'may be charged by independent third party contractors, who charge for rectifying work adding the customary margins set up costs and GST'. (5) The work in respect of items 8, 11, 12 and 13 was, 'not yet complete or alternatively was completed unsatisfactorily'. (6) Because consent orders were reached, the value of the homeowner's claim has not been determined on the merits. (7) By consenting to the work order on 1 November 2019 the builder submitted to [NCAT] making orders substantially to the effect claimed by the homeowners. (8) In the circumstances the homeowners were entitled to their costs of the proceedings. (9) The builder's argument that the homeowners' refusal to allow the homebuilder onto the site in 2017 to rectify the works in accordance with the rectification order should be seen as disentitling them from recovering costs was rejected. This was so because on the basis that, 'conduct before proceedings cannot relevantly be taken into account when considering whether costs can be ordered'."
2. The grounds of appeal, which were advanced by the builder as errors of law, were summarised by the Appeal Panel, as refined in the builder's submissions: "27 First, the builder submits that rule 38(2)(b) of the NCAT Rules was not enlivened in the circumstances of the case, or if it was, the Tribunal erred by making a costs order. 28 Secondly, the builder submits that the Tribunal erred in law by concluding, for the purpose of determining 'the amount claimed or in dispute' under rule 38(2)(b) of the [NCAT Rules], that the process - of lodging a claim - 'determines the amounts in dispute.' 29 Thirdly, the builder says that [the] Tribunal erred in law by making an order for costs in circumstances where the issues in dispute had been resolved by consent orders, relying on Nichols v NFS Agribusiness Pty Ltd [2018] 97 NSWLR 691, per Basten JA at [2]. 30 Further, the builder says that the Tribunal erred by finding that conduct the homeowners engaged in before the proceedings commenced, could not be taken into account, as disentitling conduct, when deciding whether to make a costs order. This, the builder submits is contrary to the principles set out by the High Court in Re Minister for Immigration and Ethnic Affairs: Ex Parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6. The builder adds that Tribunal's reasons for reaching the conclusion were inadequate."
3. The Appeal Panel dealt with the first and second grounds jointly. The builder had submitted that the Tribunal erred by considering "what the [homeowners] intended to claim at the commencement of the proceedings, and in the subsequent amendment of the claim to $100,000 four days later". The Appeal Panel noted the Tribunal referred to Allen v TriCare (Hastings) Ltd [2017] NSWCATAP 25 ("Allen v Tricare"), which is a decision of the Appeal Panel that considers r 38(2)(b) in appeal proceedings. The Tribunal had relied upon [37] of Allen v Tricare, which is to the effect that the term "proceedings", as it appears in r 38(2)(b), refers to the process set in motion, or commenced, by lodging an application or notice of appeal. The Tribunal stated, in a passage which was quoted at [40] of the Appeal Panel decision: "29 It is the lodging of the substantive application that is the 'process set in motion or commenced' (see Allan v TriCare at [37]) and in my view it is that process that determines the amount in dispute. In the circumstances of this case, I am satisfied that the [homeowners] had the intention to seek a work order, and in the alternative sought compensation or damages for breaches of statutory warranties exceeding the sum of $30,000. Their intention to claim a money order, in the alternative, was made apparent from the email to [NCAT] seeking a money order and the 'value of the work exceeding $100,000'. 30 … 31 It is the [builder's] argument that the value of that outstanding work determines the 'value of the claim' or 'the claim as made' for the purpose of rule 38. The fact that the [builder] values what it would cost itself to carry out the work, using its own labour and materials, is in my view not determinative of the amount claimed or in dispute. The damages for breach of statutory warranty were set out by the Bayliss and Worthington reports and the costs in dispute are those that may be charged by independent third party contractors, who charge for rectifying work adding the customary margins, set up costs and GST. The fact that the [builder] could perform the work at cost, with its own labour and materials for less, is not a relevant consideration to determine the value of a claim 'as made', unless the [builder] has, at a contested hearing, established before a Tribunal of fact that the value of the damages for breach of statutory warranty, in this case limited to defective items 8, 11, 12 and 13 is less than $55,000."
4. The Appeal Panel observed that Allen v Tricare also considered the meaning of "the amount claimed" and "the amount … in dispute" as those terms appear in r 38(2)(b), quoting [57] of that decision: "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): (1) The determinative factor is the amount in dispute in each appeal, not the amount in dispute in the proceedings at first instance; (2) The phrase 'in dispute' is to be construed as meaning truly in dispute or at issue or, inversely, not unrealistically in dispute; (3) 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 fact that the value of the property the subject of any appeal exceeds $30,000 does not, of itself, mean that 'the amount ... in dispute' in that appeal is greater than $30,000."
5. The Appeal Panel found, by an application of those principles, that the Tribunal erred, observing: "[43] It is plain from paragraph 29 of the Tribunal's decision, that the Tribunal decided that in the circumstances the amount claimed or in dispute for the purposes of rule 38 (2)(b) of the NCAT Rules is to be determined by reference to the amount claimed or the value of the work order sought when the application was lodged. This is incorrect. Such an interpretation would allow applicants to bring themselves within the scope of rule 38(2)(b), simply by claiming an amount in excess of $30,000, irrespective of the fact that that their true claim is for less that that amount. Whether or not the $30,000 threshold in rule 38(2)(b) has been satisfied requires the Tribunal, in the light of the available evidence before it, to make an assessment of whether the amount truly in issue, or put another way, the true value of the work in issue, is more than $30,000. [44] This does not require the Tribunal to arrive at an exact figure for the cost of rectification or damages payable, but to make an assessment, in the light of the available evidence, as to whether the $30,000 threshold has been exceeded or not. If a detailed consideration of the available evidence is required to reach such a conclusion, then - as is the discussed below - the decision of the Court of Appeal in Nichols v NFS Agribusiness Pty Ltd [2018] 97 NSWLR 691 indicates that the Tribunal should decline to undertake that task. In those circumstances the usual rule in the Tribunal, found in s 60 of [the Act], that each party bear their own costs, save in special circumstances, would apply. It could be argued that the difficulty of determining the issue in this case was such that the Tribunal should have declined to consider the application for costs under rule 38(2)(b), In the absence of relevant submissions [from] the parties addressing that issue, I have not considered that possibility further."
6. Similarly, the Appeal Panel dealt with the third ground together with the builder's alternative submission. The alternative submission was that if a costs order could be made "irrespective of the settlement", the Tribunal had erred by "finding no delinquency on the [homeowners'] part" when the homeowners refused to allow the builder access to their property so that it could comply with the Rectification Order issued by the Department of Fair Trading.
7. The Appeal Panel noted that the Tribunal had regard to principles in Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 per McHugh J and Kiama Council v Grant (2006) 143 LGERA 441; [2006] NSWLEC 96 per Preston CJ of LEC, which concern "exceptions to the usual course that follows where proceedings have been resolved without a hearing, which is that both parties bear their own costs". The Appeal Panel also considered the comments of Payne JA in Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 with respect to the effect of reasonable or unreasonable conduct by a party on whether a costs order is made.
8. The Appeal Panel summarised the relevant legal principles, at [57]: "Where, as here, the Tribunal is asked to make a costs order under rule 38(2)(b) in circumstances where the substantive proceedings have been resolved between the parties, apart from the issue of costs, the usual order is no order as to costs. However, the Tribunal may be persuaded that a costs order is appropriate where one party effectively surrenders to the other's claim; or where one party has acted so unreasonably that the other party should obtain their costs; or, where they have both acted reasonably and one party was certain to succeed in the proceedings."
9. The Appeal Panel observed that the "requirement that the party surrender the case" is central to the formulation in Kiama, and found that: "[59] The Tribunal's finding that the builder had not surrendered the case, albeit it agreed to consent work orders being made, is inconsistent with the formulation in Kiama which the Tribunal purported to follow, when finding it could make an order for costs. The making of the consent work order on 1 November 2019 was not a capitulation, but an agreement for work to be done following a conclave and mediation in terms different to that claimed. [60] The original work order made by the Tribunal on 18 November 2018, however, bears hallmarks of a surrender. It required the builder to carry out rectification work in accordance with the Rectification Order made by the Department of Fair Trading on 2 August 2017. This was work which the homeowners had not allowed the builder to undertake before the proceedings issued."
10. The Appeal Panel continued, at [62], addressing the builder's argument concerning unreasonable conduct by the homeowners: "As was made clear by the Court of Appeal in Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 the reasonableness of the conduct of the owners in commencing and continuing the proceedings is a relevant factor to the exercise of the costs discretion. In finding that the homeowners' refusal to allow the builder access to undertake the work specified in the work order was irrelevant, the Tribunal did not have regard to the fact that the homeowners' application in the proceedings sought a work order relating to the same defective work (and later damages). They sought a work order to the same effect as that they had previously - before commencing proceedings - refused the builder a chance to do. Such a refusal was, in the context of the proceedings as a whole, unreasonable and therefore relevant to the exercise of the costs discretion. Also relevant is the scheme established by the Home Building Act 1989 (NSW) under which remedying defective work in accordance with Fair Trading reports is an important part of the dispute resolution scheme. These are factors that the Tribunal should have considered when exercising its discretion. In the circumstances of this case, that conduct by the homeowners was relevant.
11. The Appeal Panel concluded, at [63], in respect of the third ground of appeal: "I have concluded that - assuming rule 38(2](b) of the NCAT Rules is enlivened - the Tribunal acted upon a wrong principle by making a costs order in the circumstances. I am also satisfied that the Tribunal erred by not taking into account, as unreasonable conduct, the homeowners' refusal to allow the builder to rectify works in accordance with the Rectification Order made by the Department of Fair Trading."
12. The Appeal Panel concluded that the Tribunal's "discretion to award costs miscarried" in the House v The King sense. [1]

Whether leave to appeal should have been granted

1. Finally, the Appeal Panel determined whether, to the extent that it was necessary, the builder should be granted "leave to appeal against the Tribunal's finding that 'the amount claimed or in dispute' in the proceedings exceeded $30,000", based on an argument that this was "against the weight of the evidence". To enliven the Appeal Panel's discretionary power to grant leave, the Appeal Panel must have been satisfied that "the appellant may have suffered a substantial miscarriage of justice" on various grounds, including that "the decision of the Tribunal under appeal was against the weight of evidence": the Act, Sch 4, cl 12(1)(b). The Appeal Panel referred to Collins v Urban [2014] NSWCATAP 17, which elaborates on this requirement.
2. The Appeal Panel concluded that this finding was "against the weight of the evidence and may have resulted in a substantial injustice". The Tribunal had erred by finding that the material provided by the builder addressing the actual costs of rectification (which identified that these would total $11,737.02 on completion based on evidence of "actual expenditure" and "quotes for the uncompleted part of that work") was "not determinative" and irrelevant to her determination of the amount claimed. The Tribunal had instead relied on an expert report provided by the homeowners "claiming the costs of rectification was in excess [of] $55,000"; there was a "significant difference" between the amount claimed by the homeowners and the actual costs of rectification identified by the builder.
3. The Appeal Panel observed: "[75] The builder's material concerning the cost of rectification did not necessarily demonstrate the amount truly in dispute. Other evidence, such as expert assessments, was also relevant to the Tribunal's consideration when determining the amount truly in dispute. The Tribunals dismissal of the builder's costings as irrelevant resulted in the Tribunal's not having regard to substantial and probative evidence, relating to the actual cost of rectification, which was relevant to a consideration of the amount truly in dispute. If the Tribunal had not confined its consideration to the 'amount claimed' and instead asked what the amount truly in dispute was, then it likely that the rejection of the builder's material would not have occurred. … [77] Evidence of the actual costs expended in undertaking the rectification work is necessarily more persuasive than expert costings for a scope of work that significantly exceeded that agreed to be done following the mediation and consent orders. Even allowing for an additional, significant margin for profit plus GST, over and above the actual costings, it is difficult to see how the true costs of rectification in this case would reach anywhere near $30,000. Allowing a margin of 100% of the builder's costing, plus GST, would still result in an amount in truly dispute less than $30,000. To reject the evidence of the actual costs expended in complying with the consent work orders, and the fresh quotes for that remaining, was not reasonable in the circumstances. [78] Once the material relied on by [the builder], with respect to the actual cost of rectification, is considered in assessing the true cost of rectification, the preponderance and weight of evidence points to the costs of rectification being less than $30,000. Given the evidence as to the actual costs involved, which the Tribunal disregarded, it was not open to the Tribunal to conclude that the true amount claimed or in dispute exceeded $30,000."
4. As such, the Appeal Panel granted the builder leave to appeal. There was no order as to the costs of the appeal.

The Appeal Panel's determination

1. The Appeal Panel's ultimate findings in the Appeal Panel decision were as follows, at [80]: "… I am satisfied that the Tribunal should not have departed from that general rule in s 60 of [the Act] that each party bear their own costs in this case because: (1) the true amount claimed or in dispute did not exceed the $30,000 threshold required to engage rule 38(2)(b) of the NCAT rules; and, (2) if it had exceeded the $30,000 threshold, it was not an appropriate case in which to make an order for costs."

Principles governing the appeal

1. This appeal proceeds under s 83 of the Act, which only permits an appeal on a question of law with the leave of the Court. Section 83 relevantly provides as follows: "83 Appeals against appealable decisions (1) A party to an external or internal appeal may, with the leave of the Supreme Court, appeal on a question of law to the Court against any decision made by the Tribunal in the proceedings. … (3) The court hearing the appeal may make such orders as it considers appropriate in light of its decision on the appeal, including (but not limited to) the following: (a) an order affirming, varying or setting aside the decision of the Tribunal, (b) an order remitting the case to be heard and decided again by the Tribunal (either with or without the hearing of further evidence) in accordance with the directions of the court."
2. In Taylor Construction Group Pty Ltd v Strata Plan 92888 t/as The Owners Strata Plan 92888 [2021] NSWSC 1315, at [90], Henry J summarised the principles applicable to an appeal under s 83 of the Act: "The parties referred to the recent decisions of Bronze Wing International Pty Ltd v SafeWork NSW [2017] NSWCA 41 (Bronze Wing) and Corcoran v Far [2019] NSWSC 1284 (Corcoran) for the applicable principles governing appeals to this Court, which were summarised as follows: (a) appeals lie to the Supreme Court from the Appeal Panel on a question of law pursuant to s 83 of [the Act]: Bronze Wing at [54]; (b) the appeal to the Supreme Court is confined to the decision of the Appeal Panel rather than the Tribunal: Bronze Wing at [10] (Basten JA), [37] (Gleeson JA), [61] (Leeming JA); Corcoran at [21]; (c) the appellants must demonstrate something more than that the decision of the Appeal Panel was arguably wrong. Ordinarily, leave will only be granted concerning matters that involve issues of principle, questions of general public importance or an injustice which is reasonably clear in the sense of going beyond what is merely arguable: Corcoran at [24], citing Jaycar Pty Ltd v Lombardo [2011] NSWCA 284 at [46] (Campbell JA, Young and Meagher JJA agreeing); Be Financial Pty Ltd as trustee for Be Financial Operations Trust v Das [2012] NSWCA 164 at [33] (Basten JA, Tobias AJA agreeing); and (d) the proper approach on an application under s 83 of [the Act] is to identify the questions of law on which leave is sought in the Summons seeking leave to appeal: Corcoran at [26]."
3. As McCallum J (as her Honour then was) observed in Corcoran v Far [2019] NSWSC 1284, at [25], an applicant is obliged to identify in the summons the relevant question or questions of law so as to permit a determination of whether leave should be granted. It is insufficient to merely specify alleged errors of law.

Grounds of appeal

1. The homeowners were granted leave to file the second further amended summons in Court; the builder neither consented to nor opposed this filing.
2. The homeowners advanced four grounds of appeal, which are as follows: "1. In misconstruing and/or misapplying the authority of Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 and authorities subsequent to it, in that for the purposes of the exercise of the costs discretion, he: (a) failed to find that the consent of the builder to a work order or the builder's submission to a work order was the 'event' in relation to which an award of costs should follow; (b) effectively proceeded to conduct a notional hearing and arrived at a likely outcome, and in doing so had regard to evidence adduced in the Tribunal at first instance: (i) in a manner contrary to authorities; and (ii) for the purposes of determining the [homeowners'] conduct to be unreasonable, and disentitling them to an order for costs notwithstanding that there was an 'event'; (iii) mischaracterised the [homeowners'] conduct to be unreasonable, which was contrary to the evidence and authorities. 2A The Appeal Panel constituted by a single member failed to apply the Appeal Panel's earlier decision in The Owners Corporation Strata Plan No. 63341 v Malachite Holdings Pty Ltd [2018] NSWCATAP 256 and make a finding that the order of [General Member] Briggs on 1 November 2019 was such that [rule] 38(2)(b) did not apply to the costs application, and failed to properly apply the decision of Ward CJ in EQ in Saravinovska v Saravinoski [2020] NSWSC 1232 to the default of the consent orders by the respondent builder. 3. As a result of the errors identified in grounds 1 and 2A the Senior Member constructively failed to exercise the jurisdiction given to him. 4. The [builder] (Appellant below) made application for leave as the grounds of appeal to the Appeal Panel required leave. The Appeal Panel erred in law by the grant of leave in circumstances where the [builder] did not make any submissions as to why the discretion to grant leave should be exercised."
3. The homeowners' appeal is underscored by the proposition that the Tribunal rejected the application of r 38(2)(b) and proceeded to find for the homeowners on the basis that special circumstances had been established, pursuant to s 60(2) of the Act. The Appeal Panel then reversed that basis, finding instead that r 38(2)(b) applied and finding for the builder. That being so, it is appropriate to first consider the second ground.

Ground 2A

1. The first aspect of ground 2A concerns the relevance of r 38(2)(b) to the dispute between the parties, subsequent to The Owners Corporation Strata Plan No 63341 v Malachite Holdings Pty Ltd [2018] NSWCATAP 256 ("Malachite"). The second aspect of ground 2A concerns what constitutes "special circumstances" in s 60(2) of the Act, in light of the decision of Saravinovska v Saravinovski [2020] NSWSC 1232; in particular, whether the Appeal Panel failed to "properly apply" the decision of Saravinovska v Saravinovski to the "default of the consent orders by the [builder]".

The homeowners' submissions on Malachite

1. The homeowners relied specifically on Malachite at [91] and [95]-[97]. Those paragraphs, set out along with their surrounding paragraphs for context, are as follows: "[91] Rule 38(2)(b) may also operate in circumstances where [NCAT] has power to make an order for the payment of a specific amount of money, despite the particular relief sought by the applicant. For example, in a building claim under the [Home Building Act 1989 (NSW)], the Tribunal may make an order for the payment of money despite the preferred outcome for a claim in respect of defective work being a rectification order (see s 48MA of the HB Act) or despite an applicant for relief claiming a different order (see s 48O(2) of the HB Act). [92] In these cases, the specific cost of the work to be undertaken can be determined by reference to the relief claimed, in order to ascertain whether the monetary threshold for engagement of the rule has been reached. However, in these cases, one or all parties to the proceedings would provide evidence of the cost of the rectification or completion so as to enable [NCAT] to make specific findings as to 'the amount in dispute in the proceedings'. [93] If there is no such evidence, then it could not be said there is a dispute about the amount of the cost of rectification or completion of the works. [94] Lastly, where it is necessary that the specific amount of any debt owed or payable must be determined as part of the fact finding process, in order to found any relief and establish that the specific amount in dispute is more than $30,000, it may also be said that this sum is 'the amount in dispute in the proceedings' for the purpose of r 38(2)(b) and that the rule may also operate in these circumstances. An example might be where it is necessary to determine the specific amount of rent that remains unpaid for the purpose of making a termination order for non-payment of rent under the Residential Tenancies Act, 2010 (NSW). However, for the purpose of this appeal, it is unnecessary to resolve whether the rule would operate in cases where only an order for possession was being sought and not an order for the payment of rent. [95] On the other hand, it seems to us that where there is a claim for relief that may, as a consequence of that relief being granted, result in the loss of a property or other civil right to a value greater than $30,000, it could not be said that there are proceedings in which the amount claimed or the amount in dispute is greater than $30,000 within the meaning of the rule. Similarly, the fact that it is necessary to evaluate evidence about the value of particular property or determine other rights as part of determining whether there is an entitlement to relief does not mean 'the amount claimed' or 'the amount in dispute' in the proceedings is more than $30,000. Where the relief sought is not dependent on a finding that a particular amount is payable or not payable, it could not be said that 'the amount claimed or in dispute in the proceedings is more than $30,000'. [96] Rather, in such proceedings, the evaluation of the evidence of value or amount is for the purpose of determining whether to grant relief, not to ascertain the amount which is to be the subject of a specific order."
2. The Appeal Panel in Malachite concluded: "[99] Rule 38(2)(b) operates because there can be identified in the proceedings 'the amount claimed or in dispute'. It is not in language requiring an exercise in the valuation of the right being affected by the order sought in order to determine whether the costs rule applies or to engage in some collateral evaluative process. It does not, by its language, operate because a party raises an issue in proceedings that might be capable of being assigned a monetary value or which might involve the assessment of value as part of determining the relief which is claimed. [100] It should not be construed in a manner that enables a party to raise any issue in the proceedings so as to trigger a liability for costs, absent the establishment of special circumstances. Such a construction would permit the displacement of s 60 of [the Act] by a party advancing any issue which might give rise to consideration of value or amount. [101] Further, it seems to us unlikely that the legislature intended the rule to operate so as to complicate proceedings and to require [NCAT] to embark upon an enquiry of the value of rights being affected in consequence of the relief sought in order to determine whether the costs rule is engaged."
3. Based on Malachite, the homeowners submitted that r 38(2)(b) does not apply to these proceedings because there was no express finding as to the amount involved by GM Briggs, who made the Consent Orders of 1 November 2019. Further, "none of those orders are dependent on any actual quantification of a money amount" and no such finding is required for the orders to be made or entered. The homeowners submitted that: "… [r 38(2)(b)] would not apply to the instant proceedings as there was a consent order for works to be done whilst the proceedings were for a monetary amount, the orders achieved by consent were not a request for or relief from payment (orders did not depend on a finding of an amount owed and as a result there is a need to consider special circumstances)."
4. The homeowners relied on two cases that applied Malachite: GWH Build Pty Ltd v The Owners - Strata Plan 96788 (No 2) [2022] NSWCATAP 73, at [31]; and Ding v Sanli Design & Construction Pty Ltd [2021] NSWCATCD 116, at [84] to [95].

The homeowners' submissions on Saranovska v Saranovski

1. The homeowners submitted that the builder's conduct in not finishing the works the subject of the Consent Order amounted to a special circumstance within the meaning of s 60(2) of the Act. The homeowners relied upon Saravinovska v Saravinovski, in which Ward CJ in Eq (as her Honour then was) found that "where a party had refused to perform an order of the court this amounted to a 'contempt' which gave rise to an entitlement to costs", which was in a context of there not having been a hearing on the merits. The builder's failure to fulfil an order of NCAT, the homeowners submitted, was a special circumstance for the purposes of s 60 of the Act. The Appeal Panel's failure to consider Saravinovska v Saravinovski constituted an error of law.
2. The homeowners submitted that, assuming that they were correct in submitting that r 38(2)(b) does not apply to these proceedings because of the decision in Malachite, "the original order of [Senior Member] Thode was appropriate".
3. The homeowners submitted that the appropriate basis of the award of costs in their favour was by an application of s 60(2) of the Act, namely, that "there are special circumstances warranting an award of costs". The failure by the Appeal Panel to consider its discretion pursuant to s 60(2), constituted error which "would also amount to a failure to properly exercise [the Appeal Panel's] jurisdiction".

The builder's submissions

1. The builder submitted that the homeowners had failed to identify a question of law in respect of either aspect of ground 2A. In the alternative, as to the first aspect of ground 2A, the builder noted references in the Appeal Panel decision to Malachite which indicated that he had regard to that decision. The builder submitted that there had been no error on the part of the Appeal Panel in concluding that r 38(2)(b) was not enlivened because the amount in dispute was not more than $30,000.
2. In relation to the second aspect of ground 2A, the builder noted that the Appeal Panel, at [54], had expressly acknowledged the judgment of Ward CJ in Eq in Saravinovska v Saravinovski. The homeowners had not indicated in what manner the Appeal Panel had misapplied that decision.

Consideration

1. In my view, the homeowners' submission that the Tribunal found for them on the basis of s 60(2) of the Act and not r3 8(2)(b) is incorrect. In written submissions to the Tribunal, which have been submitted to this Court, the homeowners relied upon both s 60(2) of the Act and r 38, submitting that the latter was "relevant" to the Tribunal's determination. In its decision, the Tribunal expressly noted, at [11], that the homeowners submitted that r 38(2)(b) applied.
2. The Tribunal did not expressly identify the basis of its finding for the homeowners, however, a reading of its decision makes clear that it was on the basis of r 38(2)(b). At [26], it noted that if the threshold of $30,000 is established, "the Tribunal will be unconstrained by the need to find the existence of special circumstances in order to make a costs order". At [27], it noted that the builder submitted that the amount in dispute was less than $30,000 and therefore r 38 was not enlivened. Between [28] and [31], the Tribunal considered the competing claims as to whether the threshold of $30,000 was established, and concluded that it was, so that r 38(2)(b) applied. There was no further consideration of whether the alternative basis of s 60(2) of the Act was established.
3. The homeowners continued to rely upon r 38(2)(b) before the Appeal Panel, submitting that the Tribunal "had not fallen into error, but rather came to a conclusion that the [builder] did not like". Further, "[t]he Tribunal did not err when it found that the dispute involved rectification issues in excess of $30,000 when the [homeowners] commenced the action". The homeowners expressly relied upon r 38(2)(b) in seeking from the Appeal Panel "costs of these appeal proceedings pursuant to sections 35 and 60(2) [of the] Act, rule 38(2)(b) … and the general principle that costs follow the event".
4. Accordingly, the position adopted by the homeowners before this Court as to the relevance of r 38(2)(b) is contrary to their position before both the Tribunal and Appeal Panel.
5. The homeowners' submission to this Court that r 38(2)(b) was inapplicable is based on Malachite, which was raised by the builder in submissions to the Tribunal and distinguished by the Tribunal in its decision, at [22], as not relevant because it concerned a reallocation of unit entitlements "with no amount in dispute" or "as claimed". It could not be said, therefore, that the homeowners only became aware of Malachite subsequently to the Appeal Panel decision.
6. In oral submissions, counsel for the homeowners stated that their solicitor had raised their contention in respect of Malachite that r 38(2)(b) was not relevant, in written submissions before the Appeal Panel. However, the written submissions that the Court was taken to were in fact those on behalf of the builder.
7. In my view, the reasoning of the Appeal Panel as to why the "amount claimed" by the homeowners was not determinative of whether the threshold of $30,000 was reached, in order for it to be open to the Appeal Panel to exercise its discretion to apply r 38(2)(b), was not inconsistent with Malachite. On examination, the passages from Malachite that the homeowners rely upon, extracted at [41] above, are not at odds with the Appeal Panel's reasoning or determination.
8. The question at the heart of the dispute between the parties before the Appeal Panel was whether the Tribunal had misinterpreted or misapplied the concepts from r 38(2)(b) of "the amount claimed or in dispute in the proceedings". The homeowners submitted that it was the quantum of their original claim ($100,000) or at least the amount identified in their expert building report (approximately $55,000), whereas the builder submitted it was the actual value of the work in dispute. The Appeal Panel determined, at [43], that the Tribunal's conclusion that it was "the amount claimed or the value of the work order sought when the application was lodged" was incorrect, since: "Such an interpretation would allow applicants to bring themselves within the scope of rule 38(2)(b), simply by claiming an amount in excess of $30,000, irrespective of the fact that that their true claim is for less than that amount."
9. The Appeal Panel's note of caution in Malachite at [100], extracted at [42] above, to not permit r 38(2)(b) to inappropriately avoid the constraints of s 60 of the Act, albeit in a different context, is to similar effect.
10. In any event, it is apparent from ground 2A that the homeowners' submission does not extend beyond the contention that the Appeal Panel misapplied Malachite. The homeowners have not identified a question of law in respect of this aspect of ground 2A.
11. I am satisfied that the Appeal Panel had regard to Saravinovska v Saravinovski. No error of law is disclosed. In relation to both aspects of ground 2A, I refuse leave to the homeowners to appeal against the Appeal Panel decision, as there is no identified question of law.

The homeowners' submissions

1. The homeowners' submissions in relation to this ground are difficult to understand. The reference in (a) and (b)(ii) of the ground to an "event" appears to be a reference to the term "supervening event" as it appears in the judgment of Burchett J in One.Tel Limited v Commissioner of Taxation (2001) 101 FCR 548; [2000] FCA 270, at [6], and of Preston CJ of LEC in Kiama, at [80]. The Appeal Panel extracted these passages, which summarised the relevant principles. In Kiama, Preston CJ of LEC distilled the principles in respect of two types of cases: "80 The principles that emerge from these cases are that in a civil enforcement or judicial review case where there has been no hearing on the merits: (a) where one party effectively surrenders to the other party by: (i) discontinuing without the consent of the other party; or (ii) giving undertakings to the Court or submitting to the Court making orders against the party substantially in the terms or to the effect claimed by the other party; the proper exercise of the costs discretion will ordinarily be to make the usual order as to costs, unless there is disentitling conduct on the part of the other party; and (b) where some supervening event or settlement so removes or modifies the subject of the dispute that no issue remains except that of costs, the proper exercise of the costs discretion will ordinarily be to make no order as to costs unless: (i) one of the parties has acted so unreasonably that the other party should obtain the costs of the action; or (ii) even if both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried so that the party should obtain the costs of the action." (emphasis added)
2. In written submissions to this Court, the homeowners submitted: "if there is a need to find an event then it is clearly the [builder's] refusal to comply with consent orders". This is contrary to the terms of the ground of appeal itself, which nominates "the consent of the builder to a work order or the builder's submission to a work order" as the relevant "event". This aspect of the ground was not further developed by the homeowners.
3. The second part of the ground and the submissions in support of it are also unfocussed and undeveloped. It appears to be that, since the Appeal Panel proceeded (correctly) on the basis that the Tribunal was functus officio in the absence of a renewal application in respect of all issues except that of liability for costs, it was: "… limited to the original claim and counter claim … including the Rectification Order (2 August 2017) and the expert opinions. The remaining works as addressed at appeal were irrelevant to the exercise of the discretion as to costs save as to an assessment of the Lia Qin discretion."
4. In oral submissions, the homeowners submitted that, in determining whether the figure of $30,000 was exceeded for the purposes of r 38(2)(b), the Appeal Panel made a determination based on "evidence that was not part of the consent order" and therefore "effectively, had a hearing within the appeal". In oral submissions, the homeowners nominated [70]-[78] as the relevant parts of the Appeal Panel decision.

The builder's submissions

1. The builder submitted that the ground, as framed, did not disclose a question of law. Rather, it alleged a misapplication of the law, being the Lai Qin principles. Accordingly, leave to appeal should be refused. If leave is granted, the builder submitted that the work order was not an "event" because it "was not a result arising from a litigated outcome determined by a contested proceeding, such that the owners were [entitled] to an order for costs. Thus, no error of law is demonstrated.

Consideration

1. The issue of an "event" arose in the Appeal Panel decision in the context of the Appeal Panel reviewing the basis of the Tribunal's decision, noting that the Tribunal had referred to Lai Qin and Kiama and then concluded, in an extract recited at [50] of the Appeal Panel decision, that: "35 In the instant case I am of the view that the [builder] by consenting to the work order, although not surrendering the case, at the very least gives an undertaking to the Tribunal or submits to the Tribunal making orders against the respondent substantially in the terms or to the effect claimed by the applicants, namely the continued rectification of defective items 8, 11, 12 and 13 (see Kiama). 36 In these circumstances it is appropriate that the applicants, who have incurred costs to secure the complete and satisfactory rectification of the defective items caused by the other party be reimbursed."
2. It is apparent from this passage that the Tribunal found for the homeowners pursuant to the principle set out in Kiama at [80(a)(ii)], not [80(b)], which is surprising, since, as noted by Preston CJ of LEC, the ordinary exercise of the discretion in such a case is "the usual order as to costs, unless there is disentitling conduct on the part of the other party". The Appeal Panel noted this inconsistency, at [59].
3. The Appeal Panel found that "The original work order made by the Tribunal on 18 November 2018, however, bears hallmarks of a surrender", although it went on to find that the homeowners' refusal to allow the builder access to rectify the work, together with the nature of the scheme established by the Home Building Act 1989 (NSW), disentitled the homeowners to an award of costs.
4. That being so, the first part of ground 2A raised a matter that was irrelevant to the Appeal Panel decision. Leave to appeal is refused.
5. The second part of ground 2A was undeveloped in submissions by the homeowners. I have reviewed paragraphs [70]-[77] of the Appeal Panel decision, and do not find any error in the scope of material considered or the manner in which that was done. Again, there is no question of law and leave to appeal is refused.

Ground 3

1. There being no errors identified in grounds 1 and 2A, this ground necessarily fails. Leave to appeal is refused.

The homeowners' submissions

1. The homeowners submitted that the builder had not applied for leave to appeal to the Appeal Panel in terms of why the alleged errors were "more than just arguable", which was "a significant error of law". It was submitted that the builder's application for leave to appeal to the Appeal Panel, as filed, referred to mixed ground of law and fact, being the operation of r 38(2)(b). The homeowners submitted that the grounds would have failed on the basis of Malachite, and therefore leave should have been refused.

The builder's submissions

1. The builder submitted that an error of law, as alleged by the homeowners, did not constitute a question of law, in the requisite sense. The builder submitted that the Appeal Panel carefully considered the question of leave.

Consideration

1. Earlier in this judgment, I summarised the Appeal Panel decision in respect of the issue of the grant of leave to appeal to the builder. I am satisfied that the Appeal Panel carefully considered that issue and did not fall into error. In any event, I do not consider that in relation to this ground the homeowners have identified a question of law, as they were obliged to do. Leave to appeal on this ground is also refused.

Costs

1. The builder seeks an order for costs, in the event that the homeowners' appeal fails. In my view, that is appropriate.

Orders

1. I make the following orders: 1. Leave to appeal is refused. 2. The plaintiffs to pay the defendant's costs of the appeal.

Endnote

1. House v The King (1936) 55 CLR 499; [1936] HCA 40, at [5]. 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: 10 October 2022