This is an internal appeal under s 80(2) of the Civil and Administrative Tribunal Act 2013 (the NCAT Act) against a decision made in the Consumer and Commercial Division of the NSW Civil and Administrative Tribunal (NCAT) on 12 June 2024 (the Decision).
We made the principal decision in this matter on 30 October 2024 in Houston v Phillips trading as Arise Building Services [2024] NSWCATAP 213 (the principal decision). This decision is a determination of costs applications made by both parties.
The Appellant is the Home Owner (the Owner). The Owner had engaged the Respondent Builder (the Builder) to undertake residential building works in Canyonleigh, NSW under a NSW Residential Building Contract for New Dwellings (HIA) (the contract). The contract included a progress payment schedule in eight stages.
In the initiating proceedings in the Consumer and Commercial Division (CCD) (2022/00449356), the Builder claimed that the Owner's failure to pay the second progress claim, as well as certain conduct by the Owner, constituted repudiation of the contract which entitled the Builder to terminate. The Builder sought orders for the Owner to pay $65,000 and orders that the Owner had repudiated the contract.
In her cross-claim (2022/00438274), the Owner claimed that she had paid the Builder $29,106 in advance for blackbutt timber flooring to be deducted from future progress payments. The Owner sought orders to deliver, return or replace specified goods to the approximate value of $30,000 (specifically for the delivery of the blackbutt flooring) and orders that she did not have to pay the amount of $65,000. Other orders were also sought in the Owner's Points of Cross Claim.
In its decision, the Tribunal at first instance (the Tribunal) noted that the Owner's claim had been amended and increased to a claim in excess of $500,000, but had abandoned any completion costs that resulted in the claim exceeding the jurisdictional limit of $500,000.
The Tribunal heard both matters together. The Tribunal found that the Owner had repudiated and the Builder had validly terminated the contract. The Tribunal ordered that the Owner was to pay the Builder $39,260.24 in the initiating proceedings and dismissed the cross-claim.
The Owner appealed both of these orders and the consequent costs orders made by the Tribunal.
By way of amended Grounds of Appeal, the Owner challenged the Tribunal's decision under six main themes.
1. Ground 1: whether the Tribunal erred in failing to award 15% preliminaries, 15% margin and GST ($6,910.86) on the defects as found (where those were agreed).
2. Grounds 2, 3 and 3A: whether the Tribunal erred by failing to resolve the contest as to how the $29,106.00 paid in advance by the Owner for blackbutt timber flooring should be dealt with.
3. Ground 4: whether the Tribunal applied a wrong principle of law in not allowing the Owner's claim for defective works because the Builder had terminated the contract.
4. Ground 5 & 5A: whether the Tribunal failed to resolve the contest regarding the Owner's overpayment claim or otherwise applied the wrong principle of law in not allowing the Owner's claim for overpayment because the Builder had terminated the contract.
5. Ground 6: whether the Tribunal failed to give adequate reasons when determining (i) the addition of preliminaries, margin and GST to the defects as found (ii) the blackbutt flooring issue (iii) the defects claim and (iv) the overpayment claim.
6. Ground 7: contested as against the weight of the evidence and resulting in a decision that was not fair and equitable:
1. the finding that the Owner did not establish the balance of the defects claim and
2. the finding with respect to the blackbutt flooring.
Ground 6 overlapped with grounds 1 - 5 and was considered alongside each of those grounds.
In the principal decision we upheld the appeal on all grounds and set aside the Tribunal's decision. We determined that the Owner had established errors in the Decision on questions of law, as set out at paragraph [26] of the principal decision. Certain questions, including the question of costs in the Builder's claim and the Owner's cross-claim, were remitted to the Tribunal for determination. We also made orders for submissions regarding costs in the appeal.
Both the Owner and the Builder made submissions as to costs and submissions in reply.
Our orders regarding costs submissions required that the costs application be lodged within 14 days after the date of the orders (13 November 2024); submissions in response to the cost applicant's submissions be lodged within 28 days after the date of the orders (27 November 2024) and submissions in reply to the cost respondent's submissions be lodged within 35 days of the date of the orders (5 December 2024). Both costs applications were lodged on 13 November 2024. The Builder's submissions in response were dated 27 November 2024 and lodged on 29 November 2024 (under cover of letter that the Respondent's representative was regional and unable to get to Sydney on 27 November 2024). The Owner's submissions in response to the Builder's submissions were lodged on 5 December 2024.
Although the Builder's submissions were submitted out of time and the Owner's submissions in reply appear to address the Builder's costs application rather than the submissions in reply, there has been no objection by either party to these submissions being considered and the Owner's submissions in reply do not raise any new issues. We have taken into account all relevant submissions in reaching our decision on costs.
[2]
The Owner's submissions on costs
The Owner sought an order that the Builder pay the Owner's costs of the proceedings on the ordinary basis. The Owner submitted that it was undisputed that the amount claimed or in dispute in the proceedings at first instance was more than $30,000. The Owner further submitted that the amount claimed or in dispute in the appeal was also more than $30,000 and, as a result, the usual considerations as to costs were applicable.
The Owner submitted that the Appeal Panel should award costs in its favour because the Owner was entirely successful in the appeal. Grounds 1, 4, 5, 5A and 6 had been upheld. While the determination of grounds 2, 3 and 3A had been rendered academic by reason of the fact that the Builder had delivered the blackbutt flooring, the Owner had still obtained relief in that the Appeal Panel made an order with respect to the blackbutt flooring that ought to have been made by the Tribunal below.
The Owner submitted that there was no reason to depart from the usual rule that the Owner as the successful party should be awarded her costs. There were also no factors in the appeal proceedings which would warrant a departure from the usual principle that costs follow the event. The Owner did not participate in any disentitling conduct so as to prevent the Appeal Panel from making any costs order in her favour. There were also no factors to militate against the Owner having a costs order in her favour as agreed or as assessed in accordance with the applicable costs assessment legislation.
No concessions of any kind were made by the Builder with respect to the grounds pursued by the Owner. Each ground was opposed by the Builder up to and at the final hearing. Whatever the outcome may be after the remitter, it had no bearing on the costs incurred by the Owner in the appeal proceedings, being separate and distinct proceedings that the Owner pursued to final hearing and ultimately succeeded.
In reply to the Builder's submissions on costs, the Owner submitted that the Appellant had been entirely successful with respect to the appeal and the outcome of any remitter was not a matter that was before the Appeal Panel. The appeal was a separate and distinct proceeding brought by the Appellant to the remitted proceedings below and costs of the appeal should be awarded to the Appellant who was entirely successful. No apportionment issue arose. The Builder opposed all grounds and lost on all grounds.
[3]
The Builder's submissions on costs
The Builder outlined the dispute in the Tribunal below and noted that it was mainly concerned with who had terminated the contract lawfully. That finding had been made in favour of the Builder and was unchallenged by the Owner on appeal. In the Tribunal below, the Senior Member dismissed the Owner's case with costs. The Builder's combined costs in the Tribunal below were estimated at $250,000.
On appeal, the Builder had submitted that the question of over payment should be remitted and that submission had been upheld by the Appeal Panel. The Builder submitted that, at best, what was to be remitted for the Owner was approximately $60,739.93 in alleged overpayments, less $32,289.15, less $1200 in delivery costs being a combined total of $33,589.15 payable to the Builder for the combined total of delivery costs and the outstanding progress payments.
The Builder submitted that the outcome on remitter might be that none of the defects in items numbered 1, 3 and 7 found in favour of the Owner and the claim for overpayment may be dismissed resulting in an outcome such that the appeal was successfully brought only in respect of approximately $6,910.86 in reduction of the amount of $39,260.24 previously determined as payable to the Builder. The Builder submitted that the outcome of the remitted proceedings was material to formulating a cost finding and the most appropriate order could be for the costs to be remitted to the original Tribunal.
A second possibility could be that, as in financial terms the Builder was successful in respect of the blackbutt flooring and the request to remit the defects and the overpayment to the Tribunal below, the costs should be those of the respondent Builder. Alternatively the Tribunal may find a percentage allocation of costs, say for instance 60% of the costs of the appeal, were to be paid by the Owner to the Builder or, vice versa, in respect of the matters that succeeded on appeal being the preliminaries, margins and GST. Or the Appeal Panel might dispose of appeal costs by finding that each party pays his or her own costs of the appeal.
In reply to the Owner's submissions on costs, the Builder submitted that he had sought indemnity costs in the proceedings on the basis of the failure by the Owner to accept any of the four Calderbank offers made by the Builder. The Builder submitted that, even at its highest, the Owner did not achieve a better result in the appeal than the purported Calderbank offers as the remitted matters were not determined.
The Builder submitted that the Owner was not wholly successful in the appeal apart from as the amount of $6,971.09. That amount simply reduced the sum due to the Builder of $39,260.24 to $32, 289.15. The remaining issues were not a "win" as they were all remitted primarily on the basis that the Senior Member did not explain his reasoning for the original findings.
The Builder further submitted that the Appeal Panel should take into account the Owner's failure to pay the Builder's delivery costs of the blackbutt flooring. This failure or refusal was a relevant factor for the Appeal Panel to take into account against any award of costs in favour of the Owner.
[4]
The issues
The following issues arise for determination:
1. Should a hearing on costs be dispensed with in accordance with s 50(2) of the Civil and Administrative Tribunal Act 2013 (the NCAT Act)?
2. Which legislative provisions and legal principles apply to the costs application?
3. Should the Tribunal make a costs order?
4. Who is the successful party?
5. On what basis should any costs order be made?
[5]
Should a hearing on costs be dispensed with in accordance with s 50(2) of the NCAT Act?
Under s50(3) of the NCAT Act, the Tribunal may not make an order dispensing with a hearing unless the Tribunal has first afforded the parties an opportunity to make submissions about the proposed order and taken the submissions into account. This also applies to the Appeal Panel in relation to an appeal.
Both parties have provided written submissions and both parties agree that the hearing of the costs application should be dispensed with.
The parties have been afforded an opportunity to make submissions. The costs issues have been thoroughly addressed in the parties' written submissions and can be adequately determined in the absence of the parties by considering those written submissions and any accompanying documentation. Accordingly it is consistent with the Tribunal's guiding principle under s 36 of the NCAT Act to facilitate the just, quick and cheap resolution of the real issues in the proceedings to dispense with a hearing in relation to costs.
[6]
Which legislative provisions and legal principles apply to the costs application?
[7]
NCAT Act
Under ss 60(1) and 60(2) of the NCAT Act, each party to proceedings in the Tribunal 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.
In proceedings commenced in the CCD, 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.
[8]
NCAT Rules
Rule 38 of the 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.
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.
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].
It is uncontested that the amount claimed or in dispute in each proceeding in the Tribunal below and the amount claimed or in dispute in the Appeal Panel was more than $30,000. Rule 38A applies in these proceedings and the discretion to award costs in enlivened.
[9]
Should the Tribunal make a costs order?
The findings of the Appeal Panel in Vella v Mir (No 3) [2020] NSWCATAP 17 (Vella (No 3)) at [28]-[30] are relevant on whether the Tribunal should exercise its discretion to award costs, as follows
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.
As rule 38A applies, in ordinary circumstances, costs would follow the event and award of costs would be made to the successful party.
[10]
Who is the successful party?
The Owner submitted that she had been successful on every ground and should be awarded her costs on the ordinary basis.
The Respondent set out his estimated costs in establishing that the Owner had rescinded the contract and the Builder had validly terminated in the proceedings in the Tribunal below. The Respondent also contended that he had been successful with regard to preliminaries, margins and GST. Most other matters were to be determined on remitter and the outcome of any remitter proceedings could not yet be established. Accordingly the Owner had not "won" anything.
Although we found that certain matters would need to be determined on remitter, the question to be asked in determining whether the Owner was the successful party was considered by Ward J (as she then was) in Quest Rose Hill Pty Ltd v White [2010] NSWSC 1190 (at [67]), to include the question "Had the plaintiff won anything of value or anything he could not have won without fighting the action through to a finish?" Here, although some concessions were made at the Appeal Panel hearing, the Builder contested every ground. The Owner was required to argue every ground and succeeded on every ground.
The Owner did not contest the Tribunal's finding regarding the valid termination of the contract and there was no time spent on that point in the appeal.
The Owner is the successful party in the appeal, whatever the subsequent outcome on remitted issues may be. Those remitted issues include the costs of the original proceedings.
[11]
On what basis should any costs order be made?
The Builder in the submissions in reply submitted that it had sought indemnity costs in the Tribunal below on the basis of the Owner's purported failure to accept any of the Builder's four Calderbank offers.
The application of Calderbank offers was considered by the Appeal Panel in Khong v Southern Cross Joinery Pty Ltd [2021] NSWCATAP 392 at [29] - [31] as follows:
Calderbank offers
29. Calderbank offers are made pursuant to the principles set out in Calderbank v Calderbank [1976] Fam Law 93; 3 All ER 333; 3 WLR 586. Such principles have been the subject of extensive judicial and Tribunal consideration. In Singapore Airlines Cargo Pty Ltd v Principle International Pty Ltd (No 2) [2017] NSWCA 340, the NSW Court of Appeal stated (at [30]):
"Calderbank offers are a well-established means of parties seeking to compromise proceedings in circumstances where, provided that the offer is a genuine offer of compromise and the opposing party unreasonably rejects the offer, the court may, in the exercise of its discretion, make a special costs order in favour of the offeror".
However, here it is unnecessary to even consider whether the purported offers meet the principles established in cases such as Miwa Siantan Properties Pty Ltd (No 2) [2011] NSWCA 344 and Nu Line Construction Group Pty Ltd v Fowler [2012] NSWSC 816, for the mere fact that the purported offers were dated 8 December 2021, 12 July 2023, 2 August 2023 and 9 August 2023. All four offers predated the decision of the Tribunal below being 12 June 2024 and none is relevant to the proceedings in the Appeal Panel, for which we are currently considering the parties' costs applications. The Builder is not entitled to indemnity or ordinary costs on the basis of any of those offers.
The Builder submitted that we should take into account the Owner's failure to pay the delivery charges for the blackbutt flooring in awarding costs. However, without making any finding as to whether or not the delivery costs have been paid, this does not demonstrate disentitling conduct in the proceedings which would have increased the Builder's costs or would serve to deprive the Owner of her costs.
Accordingly, the Owner is awarded costs on the ordinary basis, as agreed or, if not agreed, then 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.
[12]
Orders
We make the following orders:
1. A hearing on costs is dispensed with in accordance with s 50(2) of the Civil and Administrative Tribunal Act 2013.
2. The Respondent is to pay the Applicant's costs of, or incidental to, the appeal with such costs, if not agreed, to be assessed in accordance with the Legal Profession Uniform Law Application Act 2014 (NSW).
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: 31 January 2025