Islam v Metricon Homes Pty Ltd

NCAT Appeal Panel|2018-05-07

Metricon Homes Pty Ltd (Respondent) Representation: Self-represented (Appellants) Moray & Agnew Lawyers (Respondents) File Number(s): AP 18/09300 Publication restriction: Nil Decision under appeal Court or tribunal: NSW Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Division Citation: N/A Date of Decision: 31 January 2018 Before: L Wilson, Senior Member File Number(s): HB 16/37538

Introduction

This is an internal appeal under s 80(2) of the Civil and Administrative Tribunal Act 2013 against a costs decision made in the Consumer and Commercial Division of the Tribunal on 31 January 2018.
The costs decision was made in favour of the respondent to the appeal (the builder), after the builder applied for costs following the Tribunal's dismissal of the appellants' (the homeowners') substantive application, which was brought under the Home Building Act 1989. In the substantive application, the homeowners had sought an order against the builder in the sum of $321,838. Their cause of action was for breach of statutory warranties. The homeowners did not appeal the dismissal of the application.

Tribunal proceedings and decision

The builder lodged submissions in support of its costs application on 30 September 2017. The homeowners opposed the application for costs and lodged submissions in that regard.
The Tribunal determined the costs application on the basis of the parties' written submissions.
The builder applied for indemnity costs in "the sum certain" of $36,425.22. The builder's alternative claims were expressed as follows: In the alternative Metricon seeks an order that the owners be ordered to pay Metricon's costs in a sum certain (say 80% of the cost incurred, being party/party costs of $29,140.18) or otherwise that they be payable on an indemnity basis as agreed or assessed.
The Tribunal rejected the builder's claim for indemnity costs. It awarded costs in the sum of $29,140.18, stating: 16. I find costs on the ordinary basis are 80%, which is the standard percentage for party/party costs. I considered adjusting this percentage to a higher figure given the findings I made in [the] 31 August decision, however, on balance I decided not to as the homeowners were self-represented and, giving them the benefit of the doubt, perhaps were not fully aware of how weak their case was and how their conduct of the proceedings would be viewed by the finder of fact (which is poorly). 17. I find that it is not in keeping with the quick, just or cheap resolution of these proceedings to "order costs to be assessed on the basis set out in the legal costs legislation" as is available in s 60(4)(b). I prefer to make an order determining by whom and to what extent costs are to be paid. This is in keeping with the principle in s.36.

Scope and nature of internal appeals

Internal appeals may be made as of right on a question of law, and otherwise with leave of the Appeal Panel: s 80(2) Civil and Administrative Tribunal Act 2013 (NCAT Act).
In Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 the Appeal Panel set out at [13] a non-exclusive list of questions of law: 1. Whether there has been a failure to provide proper reasons; 2. Whether the Tribunal identified the wrong issue or asked the wrong question; 3. Whether a wrong principle of law had been applied; 4. Whether there was a failure to afford procedural fairness; 5. Whether the Tribunal failed to take into account relevant (i.e., mandatory) considerations; 6. Whether the Tribunal took into account an irrelevant consideration; 7. Whether there was no evidence to support a finding of fact; and 8. Whether the decision is so unreasonable that no reasonable decision-maker would make it.
As the costs order involved the exercise of a discretion given to the Tribunal under s 60 of the NCAT Act, the appellant needed to demonstrate an error in the House v The King sense. Such an error may be demonstrated if the Tribunal acted on a wrong principle, made a material error of fact, failed to have regard to material considerations or reached a conclusion which was, on the facts, "unreasonable or plainly unjust": House v The King [1936] HCA 40; 55 CLR 499 at 505; Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274 at [45] (Heydon JA; Sheller JA and Studdert AJA agreeing).
The circumstances in which the Appeal Panel may grant leave to appeal from decisions made in the Consumer and Commercial Division are limited to those set out in cl 12(1) of Schedule 4 of the NCAT Act. In such cases, the Appeal Panel must be satisfied that the appellant may have suffered a substantial miscarriage of justice on that basis that: 1. the decision of the Tribunal under appeal was not fair and equitable; or 2. the decision of the Tribunal under appeal was against the weight of evidence; or 3. significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with).
In Collins v Urban [2014] NSWCATAP 17 (Collins v Urban), the Appeal Panel stated at [76] that a substantial miscarriage of justice for the purposes of cl 12(1) of Schedule 4 may have been suffered where: … there was a "significant possibility" or a "chance which was fairly open" that a different and more favourable result would have been achieved for the appellant had the relevant circumstance in para (a) or (b) not occurred or if the fresh evidence under para (c) had been before the Tribunal at first instance.
Even if an appellant from a decision of the Consumer and Commercial Division has satisfied the requirements of cl 12(1) of Schedule 4, the Appeal Panel must still consider whether it should exercise its discretion to grant leave to appeal under s 80(2)(b).
In Collins v Urban, the Appeal Panel stated at [84] that ordinarily it is appropriate to grant leave to appeal only in matters that involve: (a) issues of principle; (b) questions of public importance or matters of administration or policy which might have general application; or (c) an injustice which is reasonably clear, in the sense of going beyond merely what is arguable, or an error that is plain and readily apparent which is central to the Tribunal's decision and not merely peripheral, so that it would be unjust to allow the finding to stand; (d) a factual error that was unreasonably arrived at and clearly mistaken; or (e) the Tribunal having gone about the fact finding process in such an unorthodox manner or in such a way that it was likely to produce an unfair result so that it would be in the interests of justice for it to be reviewed.
In cases involving a self-represented litigant who cannot clearly articulate grounds of appeal and distinguish between questions of law and errors of fact in relation to which leave to appeal is required, it is appropriate for the Appeal Panel to consider the material provided on the appeal to identify the grounds of appeal: Prendergast at [12].

Submissions and evidence

In deciding the appeal, we have had regard to the following:

The Notice of Appeal received on 23 February 2018;
The Reply to Appeal received on 6 March 2018;
The homeowners' submissions and amendment of the grounds of appeal received on 29 March 2018;
The homeowners' submissions on jurisdiction ("the diversity jurisdiction issue"), received on 5 April 2018;
The builder's submissions and evidence received on 20 April 2018;
The homeowners' further submissions received on 30 April 2018;
The submissions and evidence filed in the Tribunal below in respect of the costs application;
The Tribunal's reasons for decision on the costs application;
The Tribunal's reasons for decision on the substantive application;
The homeowners' application to the Tribunal;
The directions made at call over on 8 March 2018; and
The oral submissions made by and on behalf of the parties at the hearing.

Notice of Appeal

The Notice of Appeal was lodged on 23 February 2018, which is within the 28 day time period specified in cl 25(4) of the Rules.

Grounds of Appeal

The ground of appeal specified in the Notice of Appeal is in summary that the amount awarded in costs is unreasonable and excessive and costs have not been validly assessed.
The homeowners also seek leave to appeal on the basis that the decision is not fair and equitable and against the weight of evidence.
In a submission dated 29 March 2018, the homeowners sought to amend their Notice of Appeal. They state that: 1) The respondent has not supported the decision of the order by NCAT Senior member L. Wilson made on 31/01/2018 (cost order) while replying the notice of appeal. Therefore the cost order can be reversed and declared as invalid. 2) As the matter involves Federal Diversity Jurisdiction, NCAT can provide us a letter that it is not going to hear the matter and thus the cost order is inoperative / invalid. 3) As the cost was not assessed ... and not fair and equitable … Please reverse the decision and declare inoperative / invalid. 4) Please consider the number 1, 2 first and if the original decision by the Senior Member L. Wilson is invalid, we may not need to go for hearing to test the third one.

Issues

In relation to the first of the amended grounds of appeal, it is clear from the Reply to Appeal that the builder opposes the appeal and supports the decision of the Tribunal for the reasons the Tribunal gave and not otherwise. There is no substance to the suggestion that the builder does not support the Tribunal's decision.
At the hearing, the homeowner pressed an argument that the Tribunal had no jurisdiction on the basis of the decisions of the NSW Court of Appeal in Burns v Corbett; Gaynor v Burns [2017 NSWCA 3 and of the High Court in Burns v Corbett [2018] HCA 15. This issue arises from the fact that the respondent is a corporation registered in Victoria. Otherwise, as articulated at the appeal hearing, the homeowner's argument on the appeal was in essence that the costs decision was unfair because a proper assessment of costs had not been undertaken.
Given that the homeowners are self-represented, it was appropriate to consider the material provided on the appeal to identify whether the homeowners have any proper grounds of appeal or a proper basis to seek leave to appeal.
Accordingly, the issues to be determined on the appeal are: 1. Did the Tribunal have jurisdiction to hear and determine the substantive and costs applications and does the Appeal Panel have jurisdiction to hear and determine the appeal? 2. On what basis could the Tribunal make an order for costs? 3. Does the Tribunal's decision to make a gross sum costs order give rise to a question of law? 4. Have the homeowners established they may have suffered a substantial miscarriage of justice because the decision was not fair and equitable or against the weight of evidence? 5. If so, should leave to appeal be granted? 6. If a question of law is established on the appeal and/or if leave to appeal should be granted, what orders should be made?

Did the Tribunal have jurisdiction to hear and determine the substantive and costs applications and does the Appeal Panel have jurisdiction to hear and determine the appeal?

In their submissions, the homeowners rely on the NSW Court of Appeal's decision in Burns v Corbett; Gaynor v Burns [2017 NSWCA 3. At the appeal hearing, the homeowner also referred to the appeal to the High Court against that decision which was recently dismissed: Burns v Corbett [2018] HCA 15. The Burns v Corbett principle is, in brief, that a State tribunal (including the Civil and Administrative Tribunal) cannot exercise judicial power to determine matters between residents of two States because of s 39(2) of the Judiciary Act 1903 (Cth) and s 109 of the Constitution (Cth).
The High Court's decision means that a State tribunal which is not a State court is not able to hear and determine disputes between residents of two different States of Australia. However, as was the case in the NSW Court of Appeal, the proceedings in the High Court were conducted on the basis that all parties agreed that NCAT was not a court. The High Court's judgment refers to that understanding: see, for example, [38], [82], [154] and [258]. Where a point is not in dispute in a case, the decision lays down no legal rule concerning that issue: Coleman v Power (2004) 220 CLR 1 at [79]. Therefore, the High Court's decision is not authority for the proposition that NCAT is not a court of a State.
Since Burns v Corbett was decided in the NSW Court of Appeal, the Appeal Panel in Johnson v Dibbin; Gatsby v Gatsby [2018] NSWCATAP 45 (Johnson v Dibbin) has found that the Tribunal is a "court of a State" which is capable of exercising federal diversity jurisdiction. While an appeal against the Appeal Panel's decision has been heard in the NSW Court of Appeal, the appeal has not yet been decided. The Appeal Panel's decision in relation to whether NCAT is a court of a State is therefore binding on us.
Even if Johnson v Dibbin were not binding on us and even if the Court of Appeal were to overturn the decision in Johnson v Dibbin, neither the Court of Appeal nor the High Court's judgments in Burns v Corbett have altered the position in respect of who is considered to be a "resident" for the purposes of diversity jurisdiction. Specifically, a company is not a resident for the purposes of s 75(iv) of the Constitution (Cth): Australasian Temperance and General Mutual Life Assurance Society Ltd v Howe (1922) 31 CLR 290; Cox v Journeaux (1934) 52 CLR 282.
This issue was recently considered by the Appeal Panel in Atlantic Caravans Pty Ltd v Armstrong & Hinterland Outdoors Pty Ltd [2018] NSWCATAP 52. We respectfully agree with and adopt the Appeal Panel's reasoning in relation to the Burns v Corbett point, set out at [18] to [32] of the reasons for decision.
Therefore, while it is not in dispute that the builder is a company which is registered in Victoria, even if the Tribunal is not a court of a State, the Burns v Corbett principle does not apply. The Tribunal had jurisdiction to hear and determine the original application and the costs application. The Appeal Panel has jurisdiction to hear the appeal.

On what basis could the Tribunal make an order for costs?

The general rule in relation to costs in the Tribunal is that unless special circumstances are established, the parties pay their own costs: s 60(1) of the NCAT Act.
However, r 38 of the Civil and Administrative Tribunal Rules 2014 (the Rules) modifies the application of s 60 in proceedings before the Consumer and Commercial Division of the Tribunal. Rule 38(2)(b) provides that in proceedings where the amount claimed or in dispute is more than $30,000, the Tribunal may award costs in the absence of special circumstances.
In this case, the amount claimed in the homeowners' application was more than $30,000. Rule 38(2)(b) of the NCAT Rules therefore applied to the builder's costs application.
In matters where r 38(2) applies, the Tribunal has a wide discretion to make an order for costs. Clause 38 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].
Where an application has been heard and determined on the merits and cl 38(2)(b) applies, the appropriate starting point for the exercise of the discretion 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 "costs follow the event" and that a party who is successful is entitled to an order for costs in its favour. This principle is 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.
In this case, the homeowners' substantive application was dismissed. There can be no doubt that the builder was the successful party. Accordingly, the builder was entitled to a costs order in its favour, absent some disentitling behaviour or some other reason not to award costs according to the established principles. There is no evidence to suggest that the builder's conduct of the proceedings disentitled it to an order for costs or that there was any other reason to deprive the builder of a costs order in its favour. We see no error in the Tribunal determining that the homeowners should pay the builder's costs of the proceedings.
Section 60(4) of the NCAT Act provides: 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.
The Tribunal decided that the homeowners should be ordered to pay costs on an ordinary basis, rather than on the indemnity basis sought by the builder. The builder did not appeal the decision to award costs on the ordinary basis. We see no error in the Tribunal's decision to refuse the application for indemnity costs.

Does the Tribunal's decision to make a gross sum costs order give rise to a question of law?

In our view, the real issue in this appeal is the Tribunal's decision to make a gross sum costs order. While we agree that in the exercise of its broad discretion in relation to costs and in accordance with s 60(4), the Tribunal has the power to make a gross sum costs order, the issue is whether doing so in this case gives rise to a question of law and in particular whether it gives rise to a House v The King error.
In making a decision in relation to the costs application, in addition to its decision in the substantive proceedings and the evidence given and submissions made in those proceedings, the Tribunal had before it the parties' written submissions on costs and the annexures to those submissions.
Attached to the builder's costs submissions were: 1. Four tax invoices from its solicitors, Moray & Agnew, dated 17 February 2017, 29 May 2017, 29 August 2017 and 11 September 2017, which totalled $29,952.22 excluding GST; and 2. Invoices from the builder's expert witness Mr Ney dated 25 October 2016, 1 September 2017 and 13 September 2017, which totalled $6,500 excluding GST, which totalled $6,500 excluding GST.
The builder submitted that it was not claiming payment of GST as it was entitled to an input tax credit on GST charged on costs and disbursements.
At [14] of its submission on costs, the builder sought an order that the homeowners pay its costs "in the sum certain of $36,425.22", which we note is the total of the amount in the invoices referred to above; that is, a sum to which GST had not been applied. The builder's first alternative position was for payment of its costs "in a sum certain (say 80% of the costs incurred, being party/party costs of $29,140.18)". We note that sum equals 80% of the total of both legal costs and disbursements.
The builder made no submissions as to why a gross sum costs order would be the appropriate order to make in the circumstances of the case and, other than copies of the invoices, no evidence was provided in support of the claim for such an order.
The Tribunal's reason for making a gross sum costs order is found at [17] of the reasons for decision, which is set out at [8] above. The Tribunal indicates that it made the order because it was "not in keeping with quick, just or cheap resolution of these proceedings" for an order to be made that costs be assessed.
The circumstances in which a gross sum costs order can be made have been extensively considered judicially. In Hamod v State of New South Wales (No 13) [2009] NSWSC 756 (5 August 2009), Harrison J cited Einstein J's summary of the relevant principles in Idoport Pty Limited v Donald Robert Argus [2007] NSWSC 23, at [9]: [9] For present purposes it seems convenient to commence with a recitation of the principles which inform the exercise of the discretion: i. the purpose of the rule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation: Beach Petroleum NL v Johnson (1995) 57 FCR 119, Von Doussa J page 265: [following Purchase J in Leary v Leary [1987] 1 All ER 261 who described the purpose of the rule allowing the fixing of a gross sum as 'the avoidance of expense, delay and aggravation involved in protracted litigation arising out of taxation' (All ER page 265)]; ii. the touchstone requires that the Court be confident that the approach taken to estimate costs is logical, fair and reasonable: Beach Petroleum at [16]; iii. the fairness parameter includes the Court having sufficient confidence in arriving at an appropriate sum on the materials available: Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738, per Giles JA at para [22]; [following (Wentworth v Wentworth (CA, 21 February 1996, unreported, per Clarke JA) and adopted in Sony Entertainment v Smith (2005) 215 ALR 788; [2005] FCA 228; BC200500963 at para [199]; iv. a gross sum assessment, by its very nature, does not envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place: Harrison v Schipp at para [22]; v. the gross sum 'can only be fixed broadly having regard to the information before the Court': Beach Petroleum at 124; [In Hadid v Lenfest Communications Inc [2000] FCA 628 at [35] it was said that the evidence enabled fixing a gross sum 'only if I apply a much broader brush than would be applied on taxation, but that ... is what the rule contemplates'.] vi. nevertheless the power to award a gross sum must be exercised judicially, and after giving the parties an adequate opportunity to make submissions on the matter: Leary v Leary [1987] 1 WLR 72 at 76, and Beach Petroleum NL v Johnson (No.2) (1995) 57 FCR 119 at 120'; vii. In terms of the necessity for the approach taken to be logical, fair and reasonable, Von Doussa J in Beach Petroleum NL & Anor v Johnson & Ors (No 2) (1995) 57 FCR 119, put the matter as follows, at paras [16]: 'On the one hand the Court must be astute to prevent prejudice to the respondents by overestimating the costs, and on the other hand must be astute not to cause an injustice to the successful party by an arbitrary 'fail safe' discount on the cost estimates submitted to the Court: Leary v Leary at 265.' ...
These principles were referred to by the NSW Court of Appeal in Bechara trading as Bechara and Company v Bates [2016] NSWCA 294, which stated, at [12] to [14]: 12. The power to award a lump-sum should only be exercised when the Court considers that it can do so fairly between the parties and where an appropriate sum can be determined from the available materials: Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 at 742-723 [21]-[22]; Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 123. 13. The power may also be exercised where a party's conduct has unnecessarily contributed to the costs of the proceedings, especially where the costs incurred have been disproportionate to the result of the proceedings: Hamod v New South Wales [2011] NSWCA 375 at [818] per Beazley JA (Giles and Whealy JJA agreeing). 14. A "broad brush" approach is appropriate. To require the same or similar level of detail as in a formal costs assessment would defeat the purpose of the lump sum order: Auspine Ltd v Australian Newsprint Mills Ltd (1999) 93 FCR 1; [1999] FCA 673 at 5 [16]; Penson v Titan National Pty Ltd (No 3) [2015] NSWCA 121 at [7]. 15. The courts have typically applied a discount in assessing costs on a gross sum basis: Hamod v New South Wales at [814].
In this case, as noted above, the builder made no submissions in respect of the applicable principles and there was no evidence before the Tribunal in respect of legal costs other than tax invoices that were not itemised. In such circumstances, we are not satisfied that on the available material the Tribunal could be confident that it had arrived at an appropriate sum. In our view, for the Tribunal to be confident that the legal costs claimed were reasonable it would need, at a minimum, a narrative of the work that had been undertaken on behalf of the builder, with information about the rates at which particular work was charged.
In addition, no evidence was provided to support the builder's submission that it was appropriate to award 80% of the invoiced sum. There was therefore no evidence before the Tribunal to support a conclusion that, as found by the Tribunal, "80% … is the standard percentage for party/party costs". Nor was evidence provided to support a conclusion that a 20% discount was the appropriate discount to apply.
We conclude that the Tribunal failed to have regard to material considerations relevant to the exercise of the discretion to make a gross sum costs order and made such an order that was unsupported by cogent evidence. We are satisfied that this constitutes an error of law in the House v The King sense.
Further, the Tribunal has not adequately explained why, in the light of the authorities relevant to the issue, such a decision was made in the circumstances of this case.
In relation to adequacy of reasons, the requirement that reasons for decision be adequate has been extensively considered both judicially and by the Appeal Panel.
In Pollard v RRR Corporation Pty Limited [2009] NSWCA 110 McColl JA, with whom Ipp JA and Bryson AJA agreed, identified the principles relevant to the issue of adequacy of reasons. Those observations were summarised as follows in Moussa Enterprises Pty Ltd v Stanford [2015] NSWCATAP 99 at [30]: (1) The giving of adequate reasons lies at the heart of the judicial process. Failure to provide sufficient reasons promotes "a sense of grievance" and denies "both the fact and the appearance of justice having been done", thus working a miscarriage of justice. (2) The extent and content of reasons will depend upon the particular case under consideration and the matters in issue. (3) While a judge is not obliged to spell out every detail of the process of reasoning to a finding, it is essential to expose the reasons for resolving a point critical to the contest between the parties. (4) The reasons must do justice to the issues posed by the parties' cases. Discharge of this obligation is necessary to enable the parties to identify the basis of the judge's decision and the extent to which their arguments had been understood and accepted. (5) Because a primary judge is bound to state his or her reasons for arriving at the decision reached, the reasons actually stated are to be understood as recording the steps that were in fact taken in arriving at that result. Where it is apparent from a judgment that no analysis was made of evidence competing with evidence apparently accepted and no explanation is given in the judgment for rejecting it, it is apparent that the process of fact finding miscarried.
In this case, we do not consider that the Tribunal's finding that "it would not be in keeping with the quick, just or cheap resolution of these proceedings" to order that costs be assessed does justice to the parties' cases or properly identifies the basis of the Tribunal's decision. While the guiding principle set out in s 36(1) of the NCAT Act - that is, the facilitation of the just, quick and cheap resolution of the real issues in the proceedings - is of paramount importance to the Tribunal's practice and procedure, it cannot of itself explain why the Tribunal makes a particular decision or exercises its discretion in a particular way. Reiteration of the guiding principle is not a substitute for making findings of fact based on evidence and while the guiding principle is relevant to the exercise of a discretion, it does not in general fully explain why a particular decision was made. In this case, the guiding principle is clearly not the only factor the Tribunal was required to consider in determining whether to make a gross sum costs award.
Overall, we conclude that the Tribunal's failure to apply the principles relevant to the making of a gross sum costs order and its failure to adequately explain the basis on which it exercised its discretion to do so amount to questions of law.
The homeowners have not specifically articulated these issues as grounds of appeal. However, the homeowners are self-represented and, as noted above, it was appropriate for us to consider the material provided in order to identify the grounds of appeal. The builder was given an opportunity to make submissions in response to the issues we raised at the hearing.
We find that questions of law arise in respect of the Tribunal's gross sum costs order. We allow the appeal in part. In doing so, we have not disturbed the Tribunal's findings that the builder is entitled to costs or that costs should be awarded on the ordinary basis.
As we have allowed the appeal on a question of law, it is not necessary for us to consider whether the homeowners may have suffered a substantial miscarriage of justice because the decision was not fair and equitable or against the weight of evidence or, if so, whether leave to appeal be granted.

What orders should be made?

Having allowed the appeal in part, we are satisfied that we should substitute a decision for the decision under appeal. We have the power to do so under s 81(2) of the NCAT Act. In making a decision, we have considered the material before the Tribunal when it made a decision and the oral submissions of the parties made at the appeal hearing.
The builder presses the making of a gross sum costs order, arguing that the costs awarded are reasonable and that it would be unnecessarily expensive to go through the assessment process. The builder noted that in submissions that the homeowners conceded that $500 per hour is a reasonable hourly rate and stated that legal costs were charged at no more than $495 per hour.
The homeowners submitted that the costs order should be set aside. However, this appeared to be pressed on the Burns v Corbett jurisdictional point. The homeowners did not make relevant submissions as to what order should be substituted for the order made by the Tribunal in the event that we allowed the appeal, but found that the homeowners were liable to pay the builder's costs.
In the absence of evidence including a narrative setting out the work and the rates charged for that work, together with evidence as to the appropriateness of any particular discount to be applied, we cannot estimate costs in a manner that is logical, fair and reasonable. We are not satisfied that there is a sound evidentiary basis on which we could determine the reasonable and necessary costs of the proceedings, even by applying the "broad brush" approach contemplated by authorities such as Beach Petroleum NL v Johnson (1995) 57 FCR 119 and Hadid v Lenfest Communications Inc [2000] FCA 628.
We conclude that the proper exercise of the discretion is not to make a gross sum costs order, but to order the homeowners to pay the builder's costs as agreed or assessed.
We accept that in the absence of an agreement, making such an order will put the parties to the expense and time associated with having costs assessed. However, we are not satisfied that the builder has established that the costs of assessment would be disproportionate to the costs of the proceedings or that there is another sound reason for not ordering that costs be paid as agreed or assessed.
At the beginning of the hearing, we placed the homeowners on notice that an order that costs be paid as agreed or assessed could ultimately lead to a costs liability greater than that ordered by the Tribunal. With that in mind, the parties are strongly encouraged to settle their costs dispute.

Costs

We did not discuss costs of the appeal with the parties.
Rule 38 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: (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.
Rule 38A provides: 38A Costs in internal appeals (1) This rule applies to an internal appeal lodged on or after 1 January 2016 if the provisions that applied to the determination of costs in the proceedings of the Tribunal at first instance (the first instance costs provisions) differed from those set out in section 60 of the Act because of the operation of: (a) enabling legislation, or (b) the Division Schedule for the Division of the Tribunal concerned, or (c) the procedural rules. (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.
Rule 38A applies to the present appeal because: 1. It was lodged after 1 January 2016; and 2. The first instance cost provisions differ from those set out in s 60 because of the operation of the "procedural rules" in that: 1. the proceedings in the Tribunal were for the exercise of functions under the Home Building Act 1989; 2. Schedule 4, cl 3 of the NCAT Act allocates such proceedings to the Consumer and Commercial Division; 3. In those proceedings "the first instance costs provisions" included r 38 of the NCAT Rules, which modifies the operation of s 60 (1).
In the present appeal, r 38A(2) requires us to apply the first instance costs provisions, which is s 60 as relevantly modified by r 38(2), when deciding whether to award costs of the appeal.
Rule 38(2) allows us to award costs in the absence of special circumstances if either of the requirements in (a) or (b) of that subrule is satisfied. The requirement in r 38(2)(a) has not been satisfied since the Appeal Panel has not made an order under cl 10(2) of Sch 4.
Therefore, we can: 1. Award costs even in the absence of special circumstances under r 38(2)(b) if the amount claimed or in dispute in the proceedings is more than $30,000; or 2. Award costs under s 60(2) if the amount claimed or in dispute is $30,000 or less, but only we are satisfied that there are special circumstances warranting such an award.
In Allen v TriCare (Hastings) Ltd [2017] NSWCATAP 25 an Appeal Panel found at [43]: In the case of an internal appeal, the "amount claimed … in the proceedings" can be determined by considering what orders the appellant seeks on the appeal. If those orders sought include an order that the respondent pay a sum of more than $30,000, expressly or impliedly, then the Tribunal should conclude that the amount claimed in those proceedings was more than $30,000. If the substantive orders sought do not involve any express or implied claim to any amount, it is difficult to see how there is any "amount claimed" for the purposes of r 38(2)(b).
The same reasoning applies when what is at stake in an internal appeal can be characterised not as an amount claimed in the proceedings but as an "amount …. in dispute". In this case, the homeowners have appealed the order that they pay the respondent's costs in the sum of $29,140.18 and seek to have that order set aside. What is therefore in dispute in the proceedings is $29,140.18.
As the amount in dispute in the proceedings does not exceed $30,000, we can only award costs if we are satisfied that there are special circumstances warranting such an award.
In this case, our preliminary view is that there are no special circumstances warranting an award of costs and we have therefore ordered the parties to pay their own costs. In reaching that conclusion, we have considered the factors listed in s 60(3). We have also considered that the homeowners have only had a partial success on the appeal. They remain liable to pay the builder's costs as agreed or assessed. Our preliminary view is subject to any application that may be made by the parties. We have made orders accordingly.

Orders 1. The appeal is allowed in part. 2. The order made by the Tribunal on 31 January 2018 in proceedings HB 16/37538 is set aside. 3. In substitution for that order the following order is made: "Tariqul Islam and Rashada Khatun are to pay the costs of Metricon Homes Pty Ltd on the ordinary basis as agreed or as assessed, in accordance with the Legal Profession Uniform Law Application Act 2014". 1. Subject to order 5, the parties are to pay their own costs of the appeal. 2. In the event that either party seeks a different appeal costs order, the following directions apply: 1. The applicant for costs (costs applicant) must file and serve any application within 7 days after these orders. 2. The respondent to the costs application must file and serve evidence and submissions in reply 14 days from the date of these orders. 3. The costs applicant must file and serve any submissions in response within 21 days from the date of these orders. 4. Upon filing an application in accordance with order 5(a), order 4 will cease to have effect. 5. Submissions must address whether an order should be made under s 50(2) of the Civil and Administrative Tribunal Act, 2013 dispensing with a hearing.

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: 18 May 2018

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