Johnson T/As One Tree Constructions & Ors v Lukeman & Anor

NCAT Appeal Panel|2017-02-28

Solicitors: Maguire & McInerney Lawyers (Appellants) Button Hawdon &McMahon (Respondents) File Number(s): AP 16/36001 Decision under appeal Court or tribunal: NSW Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Division Citation: [2016] NSWCAT Date of Decision: 08 July 2016 Before: P Boyce, Senior Member File Number(s): HB 15/35078

Background

The underlying dispute concerns an application made by the respondents (the home owners) against the appellants (the builders) for defective building works. At first instance, the Tribunal ordered the appellants to pay the sum of $143,960 in respect of defective building works: 8 July 2016 (the First Instance proceedings).
On 21 December 2016, the Appeal Panel allowed an appeal against the First Instance proceedings: AP/36001 Johnson v Lukeman [2016] NSWCATAP 272 (the Appeal Decision). Notwithstanding that the Appeal was allowed, not all of the grounds relied upon by the appellants were upheld. Accordingly, the Appeal Panel directed the parties to provide submissions on costs and to indicate whether an oral hearing on costs was necessary.
The parties each filed written submissions seeking a costs order in their favour; and each indicated that an oral hearing was not sought.
At [44] of the Appeal Decision, the Appeal Panel highlighted that subsequent to the hearing of the Appeal, a costs order was made in the First Instance proceedings. Those orders were not the subject of the Appeal and this decision concerns only the costs of the Appeal.

Legislation

Section 60 of the Civil and Administrative Tribunal Act 2013 (NSW) (the Act) provides as follows: 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: 1. whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings, 2. whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings, 3. 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, 4. the nature and complexity of the proceedings, 5. whether the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance, 6. whether a party has refused or failed to comply with the duty imposed by section 36 (3), 7. any other matter that the Tribunal considers relevant. 1. If costs are to be awarded by the Tribunal, the Tribunal may: 1. determine by whom and to what extent costs are to be paid, and 2. 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 parties agree that, despite s 60(2) of the Act, by virtue the Civil and Administrative Tribunal Rules 2014 (NSW) (the Rules), the Appeal Panel has the discretion to award costs without needing to be satisfied that there are special circumstances.
Rule 38A of the Rules provides: (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.
The First Instance proceedings (being an internal appeal) were filed on 5 August 2016. Accordingly the costs provisions that applied at first instance are to apply to the Appeal.
At first instance, the costs provision that applied was found in r 38 of the Rules. It provides: (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.
The parties submitted and the Appeal Panel accepts that it is appropriate to apply r 38 of the Rules.
As explained in Allen v TriCare (Hastings) Ltd [2017] NSWCATAP 25 at [46], an amount claimed or in dispute on appeal may be determined as follows: 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.
The corollary of this is that if an appellant seeks to disturb an order to pay an amount in excess of $30,000, the test is satisfied.
Here, at first instance, the Tribunal ordered the appellants to pay an amount in excess of $30,000. On the Appeal, the appellants challenged this order. Accordingly, the amount in issue on the Appeal is in excess of the threshold and the Appeal Panel may make a costs order without regard to whether there are special circumstances.

The Decision on Appeal

The appellants raised, in essence, three grounds of appeal. The first ground concerned the Tribunal's refusal to adjourn the First Instance proceedings. The second ground concerned the adequacy and sufficiency of the building report prepared by the respondents' expert witness. The third ground concerned the failure of the Tribunal to consider section 48MA of the Home Building Act 1989 (NSW) (the Building Act): that the Tribunal have regard to the principle that rectification of the defective work is the preferred outcome.
The Appeal Panel dismissed the first two grounds but upheld the third.

Submissions of the Parties

The appellants and the respondents sought a costs order. The appellants submitted that costs should follow event and the respondents sought 50% of their costs of the Appeal.
The appellants relied on the principle that "the usual order for costs" is that a successful party should be entitled costs. In Latoudis v Casey (1990) 170 CLR 534, at 567-8 McHugh J said: "But even when the discretion [to award costs] is uncontrolled, civil courts act on the basis that a successful party has a reasonable expectation of obtaining an order for costs and that the discretion to refuse to award costs should not be exercised against a successful party except for reason connected with the case."
The appellants accepted that the usual order may be displaced where the party has achieved overall success, but been unsuccessful on some issues and when those issues have significantly added to costs: Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 (Bostik) at [38]. "Where there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed. Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed. … In relation to trials it has been said that it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument. …."
However, the appellants contended that the grounds upon which they were unsuccessful did not add to the hearing time or to the materials before the Appeal Panel. It was submitted, in particular, that the expert evidence (the subject of ground 2) would have been necessary in order for the Appeal Panel to be satisfied that a rectification order could be made.
The respondents relied on the passage from the Appeal Panel in Thompson v Chapman [2016] NSWCATAP 6 as correctly identifying the principles: Rather, in circumstances where there is a general discretion to award costs, the correct statement of principle is that the Tribunal in exercising its discretion is to have regard to the nature of the proceedings before it and all relevant factors arising in connection with those proceedings for the purpose of determining what order for costs, if any, should be made. Each of Regulation 20 of the CTTT Regulation and Rule 38 provide a general discretion in respect to the award of costs. The starting point in exercising such discretion is that the "usual order for costs" is that a successful party should be entitled to an order for costs in their favour: see Latoudis v Casey [1990] 170 CLR 534 per Mason CJ at 554 and Oshlack v Richmond River Council per McHugh J at 97. The reason for such an order is that it is appropriate for the party who incurred costs caused by the other party in litigation to be reimbursed. Further, an award of costs is by way of an indemnity to the successful party and not as punishment of the unsuccessful party: see Latoudis v Casey per Mason CJ at 543 and McHugh J at 567 and in Oshlack v Richmond River Council per Brennan CJ at 75. Where there is a general discretion for costs there is no absolute rule that, absent disentitling conduct, a successful party is to be compensated by the unsuccessful party nor is there any rule that a successful party might not be ordered to bear the costs of an unsuccessful party: see Oshlack v Richmond River Council per Gaudron and Gummo JJ at 88 and Kirby J at 121 - 123. The factors to be considered in awarding costs in a particular case are not to be confined as to do so would constrain the general discretion. However it is clear from the authorities that factors that might influence whether the usual order for costs should apply and, if so, to what extent include: Whether, by reason of the relative success of the parties on different issues and the time taken to determine those that an order for costs based on issues should be made: see for example Bostick Australia Pty Ltd v Liddiard (No 2) [2009] NSWSCA 304; and Whether, by reason of the nature of the proceedings the usual rule should otherwise be displaced in whole or in part: see Oshlack v Richmond River Council per Gaudron and Gummo JJ at 41 - 44. An example of such an exception was the case of Dee-Tech, a claim for relief against forfeiture. In that case the Court determined that the entitlement of the lessee (Dee-Tech) to exercise an option for renewal required the favourable exercise of discretion under s 133(F) of the Conveyancing Act 1919. In that case, White J said at [69]: The fact that Dee-Tech was in breach of the lease and was not entitled to exercise its option of renewal except for a favourable exercise of discretion under s 133F, is a reason why costs need not follow the event. On the other hand, the fact I found it entitled to conditional relief against forfeiture is a reason why it should have at least a proportion of its costs, reflecting the extent to which costs were increased by Needam Holdings' resistance to its claim. However, as White J made clear in Dee-Tech, these are but some of the factors which need to be considered and weighed against each other in determining what order for costs should be made. Other factors considered by White J included whether or not the resistance of Neddam Holdings "went beyond what was reasonable" and pursued issues unsuccessfully and that Neddam was not successful on the predominate issues litigated: per White J at [70] - [71]. Further, the case of Dee-Tech is an example of those cases referred to in Oshlack where, by reason of the nature of the relief sought, it is appropriate for a claimant to pay the costs of the respondent at least up until the stage where the conduct of the respondent and/or issue put into dispute make it just and reasonable for the respondent to pay the successful applicant's costs. That is not to say that, in all circumstances, an applicant who first requires an order in their favour in order to obtain the relief sought should be deprived of the whole or even part of their costs of the proceedings. Each case must be determined on its own facts and where the parties may, without order of a Court or Tribunal, agree to resolve all issues between themselves prior to the commencement of any proceedings, this is also a matter which needs to be considered in determining the proper exercise of any discretion in connection with the award of costs. In short, the proper exercise of the discretion requires the Tribunal to do justice between the parties and to exercise the discretion having regard to relevant considerations and in a manner which is not arbitrary or capricious: see Oshlack v Richmond River Council per Gaudron and Gummo JJ at [22] and McHugh J at 65.
The respondents submitted that they were entitled to a costs order (as to 50%) on the basis that although the Appeal was upheld, they had achieved a measure of success. This is for the reason that the appellants were not successful in obtaining the whole of the relief sought. Had the appellants been successful on either of the first 2 grounds, the matter would have been sent back to the Tribunal to reconsider in total, whereas now liability will not be in issue in the Tribunal and the only issue will be whether or not a money order ought to be made in the face of s 48MA of the Building Act.
Further, the respondents contended that they ought not suffer an adverse costs order with respect to order 3 for the following reasons: 1. In circumstances where the first 2 grounds failed, it was reasonable for the respondents to defend the remaining ground. 2. Defending the third ground did not add significantly to the costs. 3. The appellants did not, until the hearing, make clear the relief sought in the event only the third ground was successful. 4. At the time, there was no relevant authority on relation to s 48MA of the Building Act. 5. The error of law found by the Appeal Panel resulted from failure by the Tribunal and the parties to refer to s 48MA of the Building Act. 6. The potential effect of success on grounds 1 and 2 on the rights of the parties was significantly greater than in respect of success on the third ground.

Consideration

In Grain Growers Limited v Chief Commissioner of State Revenue (No 2) [2015] NSWSC 1445 (Grain Growers) Black J considered an application for costs where the plaintiff had been partially successful. His Honour summarised the position as follows: 'It should be recognised, of course, that an order for costs is made to compensate a successful party for the expense of being put to the necessity of litigation; a wholly successful party should ordinarily receive its costs unless good reason is shown to the contrary; and the discretion to order costs must be exercised judicially and not against the successful party except for some reason connected with the proceedings: Milne v Attorney-General (Tasmania) [1956] HCA 48; (1956) 95 CLR 460 at 477; Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at 97-98 per McHugh J, at 119-123 per Kirby J; Ruddock v Vadarlis (No 2) [2001] FCA 1865; (2001) 115 FCR 229 at 234.'
His Honour noted that the characterisation of the result of a "mixed result" may be an appropriate characterisation of the result in that case (at [20]). Nevertheless, his Honour characterised the plaintiff as having been "substantially successful" and after applying the principles in Bostik referred to above, held that the issues upon which the plaintiff there had been unsuccessful had not taken up a significant part of the trial, and had not been clearly dominant or separable, so as to warrant a departure from the usual principles (at [25]).
Here too the characterisation as a "mixed result" may be appropriate. As the respondents have submitted, the appellants did not achieve everything they set out to achieve. Relevantly, they did not achieve the possibility of contesting liability for defective work.
On the one hand, the appellants have been unsuccessful in obtaining a rehearing on all issues, yet they have achieved the result that the Tribunal will now consider whether a money order ought to be made in whole or in part: the Appeal Decision at [43]. This represents a significant victory for the appellants. Further, the Appeal Panel accepts the appellants' contention that the second and third grounds were somewhat interrelated in that it was necessary for the Appeal Panel to consider the expert's report in order to ensure that a rectification order was not wholly inappropriate and that the order for a rehearing would not be futile. In that way, the second ground did not add significantly to the hearing time or costs of the Appeal. The first ground also did not add to the hearing time, as the matter was run on a very small number of documents.
On the other hand, the respondents have also had a significant measure of success in that they have maintained the First Instance decision on liability.
Whilst the appellants have had substantial success (adopting the words of Black J in Grain Growers) so too have the respondents. For this reason the Appeal Panel considers it inappropriate for either party to suffer an adverse costs order.
In conclusion, the Appeal Panel determines that each party pay should pay their own costs. Accordingly, no costs order will be made.

Orders No order as to costs. 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: 28 February 2017

At a glance

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Judgment (7 paragraphs)

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Legislation Cited (3)

Cases Cited (12)

Cited By (21)