Khong v Southern Cross Joinery Pty Ltd

The appeal

1. The appellants sought leave to appeal the Tribunal's decision on the basis that the decision is not fair and equitable and is against the weight of evidence. In submissions the appellants also claimed that significant new evidence was now available that was not reasonably available at the time of the hearing. The two pieces of "new evidence" the appellants sought to rely on were a diary entry of 11 March 2018 and a statutory declaration by Sam Woo.
2. In the Notice of Appeal, the appellants indicated that in the event their appeal was successful, they sought payment of $20,464 (being their quantification of the value of the bench top) and $67,270 for defective and incomplete work.
3. At the appeal hearing the appellant conceded that no questions of law were raised on the appeal. The appellant submitted that the Tribunal should have placed more weight on two quotations in which the only substantive difference was the stone bench top, rather than on an email from the respondent's representative to the appellant. The appellant conceded that this ground would fall away if the appellant was not successful in their application for new evidence to be admitted.
4. We were not satisfied that the Tribunal's decision in relation to the bench top issue was against the weight of evidence. We found that it was open to the Tribunal on the available evidence to conclude that the bench top was worth $14,000. We concluded that neither the diary entry nor the statutory declaration of Sam Woo were new evidence for the purposes of granting leave to appeal in accordance with cl 12 Schedule 4 of the Civil and Administrative Tribunal Act 2013. Ultimately, we concluded that there were no grounds on which leave to appeal could be granted. We refused leave to appeal and dismissed the appeal, making orders for the filing and service of evidence and submissions in relation to the costs application which was flagged by the respondent.

Submissions

1. In making a decision in respect of the respondent's costs application, we have considered: 1. The respondent's submissions on costs filed on 25 October 2021, which attaches an email sent to the appellant by the respondent's solicitor on 29 September 2021; and 2. The appellant's submissions on costs filed on 8 November 2021.

Respondent's evidence and submissions in respect of costs

1. In summary, the respondent submits that an order for costs should be made in favour of the respondent because: 1. The appellants' application for leave to appeal had no tenable basis in fact; 2. The appellants' application for leave to appeal was misconceived and lacking in substance, in that the appellants failed to demonstrate a failure in the way the matter was conducted or decided which deprived the appellants of a chance that was fairly open of achieving a better outcome. 3. The respondent made an offer to the appellants to have the appeal proceedings dismissed with no order as to costs. This offer is contained in the correspondence dated 29 September 2021 attached to the respondent's submissions. The appellants should have accepted the offer and obtained an outcome which was less favourable in circumstances where an adverse costs order may be made. 4. The appellants' case was misconceived, had no tenable basis in fact and lacked substance and was wholly unsuccessful. The respondent was unnecessarily forced to incur costs to defend the application. 5. The appellants should be ordered to pay the respondent's costs on an indemnity basis, or in the alternative on an ordinary basis.
2. The correspondence relied on by the respondent in support of an award of costs being made on an indemnity basis is an email sent to one of the appellants (Ada To) on 29 September 2021. It relevantly states: These proceedings are listed for hearing before the NSW Civil and Administrative Tribunal Appeal Panel on 11 October 2021. In the proceedings, you seek to appeal from a decision of Senior Member Burton of 5 July 2021 (amended 23 July 2021) in the Consumer and Commercial Division on grounds other than a question of law pursuant to s 80(2)(b) of the Civil and Administrative Tribunal Act 2013 (NSW). The Respondent supports the original orders made by the Tribunal and its position is that the appeal must fail on several bases. The Respondent's position is set out comprehensively in its written submissions (Tab 25 of the Respondent's bundle). The Respondent is conscious of the considerable time and cost that both parties have incurred to date and is very mindful of the further cost that will be required in pursuing this litigation to a final hearing. As such, on an open basis, the Respondent makes the following offer to resolve these proceedings (the appeal): (1) The proceedings be dismissed; and (2) There be no order as to costs. This offer is open for acceptance in writing for a period of seven (7) days from the date of this correspondence. The timeframe the respondent has provided for consideration of its offer is reasonable in the circumstances, which include the following: (a) the factual and legal issues are well known to the parties; and (b) the upcoming hearing date of 11 October 2021. In the event that you do not accept this offer, we give notice that the Respondent will rely on this correspondence on the question of costs pursuant to the principles in Calderbank v Calderbank [1975] 3 All ER 333, and on the question of indemnity costs pursuant to s 60 of the Civil and Administrative Tribunal Act 2013 (NSW).

Appellants' submissions in respect of costs

1. In summary, the appellants submit that: 1. The appeal was lodged as the proceedings in the Tribunal were conducted in a manner that was not fair and equitable, given that the appellants were not legally represented in the Tribunal proceedings and were not aware of the procedures in relation to tendering evidence in support of their case. 2. If the Appeal Panel had admitted the new evidence they filed in the appeal, there would have been a chance of obtaining a better outcome. 3. It was not unreasonable for them to have rejected the offer made on 29 September 2021 as they believed that Tribunal proceedings had not been conducted in a manner that was fair and equitable and that the evidence they sought to rely on at the appeal would affect the Tribunal's decision. 4. There are currently negotiations in relation to costs, with an offer by the appellants made on 29 October 2021 still open for acceptance. 5. Each party should pay its own costs. In the alternative, costs should be awarded on the ordinary basis, as agreed or assessed.

Issues

1. The issues to be determined on the costs application are: 1. Should a hearing on costs be dispensed with? 2. What provisions apply to the costs application? 3. What legal principles apply to the costs application? 4. Should the appellants be ordered to pay the respondent's costs of the appeal? 5. If so, on what basis should the costs order be made?

Should a hearing on costs be dispensed with?

1. Section 50 of the Civil and Administrative Tribunal Act 2013 (the NCAT Act) relevantly provides: 50 When hearings are required (1) A hearing is required for proceedings in the Tribunal except: … (c) if the Tribunal makes an order under this section dispensing with a hearing, or … (2) The Tribunal may make an order dispensing with a hearing if it is satisfied that the issues for determination can be adequately determined in the absence of the parties by considering any written submissions or any other documents or material lodged with or provided to the Tribunal. (3) The Tribunal may not make an order dispensing with a hearing unless the Tribunal has first: (a) afforded the parties an opportunity to make submissions about the proposed order, and (b) taken any such submissions into account. (4) The Tribunal may determine proceedings in which a hearing is not required based on the written submissions or any other documents or material that have been lodged with or provided to the Tribunal in accordance with the requirements of this Act, enabling legislation and the procedural rules. …
2. The parties were given an opportunity to make submissions concerning whether costs could be determined on the papers. Neither party objected to that course of action.
3. We are satisfied that the issue of costs can be adequately determined in the absence of the parties by considering the parties' written submissions. The parties would be put to unnecessary expense if required to argue the costs application at a hearing. The order under s 50(1)(c) of the NCAT Act has accordingly been made.

What provisions apply to the costs application?

1. 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.
2. 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 and r 38A modifies the position in respect of appeals.
3. 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.
4. 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.
5. In this case, it is not in dispute that because the amount claimed in the appeal exceeds $30,000, the operation of r 38A means that r 38 applies to the costs application.

What legal principles apply to the costs application?

General principles

1. Rule 38(2)(b) gives us a wide discretion to make an order for costs. It does not specify the factors we must take into account in exercising the discretion, although the discretion must be exercised judicially: see, for example, Ruddock v Vadarlis [2001] FCA 1865 at [9].
2. In circumstances where an order for costs may be made in the absence of special circumstances, the starting point in exercising the discretion 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 (1998) 193 CLR 72 per McHugh J at 97. The exercise of the discretion in this manner results in what is referred to as "the usual order for costs".
3. In Thompson v Chapman [2016] NSWCATAP 6, the Appeal Panel discussed the exercise of the discretion in this manner, stating at [70] to [72]: 70. 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. 71. 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 Gummow JJ at 88 and Kirby J at 121 - 123. 72. 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: (1) 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 (2) 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.

Calderbank offers

1. 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".
2. In relation to a claim for indemnity costs based on the refusal of a Calderbank offer, a Calderbank offer in more favourable terms that the outcome of proceedings does not of itself entitle the offeror to an order for indemnity costs: Jones v Bradley (No. 2) [2003] NSWCA 258.
3. In Miwa Pty Ltd v Siantan Properties Pte Ltd (No. 2) [2011] NSWCA 344, Basten JA identified two questions which are relevant to a Calderbank offer and a claim for indemnity costs. They are whether there was a genuine offer of compromise and whether it was unreasonable for the offeree not to accept it.
4. Basten JA (with whom McColl and Campbell JJA agreed) adopted the non-exclusive list of factors identified by the Victorian Court of Appeal in Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435 at [25]: 1. the stage of the proceeding at which the offer was received; 2. the time allowed to the offeree to consider the offer; 3. the extent of the compromise offered; 4. the offeree's prospects of success, assessed as at the date of the offer; 5. the clarity with which the terms of the offer were expressed; 6. whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejecting it.

Should the appellants be ordered to pay the respondent's costs of the appeal?

1. The respondent was the successful party on the appeal. The appellants did not establish any grounds of appeal or grounds for leave to appeal.
2. The starting position is that the respondent is entitled to recover its costs of and incidental to the appeal proceedings in circumstances where there has been no submission that disentitling conduct on their part should cause the discretion to award costs in their favour not to be exercised. Further, the fact that the appellants have apparently made a settlement offer in relation to costs does not weigh against an order for costs in favour of the respondent.
3. We conclude that the appellants should be ordered to pay the respondent's costs.

On what basis should the costs order be made?

1. The final issue to consider is whether costs should be payable on the ordinary basis, or whether a special costs order should be made awarding costs on an indemnity basis.
2. We are satisfied that the offer made to the appellants on 29 September 2021 conformed with the general principles applicable of a Calderbank offer and foreshadowed an application for indemnity costs if the appellants rejected the offer.
3. We conclude that the appellant's rejection of the offer justifies costs being awarded on an indemnity basis from the date of the offer. Our reasons for this conclusion are as follows.
4. First, the respondent's offer that the parties pay their own costs in a matter in which the successful party could reasonably expect that costs would follow the event represents a genuine offer of compromise.
5. Second, the offer was made some ten days prior to the hearing and the appellants were given seven days in which to respond to it. In our view, this provided ample time prior to the appeal hearing for the appellants to consider the offer, obtain advice about it if necessary and respond to it.
6. Third, the appellant's prospects of success, when assessed at the date of the offer, were so weak as to be negligible. No questions of law were raised on the appeal and the "new evidence" on which the appellants sought to rely at the hearing was clearly available at the time the proceedings were heard. Further, there were no factors in their case that supported the exercise of the discretion to grant leave to appeal, even if grounds for leave had been established. While the appellants may have thought they had a case on appeal, their subjective views on that subject do not overcome their objectively negligible prospects of success.
7. Fourth, the terms of the offer were clearly expressed. The appellants cannot have been in any doubt as to what the respondent had offered.

Orders 1. A hearing is dispensed with pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013 2. Heng Yew Khong and Ada To are to pay the costs of Southern Cross Joinery Pty Ltd t/as Sydney Kitchens on the ordinary basis until 29 September 2021 and on an indemnity basis thereafter.

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: 03 December 2021