Kumar v Point of Care Diagnostics Pty Ltd

Costs application

1. The respondents applied for one of the following orders: "Pursuant to section 60(2) of the Civil and Administrative Tribunal Act 2013 (NSW), the Applicant pay the Respondents' costs: a. of and incidental to the proceedings on a party-party basis, as agreed or assessed; or b. in the alternative, of the proceedings from 12 August 2021 on a party-party basis, as agreed or assessed; or c. in the alternative, fixed in the amount of $45,000 payable within 28 days; or d. in the alternative, fixed in an amount as determined by NCAT payable within 28 days."

Hearing on the papers

1. The parties all submitted that the costs application should be determined on the papers.
2. I am satisfied that the issues for determination can be adequately determined in the absence of the parties by considering the written submissions or other documents or material lodged with the Tribunal: NCAT Act, s 50(2). Determination of the costs application on the papers would facilitate the just, quick and cheap resolution of the real issues in the proceedings (NCAT Act, s 36(1)).
3. Accordingly, I dispensed with a hearing of the respondents' costs application.

Respondents' evidence and submissions

1. The respondents relied upon an affidavit of Justin Claude Le Blond sworn on 10 September 2021 and a further affidavit of Mr Le Blond sworn on 22 October 2021, filed as reply evidence. Mr Le Blond is a partner in the firm of solicitors which represents the respondents in these proceedings.
2. The respondents submitted as follows: The [applicant's] Withdrawal [at 3.45pm on 24 August 2021] came at the heel of the hunt and after the Respondents had been put to considerable expense defending the proceedings in circumstances where Mr Kumar had, until that moment, vigorously pursued the proceedings including expanding his claim, rejecting an offer from the Respondents to settle the proceedings, refusing a request for an adjournment and filing evidence in reply the day before the Withdrawal. 6 It is the Respondents' position that this conduct constitutes "special circumstances" entitling the Respondents to an order for costs pursuant to section 60(2) of the Civil and Administrative Tribunal Act 2013 (NSW) …
3. The respondents relied upon GHI v ABC t/as DEF [2018] NSWCATAD 8 (GHI), a case in which the applicant notified the respondent at 10.30pm on the day before the hearing of a leave application under the AD Act that he wished to withdraw his leave application. The respondents submitted that GHI demonstrates that the withdrawal of proceedings on the day preceding hearing constitutes "special circumstances" justifying a costs order under section 60(2) of the NCAT Act, by reason of the failure to comply with the guiding principle under section 36(3) of that Act.
4. The respondents submitted that the following matters are relevant to the exercise of the costs discretion: 1. in GHI, the withdrawal occurred the day before the hearing of an application for leave to commence proceedings in NCAT. In contrast, in this case, the applicant's withdrawal occurred on the afternoon before the three day final contested hearing of the proceedings, involving the preparation of substantial detailed evidence and five witnesses; 2. the respondents made a "without prejudice" offer to resolve the proceedings during a Tribunal-ordered mediation held on 17 February 2021, which was rejected; 3. the applicant refused to consent to an adjournment of the hearing on 12 August 2021, which was completely at odds with the withdrawal just twelve days later (after the respondents had incurred the time and expense of preparing for the fully contested hearing); 4. the applicant served his evidence in reply on 23 August 2021, which was completely at odds with the withdrawal the following afternoon; 5. the respondents were forced to incur over $70,000 (including GST) in legal costs and disbursements in order to defend the proceedings and prepare for the hearing, only for Mr Kumar to withdraw the proceedings just over one hour before close of business on the day before the hearing.
5. The respondents submitted, more generally, that the withdrawal gave rise to substantial unfairness to them, which was amplified by the circumstances referred to above. They said that "serious unfairness" was a highly relevant consideration, relying upon Gaynor v Burns [2015] NSWCATAP 150 at [19].
6. Mr Le Blond states in his affidavit of 10 September 2021 that, by reason of the applicant's conduct, the respondents have incurred over $70,000 in fees and disbursements defending the proceedings. He annexed two invoices to his affidavit. One is for disbursements to the value of $17,908 (inc GST), which are said to include counsel fees for the vacated hearing. The other is for $54,341.10 (inc GST) for professional charges apparently incurred by the applicant's current solicitors. No invoice has been provided for the professional fees of the applicant's former solicitor.
7. Mr Le Blond annexed, to his affidavit of 22 October 2021, notes which he stated that he understood "to be the notes of Mr John McCooe taken at the Mediation." Mr McCooe is the respondents' former solicitor, now deceased. The notes appear to record offers and counter offers made by the opposing parties at the mediation.

Applicant's evidence and submissions

1. The applicant has sworn an affidavit as to the decline in his mental health prior to the date of the scheduled hearing. His solicitor, Mr Richard Aslanian, has also affirmed an affidavit, attesting to his communications with the applicant about his mental health and annexing relevant documents.
2. The applicant submitted that the costs application should be dismissed. He says the prima facie position in s 60(1) of the NCAT Act, that each party pays the party's own costs, should apply. He submits that an order that he pay the respondents' costs would be to punish him for the withdrawal, which is not a proper basis for a costs order.
3. The applicant submitted that serious unfairness is not a recognised ground of "special circumstances" under s 60 of the NCAT Act but, to the extent that it is relevant, there was no serious unfairness in this case. The applicant points to the respondents' failures to comply with the Tribunal's directions for the filing of evidence, to the applicant's serious decline in mental health and to the medical evidence of his mental health condition. He made some submissions as to why a costs order should not be made, including that a costs order "would devastate his mental health."

Objections to applicant's evidence

1. In an annexure to their reply submissions, the respondents objected to the "entire substance" of the applicant's affidavit "on the basis that it is impermissible opinion and comprised of conclusions without any foundation." The objection does not appear to extend to all of the documents which are attached to that affidavit as (in the respondents' submission) "those documents speak for themselves."
2. Annexure AK3 to the applicant's affidavit is an expert report of Dr Kai Tai (Frank) Chow, consultant psychiatrist, apparently obtained for the purposes of workers compensation proceedings. The respondents submitted that "[t]he evidentiary use of AK3 ought be limited to the fact Mr Kumar stated various matters to Dr Chow but not truth of the content of what he said."
3. The respondents submitted, in the alternative, that the evidence ought to be given very little weight.
4. The respondents also objected to specified parts of Mr Aslanian's affidavit and submitted that the use of certain parts of that affidavit should be limited.
5. The respondents submitted, having referred to the schedule of objections, that: "[u]nless NCAT would be assisted by oral submissions, the Respondents are content for the costs application to be determined on the papers."

Determination of objections

1. The starting point for determining the respondents' objections is that the Tribunal is not bound by the rules of evidence and may inquire into and inform itself on any matter in such manner as it thinks fit, subject to the rules of natural justice (NCAT Act, s 38(2)).
2. The guiding principle for the NCAT Act and the procedural rules, in their application to proceedings in the Tribunal, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings (NCAT Act, s 36(1)). One way of doing that is to determine appropriate matters on the papers. For reasons given above, I consider that an order dispensing with a hearing is appropriate in this case.
3. When a hearing has been dispensed with, difficulties arise in dealing with evidentiary disputes. The applicant has not had an opportunity to respond to the objections to evidence which are annexed to the respondents' submissions in reply. The respondents were not given leave to file objections to the applicant's evidence, and did not contend that they needed a hearing so that those objections could be dealt with. If I were to uphold one or more of the respondents' objections now, that would deny procedural fairness to the applicant, in circumstances where the applicant has not had an opportunity to respond.
4. In these circumstances, the best way to deal with the objections is to treat them as submissions as to the reliability of the applicant's evidence, and the weight which should be given to it.
5. The applicant's affidavit attests to his opinion that his mental health has declined, to discussions he had with his lawyers on 24 and 25 August 2021, to the reasons for his decision to "stop the case," to his current health and to his opinion that a costs order would have a very negative effect on his mental health and his finances.
6. The applicant is entitled to express a view about his own experience of his mental health, and that view can be given some weight, although I also take into account that there is a possibility his own opinion will be self-serving, and that it is not an expert psychiatric opinion. I also give some weight to his evidence about the discussions he had with his lawyers and the reasons he said he decided to withdraw. I have given less weight to his assessment of the effect of a costs order on his mental health. I have also taken into account that he was not cross examined, but have not discounted his evidence significantly on that account, given that the parties agreed to the matter being determined on the papers and the respondents did not request the applicant to make himself available for cross examination.
7. I have taken into account that Dr Chow was not cross examined, that he prepared his report for different proceedings, and that his opinions relate to an interview with the applicant on 9 August 2021, some weeks before the listed hearing date. Whilst I have not given much weight to Dr Chow's opinion about the cause of the applicant's psychological injury, I have taken into account his opinion that the applicant had a major depressive disorder on 9 August 2021.
8. The objections to Mr Aslanian's affidavit concerned a number of matters. The respondents objected to annexed submissions that were filed in support of the applicant's amendment application. I have not needed to take these into account.
9. The respondents objected to a number of statements in the affidavit dealing with Mr Aslanian's opinions about the applicant's mental health and his communications with the applicant around the hearing date. I have treated those opinions as lay opinions, rather than expert opinions as to the applicant's mental health, but have taken into account that the applicant appeared to his solicitor to be experiencing "significant distress." I have also taken into account the evidence of the content of the email sent by the applicant to Mr Aslanian. Whilst there is a possibility that this email could be self-serving, the respondents did not seek to cross examine the applicant. Surrounding circumstances, such as the applicant's admission to hospital, and the hospital records, provide support for the applicant's opinion, expressed in that email, that he was "suicidal at times."

Evidentiary Findings

1. I find, having regard to the evidence of the applicant and Mr Aslanian (including the report of Dr Chow), that the applicant was suffering from a major depressive order in the weeks leading up to the hearing. His mental health declined in the days before the hearing. I also find that he withdrew the proceedings due to his mental health and that of his wife (as he stated in his email to his solicitor of 24 August 2021). I find that he admitted himself to hospital the following day (the day of the hearing) because he was suicidal. The hospital records support the conclusion that he was suicidal.

Consideration of costs application

1. As the parties have acknowledged, the usual position is that each party to proceedings in the Tribunal is to pay the party's own costs (NCAT Act, s 60(1)). 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 (NCAT Act, s 60(1)). Section 60(3) of the NCAT Act provides: (3) In determining whether there are special circumstances warranting an award of costs, the Tribunal may have regard to the following - (a) whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings, (b) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings, (c) the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law, (d) the nature and complexity of the proceedings, (e) whether the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance, (f) whether a party has refused or failed to comply with the duty imposed by section 36(3), (g) any other matter that the Tribunal considers relevant.
2. "Special circumstances" are circumstances which are out of the ordinary; they do not have to be extraordinary or exceptional (see, for example, Gaynor v Burns [2015] NSWCATAP 150 at [19]; Kadielski v Guca 1 Pty Ltd [2018] NSWCATAP 223 at [14]).
3. The discretion to award costs must be exercised judicially and having regard to the underlying principle that parties to proceedings in the Tribunal are ordinarily to bear their own costs: eMove Pty Ltd v Naomi Dickinson [2015] NSWCATAP 94 at [48]; Kadielski v Guca 1 Pty Ltd [2018] NSWCATAP 223 at [16]. Each situation must be assessed on a case by case basis to see whether or not special circumstances exist so as to warrant the award of costs: eMove Pty Ltd v Naomi Dickinson [2015] NSWCATAP 94 at [48].

Circumstances of withdrawal

1. The respondents rely on the very late withdrawal of the proceedings, late in the afternoon before the listed hearing.
2. The withdrawal of an application shortly before a hearing may, in some factual contexts, constitute special circumstances: see Rodny v Stricke [2020] NSWCATAP 20 at [110]. In that case, "the withdrawal of an application, which has been the subject of lengthy preparation and the incurring of significant costs, shortly before the hearing" was held to constitute special circumstances (at [112]). On the other hand, in GHI, the Tribunal found that the fact of the applicant withdrawing his compliant after close of business on the day before a hearing was not a special circumstance warranting the award of costs (at [76]). The question of whether a late withdrawal constitutes special circumstances warranting an award of costs depends upon a factual analysis in each case (eMove Pty Ltd v Naomi Dickinson [2015] NSWCATAP 94 at [48]; Wynne Avenue Property Ltd v MJHQ Pty Ltd (No 2) [2019] NSWCATAP 68 at [57]; The Owners - Strata Plan 20211 v Rosenthal [2019] NSWCATAP 49 at [13]).
3. The Appeal Panel in Rodny v Stricke also acknowledged that "[t]here will be circumstances in which the withdrawal of proceedings is justified by factors out of the moving party's control" (at [113]). It cited (at [113]) the judgment of McHugh J in Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 625 to the following effect: "If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases."
4. I am satisfied that the applicant acted reasonably in withdrawing the proceedings, in circumstances where he was critically unwell and reasonably considered that the continuation of the proceedings would exacerbate his mental health condition. His mental health condition was, in my opinion, a factor which was "out of [his] control" (Rodny v Stricke).
5. The respondents relied upon Blue Badge Insurance Australia Pty Ltd v Farnan (No 2) [2017] NSWSC 1688 at [39] for the proposition that "mental health difficulties, even if diagnosed, should not be regarded as suspending the operation of the rules which apply to litigants' conduct of their cases in Court." That was not a case about costs, but rather an application to set aside orders made against a party who did not appear at the hearing, due to mental health issues. As Kunc J noted at [38], there was no medical evidence to support the suggestion that the party lacked the ability to appear at the hearing. His Honour observed at [39] that "even if there were evidence which demonstrated that she had some recognised mental health condition at the time, this would not, of itself, have operated as an excuse" for not complying with the Court's directions.
6. That case is not authority for the way in which the Tribunal should exercise its discretion to award costs under the NCAT Act.
7. I am not aware of any case law considering the withdrawal of proceedings for reasons relating to the mental health of an applicant. There is a question as to the relevance of the applicant's mental health, in circumstances where costs orders are compensatory (see, for example, Northern Territory v Sangare (2019) 265 CLR 164 at 174 [27], 175 [30]). The principle that costs are compensatory supports the Tribunal considering costs primarily from the costs applicant's perspective. That is why the impecuniosity of a party is generally not relevant to the exercise of the costs discretion (see Northern Territory v Sangare (2019) 265 CLR 164 at 175 [30]-[32]).
8. I consider that, in some circumstances, factors pertaining to the costs respondent's circumstances are relevant to whether there are special circumstances warranting an award of costs. An award of costs may be warranted, for example, if "a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings" (NCAT Act, s 60(3)(a)). The word "unnecessarily" invites a consideration of the reasons for a party conducting the proceedings in a way which disadvantaged another party. If a party were to withdraw at the eleventh hour because, for example, the party had to be admitted to hospital to undergo chemotherapy, it would be unlikely that that would constitute "unnecessarily" disadvantaging the other party. Similarly, I consider that the applicant's withdrawal due to the reasonable perception that this was necessary to manage his mental health condition, is not "unnecessarily" disadvantageous to the respondents.
9. The respondents submitted that the applicant's conduct in "vigorously pursu[ing] the proceedings including expanding his claim, rejecting an offer from the Respondents to settle the proceedings, refusing a request for an adjournment and filing evidence in reply the day before the Withdrawal" constituted special circumstances. I do not consider, having regard to the reasons for his withdrawal and the respondents' conduct prior to this, that this constitutes "special circumstances warranting an award of costs." The very late filing of the evidence in reply was brought about by the respondents' substantial delays in complying with the Tribunal's timetable. The refusal of the adjournment request was not unreasonable at the time.
10. In this case, there was no failure on the part of the applicant to comply with the duty under s 36(3) of the NCAT Act. Section 36(3) provides that a party is under a duty to co-operate with the Tribunal to give effect to the guiding principle and, for that purpose, to participate in the processes of the Tribunal and to comply with directions and orders of the Tribunal. It was the respondents, and not the applicant, whose failures to comply with Tribunal directions were most significant. Withdrawing proceedings (even at a late stage) does not, in my view, constitute a failure to comply with directions of the Tribunal within s 36(3) of the NCAT Act. Nor does it usually constitute a failure to cooperate with the Tribunal to facilitate the just, quick and cheap resolution of the real issues in the proceedings. Section 36(1) is directed at the operation of the NCAT Act and the procedural rules. It is not, on its face, concerned with a decision of a party to withdraw proceedings. In any event, the applicant has provided a reasonable explanation for the late withdrawal of his application.

Offer at mediation

1. I have not had regard to the offer the respondents claim they made to the applicant at mediation and upon which they rely in support of their costs application.
2. The applicant objects to the Tribunal taking into account any offer made at mediation. He has provided evidence of the mediation agreement signed on behalf of the first respondent. That provides that, with certain non-applicable exceptions, the parties agree not to disclose to any person not present at the mediation any information communicated during the mediation. It also provides that evidence of any thing said or of any admission made in a mediation session is not admissible in any proceedings before any court, tribunal or body.
3. Section 67(1)(c) of the NCAT Act provides that nothing in that Act requires the disclosure of a document if the Tribunal is satisfied that evidence of the document could not be adduced in proceedings before a NSW court by reason of the operation of Part 3.10 (Privileges) of Chapter 3 of the Evidence Act 1995. Section 131 of the Evidence Act (in Part 3.10) relevantly provides that evidence is not to be adduced of a communication that is made between persons in dispute in connection with an attempt to negotiate a settlement of the dispute or a document (whether delivered or not) that has been prepared in connection with an attempt to negotiate a settlement of a dispute. That applies to the notes of Mr McCooe which are annexed to Mr Le Blond's reply affidavit.
4. Section 67 of the NCAT Act relates only to documents, including the disclosure of the contents of a document. The offer in this case appears to have been made orally at a mediation (although that is not entirely clear). However, s 67 of the NCAT Act evinces an intention that the "without prejudice privilege" may apply in the Tribunal (at least in its statutory form). The "without prejudice" privilege at common law attaches to communications which are made in the course of genuine negotiations with intent to compromise an existing dispute (Harrington v Lowe (1996) 190 CLR 311 at 323). It is a rule of evidence which protects communications generally (Duffy Kennedy Pty Ltd v Galileo Miranda Nominee Pty Ltd (2020) 101 NSWLR 927 at [165]-[166]). The purpose of the privilege is "to encourage compromises by sparing the parties the embarrassment which might be caused to them if the negotiations fail and later their communications are liable to be put in evidence" (Harrington v Lowe (1996) 190 CLR 311 at 323).
5. The Administrative Appeals Tribunal has held that the "without prejudice" privilege applies to proceedings in that tribunal (see, for example, Re Bevan Bruse and Commissioner of Taxation [2010] AATA 404 at [17]). I am unaware of any authority as to its application to the Tribunal. It is possible that, because the "without prejudice privilege" is a rule of evidence, and the Tribunal is not bound by the rules of evidence (NCAT Act, s 38(2)), it could choose to admit evidence of oral communications to which that privilege applied, in its discretion.
6. The respondents submitted, in their reply submissions, that I could take into account the evidence of the offers made at mediation, notwithstanding the mediation agreement. This was, in their submission, because "the premise of confidentiality agreements for mediations is in order to ensure that the substance of discussions within the mediation remain confidential, not to prevent offers from being relied on for the purpose of costs." However, the mediation agreement was not expressed in this way; it prohibited disclosure without making an exception for costs application. I note that, in certain circumstances, "without prejudice" communications can be considered to determine a question of costs, but this may be limited to the situation where the communications are expressed to be without prejudice save as to costs: see Biovision 2020 Pty Ltd v CGU Insurance Ltd [2010] VSC 589 at [36], citing Cutts v Head [1984] Ch 290; Duffy Kennedy Pty Ltd v Galileo Miranda Nominee Pty Ltd (2020) 101 NSWLR 927 at [167].
7. I would be inclined not to admit the evidence of settlement negotiations in this case, given the evidence of the signed mediation agreement prohibiting disclosure, the applicant's objection to the evidence of the offer and the policy underlying the "without prejudice" privilege. Further, and perhaps more importantly, I am not satisfied that the evidence is relevant.
8. The respondents properly accepted that (quoting from their submissions in chief): "in circumstances where the contentions in the proceedings have not been finally determined, NCAT will be unable to assess the relative strength of the parties' respective claims under section 60(3)(c)." They reiterated this position in their reply submissions. The withdrawal does not constitute a concession that the application lacked merit, nor can such an inference necessarily be drawn (see Aydemir v Redegalli [2011] NSWADT 198 at [16], cited in GHI at [72]). That is particularly so in circumstances where the withdrawal is explained by evidence about the applicant's mental health condition.
9. The evidence of the offer is therefore not relevant to the question of whether there are special circumstances warranting an award of costs. It is not possible to ask whether the applicant would have got a more favourable or less favourable outcome than that contained in the offer. The Tribunal cannot try a hypothetical action between the parties (Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624; see also D Constructions Pty Ltd v Walsh [2020] NSWCATAP 91 at [21]). Nor could the Tribunal conclude that the applicant acted unreasonably in refusing the respondents' offer.
10. I note that the Appeal Panel came to a similar conclusion about the relevance of the failure of an appellant to accept an offer, in circumstances where there had been no determination of the appellant's claim on the merits, in Mrjana v Imagine Education Australia Pty Ltd [2016] NSWCATAP 232 at [74].

Conclusion

1. For these reasons, I am not satisfied that there are any special circumstances warranting an award of costs. The respondents' application for costs is accordingly dismissed.

Orders

1. I make the following orders: 1. A hearing of the respondent's costs application is dispensed with. 2. The respondents' costs application is dismissed.

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: 26 November 2021