CATCHWORDS: Costs, offers to settle, vexatious proceedings

Mr Derek Cronin, Cronin Litigation Lawyers for the applicant Mrs Karen Schwede, Lawyers Qld Pty Ltd for the respondent

1. On 14 December 2009, I ordered that both the applicant's claim and the respondent's counterclaim be dismissed. I invited the parties to make submissions as to costs. The applicant is content with no order as to costs. The respondent wants his costs paid on an indemnity basis.

2. The respondent's grounds for claiming indemnity costs are:
   • The respondent made a settlement offer on 6 November 2009 and the decision of the tribunal was no more favourable to the applicant than that offer.
   • The applicant's proceedings were vexatious.
   • The applicant's conduct during the proceedings, the nature and complexity of the proceedings and the relative strengths of the claims, merits an order for costs.

1. Section 142(2) of the Commercial and Consumer Tribunal Act states that, if:

1. A party to a proceeding serves another party to the proceeding with a written offer to settle the matters in dispute between the parties; and 2. The other party does not accept the offer within the time is open; and

1. In the opinion of the tribunal, the decision of the tribunal on the matters in dispute is not more favourable to the other party than the offer;

the tribunal must award the party who made the offer all reasonable costs incurred by that party in conducting the proceeding after the offer was made. Section 138 requires that an offer must be made by signed writing served on the party to whom the offer relates.

By email of 6 November 2009, the respondent offered to settle this dispute by a payment of $1500.00 "within 14 days after service of a signed notice of acceptance of the offer". The respondent asserted that the settlement sum was to be paid and accepted "in full and final satisfaction of any and all claims which one party may have either now or in the future against the other in respect of, or arising out of, or otherwise in connection with the proceedings ... BD534-05 or the works ...."

The offer was rejected by email from the applicant dated 7 November 2009.

I am satisfied that the respondent's offer does comply with section 138. The offer is "signed" within the context of section 14 of the Electronic Transactions (Queensland) Act and section 44 of the Commercial and Consumer Tribunal Act allows the tribunal to deem informal service as "service". I am also satisfied that the decision of the tribunal was not more favourable to the applicant than the offer. Therefore, I am required to award the respondent all reasonable costs incurred in conducting the proceeding after 6 November 2009.

What is "all reasonable costs"? The respondent seeks indemnity costs and has referred me to Energy Efficient Houses Pty Ltd -v- Byrne & Sheldon t/a Sheldon and Byrne Painting Contractors [2009] QCCTB in support of that contention. The point of provisions such as section 142 is to make parties think very seriously about an offer to settle. In jurisdictions where costs normally follow the event, the cost disincentive must necessarily be something more punitive than would otherwise be available. In that context, an award of indemnity costs is reasonable. If the starting point in the tribunal is that each party should bear its own costs, I see no sensible reason for the entitlement to costs to be anything more than standard costs.

On 4 December 2009, the respondent sent the applicant an email which said, in part "the only avenue for the claims by each party against the other to be resolved at this late stage is for the parties to agree to withdraw all claims against each other and for the parties to each pay their own costs including legal and expert costs."

The respondent's solicitors sent a series of emails on 7 December 2009 advising his intentions in relation to the hearing. The applicant sent an email at 11.19 am that day stating that he had not received the email of 4 December 2009.The respondent's solicitors re-sent that email at 11.31 am with the advice that they would seek their client's instructions if the applicant wanted to settle on the terms set out in the email of 4 December 2009. By email sent at 12.10 pm that day, the applicant advised that he would be withdrawing his application.

The respondent did not consent to the withdrawal. He did not offer to withdraw his counter-claim (as he had indicated in the email of 4 December 2009). Instead, he asked the applicant to execute and return a deed of settlement. I note that the need for a deed of settlement was not raised in the offer of 6 November 2009 or the email of 4 December 2009.

The rationale for the request for the deed was that, if the applicant simply withdrew the application, there was nothing to stop him filing a fresh claim on the same basis. While that is technically true, it seemed unlikely, given the applicant now resides in Canada.

The respondent sent the applicant a draft deed and draft consent order on 7 December 2009. The applicant sent an email on 9 December stating that he did not have access to a fax but that he had advised the tribunal that he was withdrawing his application. A course of email correspondence ensued in which it is clear that the applicant did not want to proceed with the hearing and thought that all matters had been resolved. Even though there was no consent order signed by the parties, the respondent could have avoided a hearing by asking the tribunal to make an order in terms of the draft consent order on the basis of the email correspondence. That decision could have been made on the papers.

Because of the respondent's insistence on a deed, when other means of finalisation were available to him, I do not consider it reasonable that he recover his costs after 9 December 2009.

1. The respondent has referred me to section 60 of the Commercial and Consumer Tribunal Act which allows me to award costs if a party to a proceeding is acting in a way that unreasonably disadvantages another party to the proceeding. The respondent says that he is entitled to his costs because the applicant's claim was conducted vexatiously (section 60(1)(c)).

2. A claim is not vexatious simply because it is not a strong case or the claim wholly fails, see the decision of Judge Robin QC in Civic Steel Homes -v- Mitra [2006] QDC 322. It cannot be said that this proceeding was an abuse of process, intended to harass or annoy, or instituted without reasonable ground.

3. The respondent says that the applicant vexatiously persisted with his claim after the joint report filed in January 2007 because he never reduced or changed his claim after the joint expert report. That report did not support the applicant's claim for demolition and reinstatement but it did acknowledge that the work was defective. It is true that the applicant did not change his claim. It is also true that, until November 2009, the respondent never offered to rectify the defective work or to compromise the dispute. If the joint report found that there was no defect at all, there would be some basis for saying that the applicant's persistence with the claim was vexatious.

That leaves the question of costs from the date of the application to 6 November 2009. The starting point is section 70 of the Commercial and Consumer Tribunal Act which provides that the main purpose of the division is to have parties pay their own costs unless the interests of justice require it.

Section 71(4) of the Commercial and Consumer Tribunal Act sets out the matters to which the tribunal can have regard in deciding whether to award costs.

Section 71(4)(a) - the outcome of the proceedings - does not assist me. Both claims were dismissed, so neither party was successful. It is true that the applicant started the proceedings but the respondent maintained his counter-claim up to, and including, the first day of the proceedings.

The respondent complains about the applicant's conduct of the proceedings. I have already commented on the effect of the joint expert report. While the report weakened the applicant's case, a cause of action remained.

The long silence between 2007 and 2009 does neither party any credit. The applicant's failure to attend the hearing was explicable in light of his stated intention to withdraw. As I have already commented, the respondent's attendance at the hearing was only necessary because of its own intransigence.

This dispute was not a complex dispute. There were no difficult issues of fact or law to be determined. I acknowledge that the tribunal gave leave for the parties to be legally represented and I am conscious of the decision of the Court of Appeal in Tamawood Limited -v- Paans [2005] QCA 111. Nevertheless, I am of the view that merely engaging legal representation does not give a party an entitlement to costs in this proceeding.

The respondent says that, if there was a failure to comply with the Act, that was not a factor in the dispute. I agree. This case is very different from Civic Steel Homes -v- Mitra in which the failure to comply with the Act was the principle reason there was a dispute before the tribunal.

I am not persuaded that there are sufficient grounds to overturn the purpose expressed in section 70.

I order that the applicant pay the respondent's costs on a standard basis for the period 6 November 2009 to 9 December 2009. Even though the applicant's claim falls within the jurisdiction of the Magistrates Court, the order would be meaningless if that Court's scale was adopted in the assessment of the costs. I therefore order that the costs be assessed on the District Court Scale and that the applicant pay the costs of that assessment.