Lucchese v McDonell

Costs at First Instance

1. As noted at [4] above, the Owners submit that we should make an order for costs in relation to the first instance proceedings. The Tribunal at first instance has not yet made any decision in relation to those costs.
2. We are of the opinion that we are not empowered to make any decision as to costs of the proceedings at first instance when the Tribunal below was asked to do so but has yet to make a decision.
3. In LMA Contractors Limited v Changizi [2017] NSWCATAP 145 the Appeal Panel said that, given the terms of s 81 of the NCAT Act, an Appeal Panel was not allowed to make a costs determination in relation to costs at first instance when no application for costs was made to the Tribunal at first instance. A party's remedy, in such circumstances, was to pursue the leave granted by the Tribunal in that case to make submissions as to costs.
4. Although the parties in this case have made submissions as to costs to the Tribunal below, albeit no decision has yet been made, we do not think that distinguishing fact allows us to determine the first instance costs determination in the absence of a decision by the Tribunal at first instance.
5. If we were wrong on that question of power, we would not be inclined to decide the costs at first instance. That application ought be pursued with the Tribunal below.
6. Accordingly, in relation to the costs of the first instance proceedings, the parties should seek a determination of their applications and submissions from that Tribunal.

Costs of the Appeals - General Principles

1. Section 60 of the NCAT Act provides: 60 Costs (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: (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. (4) 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. (5) In this section: costs includes: (a) the costs of, or incidental to, proceedings in the Tribunal, and (b) the costs of, or incidental to, the proceedings giving rise to the application or appeal, as well as the costs of or incidental to the application or appeal.
2. Rules 38 and 38A of the Civil and Administrative Tribunal Rules 2014 provide: 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. 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.
3. The proceedings at first instance were allocated to the Consumer and Commercial Division of the Tribunal, and so fall within r 38(1).
4. As explained in Allen v TriCare (Hastings) Ltd [2017] NSWCATAP 25 at [22], the first instance costs provisions differed from those set out in s 60 because of the operation of the "procedural rules".
5. Accordingly, and as these appeals (being internal appeals) were lodged after 1 January 2016, they meet the conditions set out in r 38A(1). It follows that, pursuant to r 38A(2) we must apply the first instance costs provisions when deciding whether to award costs in relation to these appeals.
6. Whether or not, pursuant to r 38(2), "special circumstances" must be found which would warrant an award for costs, is determined by the "amount claimed or in dispute".
7. In Allen v TriCare the Appeal Panel held at [43] that: "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."
8. In their Notice of Appeal in appeal AP 18/08577 the Owners (appellants) sought an order dismissing the Builders' claim in its entirety. The order at first instance was that the Owners pay the Builders $57,440.81. Accordingly, the amount in dispute in that appeal was more than $30,000.
9. In their Notice of Appeal in appeal AP 18/08247 the Owners (appellants) sought an order that the Builders pay the Owners $51,022.85, rather than the sum of $36,879.65 which the Tribunal at first instance had ordered the Builders to pay to them. This represented, in substance, a claim or dispute about the sum of $14,143.20.
10. This amount falls within r 38(2)(a). Accordingly, to dispense with the need to find special circumstances in order to make an award for costs on that appeal we would need to first make an order under clause 10(2) of Schedule 4 to the NCAT Act in relation to that appeal. The Owners (costs applicants) do not seek such an order, and properly so with respect.
11. It follows that in appeal AP 18/08247 the Owners would need to demonstrate special circumstances warranting an award of costs.
12. Uninstructed by authority we would have been inclined to consider the two appeals in a combined manner for the purposes of the costs provisions. The disputes arose between the same parties, from the same building contract, and the parties were represented by the same solicitors and counsel in each case (when heard).
13. However, in Allen v TriCare the Appeal Panel held at [37] - [41] that, in the absence of an order consolidating proceedings, two proceedings heard together were to be treated as separate proceedings for the purposes of r 38. We should not depart from this holding unless convinced that that decision is clearly wrong, [1] a conclusion to which we do not come.
14. As no order consolidating the proceedings at first instance nor the appeals was made, and following Allen v TriCare, we shall treat the two appeals as separate proceedings for the purposes of r 38.
15. Accordingly, in appeal AP 18/08577 the Owners do not have to establish special circumstances in order to obtain an award of costs in their favour.
16. However, in appeal AP 18/08247 the Owners are required to establish special circumstances in order to obtain an award of costs in their favour.
17. We shall deal with each appeal separately.

The Owners' Submissions

1. The Owners submit that the usual order is that costs ought follow the event and cite in support Thompson v Chapman [2016] NSWCATAP 6 and Gan v Shop 3, 228 - 230 Hanvaylee Parade Kensington Pty Ltd (No 2) [2018] NSWCATAP 131.
2. The Owners submit that the "event" is generally taken to be the practical outcome of the proceedings, citing Traderight (NSW) Pty Ltd v Bank of Queensland Limited [2014] NSWSC 733.
3. The Owners submit that in the ordinary course of events a successful applicant is awarded costs both in the appellate court and the court below because this reflects the position that it is usually demonstrable that the party in the court below should have won and the order for costs should therefore have been in that party's favour.

The Builders' Submissions

1. The Builders submit that the appropriate order is that each party bear their own costs.
2. The Builders submit that the Owners have only succeeded on part of their claim and cite Forster v Farquhar (1891) 1 QB 564 in support of the proposition that the circumstances may make it reasonable that a successful party bear the expense of litigating that portion of the proceedings upon which he or she has failed.
3. The Builders also submit that attempts to compromise the proceedings are relevant to the exercise of the discretion as to costs, and submit (without evidence) that the Builders, but not the Owners, were willing to negotiate a compromise.
4. In the alternative, the Builders submit that each party was partly successful, and partly unsuccessful, and the appropriate order would accordingly be that each party pay the other parties' costs.
5. The Builders submit that ordering each party to bear his and her own costs will save the parties further costs of negotiating or assessing costs, would address the fact the Owners elected to incur additional costs in instructing new solicitors and counsel for the appeal, would be consistent with the NCAT's guiding principle to facilitate the just, quick and cheap resolution of the real issues in the proceedings (see s 36 of the NCAT Act), and would be consistent with the principle that an award for costs is one of compensatory or restorative justice (citing Ruddock v Vadarlis (No 2) (2001) 115 FCR 229; [2001] FCA 1865 at [12]).

The Owners' Submissions in Reply

1. In reply, the Owners submit that attempts to settle proceedings are of limited relevance unless an offer has been made which the offeror subsequently "betters". The Owners submit that there is no evidence the Builders made an offer which they have "bettered" on the appeal.
2. The Owners submit, correctly, that there is no evidence to support the submissions as to the parties' willingness to negotiate. In any event, the Owners submit, the Builders chose to initiate the litigation and the result on appeal shows the Builders decision was misconceived.
3. The Owners submit the fact that they changed legal representation should not weigh against them.
4. The Owners submit that, if their principal submissions are rejected, each party ought be ordered to pay his and her own costs rather than each party being ordered to pay the other parties' costs. In substance, the Owners submit there would be no difference, in practical terms, save as to avoid the necessity of negotiating and assessing competing costs claims.

Decision

1. We accept the general rule that costs ought follow the event. In this case the event is the success of the appellants on their appeal. Their success is not complete, but is substantial.
2. Sometimes that general rule is departed from for a number of reasons. In Ruddock v Vadarlis Black CJ and French J said, at [15] - [16] (citations omitted): "[15] Usually the circumstances in which a successful party is denied all or part of its costs have to do with its conduct of the proceedings. The rules of Court make specific provision for the case in which a judgment is obtained which is not more favourable than terms previously offered by a respondent: O23 r11. Within the general discretion to award costs, costs may be refused where, for example, the applicant has made an exaggerated claim which has occupied a significant proportion of the proceedings and has succeeded only on a minor aspect of its original claim. Costs may be apportioned according to success or failure on particular distinct or severable issues ... And a trial judge may award only a proportion of the successful party's costs if the conduct of that party at trial was such as to unreasonably prolong the proceedings ... [16] The costs of an appeal, like those at first instance, are in the discretion of the appellate court. If an appeal succeeds then in the ordinary course the Court will order the respondent to pay the costs of the appeal and of the action at first instance ... An order for payment of the costs of the successful party may, as in the case of proceedings at first instance, be refused or the costs ordered reduced. The discretion conferred on the Court enables it to respond to the wide variety of circumstances that may arise in relation to the making of costs orders."
3. The Builders do not submit that the Owners engaged in any disqualifying conduct of the type mentioned in the quote above, or other disqualifying conduct. Nor do the Builders, with respect correctly, submit that the Owners only succeeded on a minor aspect of their claim.
4. Whilst costs may be apportioned on particular distinct or severable issues, we do not think the success on one argument on this appeal, and the failure on the other, justifies such an apportionment.
5. Nor do we think Forster v Farquhar assists the Builders. As McDougall J observed in A & P Parkes Constructions v Como Hotel Holdings [2004] NSWSC 792 at [11], that was a case: "... where, on a proper analysis, it could be seen that there was a dominant issue that led to the plaintiff receiving substantially less than the amount of his claim."
6. In this appeal we do not consider one issue to have been dominant in the sense used by McDougall J.
7. We do not accept the assertions made in the Builders' written submissions as to the parties' willingness to negotiate. There is no evidence supporting that submission (and we made directions to provide any material or documents supporting any submissions as to costs). Further, as the Owners correctly point out, the Builders have not tendered any offer made by them which has been "bettered".
8. Nor do we think the matters submitted by the Builders and listed at [36] above, other than that relating to compensatory or restorative justice, are applicable to the exercise of our discretion as to costs.
9. The Owners were largely successful on this appeal. They have regained their deposit which the Builders were not entitled to keep and about which there is no evidence that the Builders ever offered to return.
10. We do not consider the Owners' change of legal representation to be relevant on costs, nor do we consider the alleged savings of costs which may arise from ordering each party to bear his and her own costs to be relevant. As Black CJ and French J said in Ruddock at [12]: "The award of costs to a successful party is principally by way of perceived restorative justice. The general rule assumes that where an applicant succeeds it will have incurred costs because the respondent's conduct made it necessary for the applicant to bring the proceedings. If the applicant fails, the respondent will have incurred costs defending an action which ought not to have been brought against it. The order made in such cases is compensatory ..."
11. The principle that arises in relation to an award for costs is one of compensatory or restorative justice, and neither of the factors just mentioned are relevant to that issue in our opinion.
12. Neither do we think the NCAT's guiding principle set out in s 36 of the NCAT Act is relevant in the exercise of our discretion as to costs. That section is relevant to the process invoked in determining that issue, but not in the determination of the issue itself.
13. In our opinion the Owners should have their costs of this appeal.

The Owners' Submissions

1. As we have said at [27] above, in this appeal the Owners are required to establish special circumstances in order to obtain an award of costs in their favour. We have set out the terms of s 60 of the NCAT Act earlier in these reasons.
2. The Owner relies on three "special circumstances". First, the nature and complexity of the proceedings [in reliance upon s 60(3)(d)]. Second, the practical outcome (meaning the final orders we made) was that there was a single order for payment by the Builders to the Owners of $10,494.84 [in reliance upon s 60(3)(g)]. Third, in appeal 18/08577 both parties were at risk as to costs (because no "special circumstances" were required to be established), and this appeal being presently considered occupied only a small part of the hearing (of both appeals), the policy reasons for avoiding costs orders in matters of limited quantum do not apply [in reliance upon s 60(3)(g)].

The Builders' Submissions

1. The Builders essentially repeat the submissions they made in the earlier appeal.

Decision

1. As to the first "special circumstance" relied upon by the Owners, whilst there was a degree of complexity in this present appeal we do not think the appeal was so complex, or of such a nature, as to justify an order for costs.
2. As to the second circumstance, the single order for payment was made to avoid the needless complexity of making orders for payment from party A to party B in one appeal, and party B to party A in the other. Further, to have regard to this practical outcome would be to fall foul of the holding in Allen v TriCare (see [24] above) that appeals heard together are to be treated as separate proceedings for the purposes of r 38.
3. As to the third circumstance, and treating this appeal separately from the other for the purposes of r 38, we do not consider the relative amount of time taken with this appeal compared to the other is a relevant special circumstance. Further, whilst the time taken for arguing the appeals is one thing, the time and expense in preparing for the hearing of the appeals is another, and one in which the relativities may differ from those apparent on the oral hearing of an appeal.
4. Therefore, we are not persuaded there are any special circumstances. If we are wrong about that, we are not persuaded by the matters raised that it would be appropriate to exercise our discretion as to costs in favour of the Owners on this appeal.

Orders

1. In proceedings AP 18/08577 we make the following orders: 1. A hearing of the costs application is dispensed with. 2. The respondents are to pay the appellants' costs of the appeal as agreed or assessed.
2. In proceedings AP 18/08247 we make the following orders: 1. A hearing of the costs application is dispensed with. 2. Each party is to pay his and her own costs of the appeal.

I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Principal Registrar

Endnote

1. Hicks v Minister for Immigration & Multicultural & Indigenous Affairs [2003] FCA 757 at [75] - [76]. 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: 11 July 2018