Manca v Tullipan Homes Pty Ltd

The orders sought

1. The respondent relies on its Calderbank offer in seeking an order for the appellant to pay the respondent's costs of the appeal as agreed or assessed on an ordinary basis up to 20 September 2023 and on an indemnity basis from 21 September 2023.
2. The appellant says that the appropriate order is for the appellant to pay the respondent's costs of the appeal on the ordinary basis, as agreed or assessed.

Legal principles

1. The respondent, in its submissions dated 3 January 2024, submitted that rule 38 of the Civil & Administrative Tribunal Rules 2014 (NSW) (the NCAT Rules) applies as the amount claimed by the appellant was in excess of $30,000. This relevantly 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 … (b) the amount claimed or in dispute in the proceedings is more than $30,000.
2. These proceedings were filed in the Consumer and Commercial Division of the Tribunal.
3. In Bondi Builders Pty Ltd v Dennett [2022] NSWCATAP 317 the Appeal Panel stated at [28]-[29]: 28 As the amount claimed or in dispute at first instance exceeded $30,000, it was not disputed that costs had to be determined not by s 60 of the NCAT Act but by rule 38 of the Rules. When rule 38 applies there is a general discretion to award costs and it is well established, by decisions such as News v Cotes [2019] NSWCATAP 186, Bonita v Shen [2016] NSWCATAP 159 and Thompson v Chapman [2016] NSWCATAP 6, that: (1) the starting point is that the usual order for costs should be in favour of the successful party, (2) the award is not to punish the unsuccessful party but to compensate the successful party for the costs incurred in the proceedings, and (3) departure from the usual order is permissible if the circumstances favour that outcome. Simply stated, when rule 38 applies it is not necessary to establish special circumstances and the order usually made is that costs follow the event (ie follow the outcome of the case) unless there is disentitling behaviour by the successful party (Latoudis v Casey [1990] HCA 59, Oshlak v Richmond River Council [1998] HCA 11 (Oshlack) which can include unreasonable refusal of an offer of settlement.
4. In respect of the costs of appeal proceedings, r 38 is not the sole consideration. Rule 38A of the NCAT Rules states as follows: 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. The operation of r 38 and r 38A is a two-step process. Firstly, the amount claimed or in dispute in the proceedings under appeal must have exceeded $30,000. Secondly, the amount claimed or in dispute in the appeal itself must have exceeded $30,000. Both steps must be satisfied for the costs determination not to involve consideration of whether "special circumstances" are established under ss 60(2) of the NCAT Act (Promina Design & Construction Pty Ltd v The Owners-Strata Plan No 97449 (No 4) [2023] NSWCATAP 338 at [10]-[18] and the authorities cited therein).
6. In this matter, the appellant "consents" to an order that he pay the respondent's costs of the appeal on the ordinary basis as agreed or assessed (para [2] of the appellant's costs submissions), with the only issue raised by the appellant being opposition to there being an indemnity costs order.
7. The "consent" to pay costs as agreed or assessed on the ordinary basis can only logically be construed as a concession by the appellant that both the amount claimed or in dispute in the proceedings at first instance and in the appeal exceed $30,000, or in the alternative, that (if r 38 and 38A do not apply) that there are sufficient special circumstances to justify a costs order under ss 60(1) and (2) of the NCAT Act (The Owners-Strata Plan No 63731 v B & G Trading Pty Ltd (No 2) [2020] NSWCATAP 273 at [5]-[15].
8. At no point in the appellant's costs submissions dated 10 January 2024 does the appellant argue that he should not be liable to pay any costs of the appeal. We note the appellant is a practicing Solicitor and that the appellant instructed Senior Counsel and junior Counsel in the appeal, although it is the appellant who authored the costs submissions.
9. The relevant principles relating to Calderbank offers were recently set out in C&V Engineering Services Pty Ltd v Metropolitan Demolitions Pty Ltd (No 2) [2023] NSWCA 240 at [29]-[32]: 29 There is no presumption that a party who does not accept a Calderbank offer and does not obtain a more favourable judgment will necessarily pay indemnity costs from the date of that offer: Leichhardt Municipal Council v Green [2004] NSWCA 341 at [19] (Santow JA, Bryson and Stein JJA agreeing); Tati v Stonewall Hotel Pty Ltd (No 2) [2012] NSWCA 124 at [9] (Bathurst CJ, Allsop P and Beazley JA agreeing). 30 The relevant principles on an application for indemnity costs following a Calderbank offer are well established. Success on such an application depends upon whether the offer was a genuine offer of compromise and whether the offeree acted unreasonably in all the circumstances in refusing the offer, tested as at the time the offer is made and not with the benefit of hindsight resulting from a known outcome recorded in a judgment: Miwa Pty Ltd v Siantan Properties Pty Ltd (No 2) [2011] NSWCA 344 at [8] , [11] (Basten JA, McColl and Campbell JJA agreeing); Krolczyk v Winner t/as J Winner Building Services [2022] NSWCA 196 at [217] (Griffiths AJA, White and Kirk JJA agreeing). 31 The party seeking an indemnity costs order bears the onus of demonstrating that the other party's failure to accept a Calderbank offer was unreasonable in all the circumstances. 32 As recently set out by Ward CJ in Eq (as her Honour then was) in E Group Security Pty Ltd v Chief Commissioner of State Revenue (No 2) [2021] NSWSC 1296 at [59]- [60], the factors to be taken into regard when considering whether the rejection or non-acceptance of an offer was unreasonable include: (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; and (6) whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejecting it.

The stage of the proceedings at which the offer was received

1. The Notice of Appeal was filed on 31 August 2023. On 13 September 2023 the appellant told the respondent that he was "contemplating" amending the Notice of Appeal as it had been prepared "without input of senior counsel. The nature of the revision will be to remove some of the work items included in the grounds of appeal. I am awaiting the advice of senior counsel in this regard."
2. The appellant had also filed an Application for a Stay which was listed for directions on 13 September 2023. At that directions hearing an Order was made granting leave to the appellant to file an Amended Notice of Appeal seeking to narrow the issues in dispute by 4 October 2023. The appeal was listed for hearing on 23 November 2023.
3. The Calderbank offer was made on 21 September 2023. In a letter dated 4 October 2023 the appellant rejected the offer and served the Amended Notice of Appeal. The original Notice of Appeal contained 26 grounds of appeal, whereas the Amended Notice of Appeal filed on 4 October 2023 reduced those grounds to four. The respondent served its Reply to Appeal on 12 October 2023.
4. The appellant says that the Calderbank offer was premature because the position of the parties was not clear at that time as the Amended Notice of Appeal and Reply to Appeal had not been filed and served and the issues for determination in the Appeal were not certain. The timing of the offer in all of the circumstances favoured a conclusion that the rejection of the offer was not unreasonable. This, it was submitted, was a very strong factor which weighed to the benefit of the appellant.
5. The respondent says that the assertion that the offer was premature is misconceived. The fact that the letter addressed deficiencies in the Notice of Appeal which were abandoned in the Amended Notice of Appeal did not detract from the fact that the offer was made at a time when the appellant was in a position to assess the strengths and weaknesses of the Appeal Grounds which it intended to and ultimately did (unsuccessfully) press.
6. We reject the appellant's argument that the offer was premature. As of 21 September 2023, the appellant was clearly in a position to know what grounds of appeal were going to be relied upon in the Amended Notice of Appeal. The Amended Notice of Appeal narrowed the grounds of appeal rather than expanded them. The comments made by the respondent pointing out the weakness of the appellant's grounds and arguments were applicable irrespective of the appellant filing Amended Grounds of Appeal. The appellant was clearly able to make an informed decision about the matters identified in the Calderbank offer and fairly assess whether or not it should be accepted.

The time allowed to the offeree to consider the offer

1. The appellant concedes that time allowed for him to consider the offer was not unreasonable.

The extent of the compromise offered

1. The appellant says the Calderbank offer did not contain a genuine element of compromise. He described it as being a tactical device executed with the intention of securing a costs advantage, rather than genuinely seeking to compromise the respondent's position. This, it was submitted, was illustrated by the respondent's failure to make a further offer after the Notice of Appeal had been amended.
2. In addition, the appellant says that the costs which the respondent claimed had been incurred up to the time of making the offer were excessive. The offer had been made 21 days after the filing of the Notice of Appeal and at a time when respondent was aware that the appellant intended to file an Amended Notice of Appeal which would narrow the issues in dispute. Accordingly, it was submitted, the Calderbank offer was merely tokenistic as the respondent's legal practitioners should only have done minimal work until they received the amended Notice of Appeal. Accordingly a walk away offer could not reasonably be considered a genuine compromise.
3. The respondent agrees that its offer was essentially a walk away offer by which the respondent agreed to cover its own legal costs to date, being costs which it would otherwise be able to successfully claim from the appellant.
4. The respondent relies on the decision in Evans v Braddock (No 2) [2015] NSWSC 518 in which Hallen J held at [57]: "...there is little doubt that a "walk-away" offer, in a particular case, can be a "genuine offer of compromise": Melchior v Sydney Adventist Hospital Limited (No. 2) [2009] NSWSC 65, at [8]; Hearse v Staunton [2011] NSWSC 1065.
5. The respondent says that the Appeal Panel in Xpertise Construction Pty Ltd v Orantia [2023) NSWCATAP 22 considered essentially the same factual circumstances. It held at (60]: While there was no element of compromise amount in the subject letter, it provided a clear opportunity for the appellants to discontinue the appeal without risk of an adverse costs order. If done, both parties would have saved the legal costs subsequently incurred but the respondent would have given up the opportunity to obtain a costs order in his favour for costs to date. The offer was made a month after the appeal was commenced and about two months prior to the hearing. At the time of the letter, the position of each party was clear.
6. The respondent also relied on the decision of the Supreme Court in The Owners Strata Plan No 90189 v Parkview Constructions Pty Ltd (No 2) [2022] NSWSC 1477. The Court relevantly held: 17. An indemnity costs orders based on non-acceptance of a "walk away" offer is, unsurprisingly, more difficult to obtain than where a party has offered to pay 'real money' to resolve the proceedings. Authorities considering " walk away " offers tend to focus on whether the offer involved an element of compromise or was simply an invitation to capitulate. It was not suggested here that the plaintiffs offer was derisory. Rather, as the plaintiff submitted, its offer to bear its own costs was all that it could offer to resolve the motion. The plaintiff could not offer, for example, to pay the defendant's costs or agree to exclude some of its expert evidence or bring an application to amend. 18. The key question in this case is whether it was unreasonable for the defendant not to accept the "walk away" offer: Mainteck Services Pty Limited v Stein Heurtey SA and Stein Heurtey Australia Pty Ltd [2013] NSWSC 1165 at [15] (per Sackar J). Whilst bearing in the mind the authorities on which the defendant relies, the general position remains that the Court's discretion to order indemnity costs is one that has to be exercised having regard to all the circumstances of the case.
7. We accept the submission that a 'walk away' offer can, in some circumstances, be a genuine compromise of the issues in dispute between the parties - see the extensive discussion in Leichhardt Municipal Council v Green [2004] NSWCA 341 at [23]-[37].
8. The fact that the Calderbank offer can be described as being a tactical device executed with the intention of securing a costs advantage is not fatal to the respondent's application. Hallen J held in Evans v Braddock (No 2) at [50]: To these principles, I should add that service of a Calderbank offer serves a number of purposes, including to promote settlement and also to give the offeror cost protection in the event of an unreasonable refusal by the offeree. Furthermore, "to some extent any offer of compromise or Calderbank offer is necessarily a tactical weapon. At the heart of a Calderbank offer are two factors - settlement of the case and protection on costs if the offer is ultimately regarded as reasonable. Characterisation as a tactical weapon does not necessarily defeat the efficacy or the genuineness of the offer": Zealley v Liquorland (Australia) Pty Ltd & Anor (Costs Ruling) [2015] VSC 133, per J Forrest J, at [18] and [24].
9. In determining whether the Calderbank offer was a genuine compromise, we take into account that it was made, and rejected, following years of litigation between the parties, with detailed submissions having been served at each stage of the litigation addressing the merits of the matters the subject of the appeal.
10. Further, we do not accept the submission by the appellant that the costs which the respondent claimed had been incurred in the Calderbank offer were excessive because the respondent should not have prepared its case until after it had received the Amended Notice of Appeal. It is not our role to assess whether the steps taken by the respondent as set out in the Calderbank offer were all recoverable. However we do not accept the fundamental proposition that it was not reasonable for the respondent to prepare its defence to the claims made against it simply because the appellant had foreshadowed that its claims may be amended.
11. We are satisfied that the Calderbank offer did contain a genuine element of compromise.

The appellant's prospects of success assessed as at the date of the offer

1. The appellant says he had a genuine private interest of high importance in having his Appeal determined, as grounds 1 to 3 related to claims for defective work to his family home, which would require substantial works and cost to rectify, and ground 4 would require the appellant to pay a significant amount of costs of the Remitter Hearing. He says he reasonably sought, through his Appeal, a determination as to whether the interpretation of the Tribunal of the orders from the Appeal Panel in the First Appeal was correct. That fact that this issue was ultimately decided against him, he says, does not necessarily mean that the ground was doomed for failure at the outset.
2. The following additional submission was made in respect of the appellant's prospect of success: The offeree's prospects of success, assessed as at the date of the offer needs to be considered on the basis of the initial Notice of Appeal filed 31 August 2023 which included 26 grounds of appeal, in circumstances where no Reply to Appeal had been filed. Due to the timing of the offer contained in the Respondent's Letter which only addressed the grounds in that particular Notice of Appeal, the offer was essentially irrelevant, as the Amended Notice of Appeal contained the grounds that were contended for at the hearing of the Second Appeal. In the absence of any subsequent offer addressing the Amended Notice of Appeal, or following the filing and service of a Reply to Appeal, this factor cannot be considered in favour of the Respondent. Given the premature timing of the Respondent's Letter for the reasons set out above, it was not possible at that time for any reasonable analysis of the Appellant's prospects of success on the Amended Notice of Appeal to be considered.
3. The respondent says that the prospects of success for the appellant at the date of the offer must be considered very poor.
4. Our reasons in the substantive decision dismissing each ground of appeal are self-explanatory and do not require repetition. A number of the grounds of appeal raised by the appellant required leave to appeal. The substantive decision sets out succinctly why the appeal failed.
5. The reasonableness of accepting or failing to accept a Calderbank offer is, however, assessed prospectively not retrospectively.
6. A critical issue is whether the respondent explained why the appeal would fail in sufficient detail that it can be said, assessed objectively at the date the offer was made, it was unreasonable for the appellant to reject the offer in circumstances where the appeal ultimately failed. That assessment also needs to take into account the relevant history of the litigation known to the parties leading up to the making of the offer.
7. In our view, the reasons at paras [4]-[9] of the Calderbank offer give a sufficiently detailed explanation as to why the appeal was doomed to fail. The reasons focus on the appellant seeking to introduce new evidence in contravention of the terms of the Appeal Panel orders remitting the proceedings back to the Tribunal. Although the appellant raised other grounds of appeal, assessed objectively that was the central issue in the appeal. The respondent also stated (correctly in our view) the other grounds of appeal in substance raised challenges to factual findings that were reasonably open to the Tribunal on the evidence before it.
8. The fact that as of the date of the Calderbank offer the appellant was relying upon 26 grounds of appeal, which were subsequently refined to 4 grounds of appeal, does not assist the appellant. The amended grounds of appeal narrowed, rather than expanded, the grounds of appeal. That does not affect our finding that the reasons provided in the Calderbank offer as to why the appeal was doomed to fail were sufficiently detailed for the appellant to form a view (assessed objectively) as to the lack of prospects in the appeal.
9. We are satisfied that, as at the date the offer was made, the appellant's prospects of success were poor, assessed objectively.

The clarity with which the terms of the offer were expressed

1. The appellant concedes that the clarity with which the terms of the offer were expressed is not really in dispute. However he does not concede that the respondent adequately explained in that letter why it asserted that the grounds of appeal, other than Ground One, would fail. The appellant considered that this factor would be considered to be neutral, or favouring the appellant with respect to the question as to whether or not it was reasonable to reject the offer.
2. We have already found that the reasons at paras [4]-[9] of the Calderbank offer give a sufficiently detailed explanation as to why the appeal was doomed to fail.

Whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejecting it.

1. The appellant concedes that the Calderbank offer foreshadowed an application for indemnity costs in the event it was rejected.

Outcome

1. On balance, we are satisfied, having considered all of the evidence and the submissions, that it was unreasonable for the appellant not to have accepted the Calderbank offer made the respondent.

Orders

1. We make the following Orders: 1. A hearing with respect to the question of costs is dispensed with pursuant to s 50 of the Civil and Administrative Tribunal Act 2013 (NSW). 2. The appellant to pay the respondent's costs of the appeal as agreed or assessed on an ordinary basis up to 20 September 2023. 3. The appellant to pay the respondent's costs of the appeal as agreed or assessed on an indemnity basis from 21 September 2023.

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 February 2024