Markunsky v Zammit t/a Zammit Quality Constructions

Defect in notice of appeal

1. Before proceeding to the substance of this appeal, it is necessary to dispose of the Builders' argument that the appeal should be dismissed summarily as the notice of appeal is "defective". The alleged defect is the absence of any mention in the notice of appeal to the grounds of appeal and the orders sought by the Owners. Although reference is made in the body of the notice of appeal to an attachment said to address those matters, the notice lodged with NCAT and served on the Builders did not include an attachment.
2. Rule 25(1) of the Civil and Administrative Tribunal Rules 2014 (NSW) (the Rules) provides that an "internal appeal" may be made to NCAT by lodging a notice of appeal. The notice of appeal must be in, or to the effect of, the approved form and must be duly completed: r 25(2). The approved form of notice stipulates that certain information must be provided, including the grounds of appeal, the orders sought and, if leave to appeal is required, the reason leave should be granted.
3. As the Builders point out, the notice lodged by the Owners did not address these issues. Nor, apparently because of an administrative oversight, was a document containing that information appended to the notice. It follows, that in contravention of r 25(2) of the Rules, the notice of appeal was not "duly completed".
4. A document headed "Appellant's Submissions (Costs Judgment)", contains some of the information required to be included in the approved notice of appeal, such as the grounds of appeal and the orders sought. While these submissions bear the date the notice of appeal was lodged with NCAT, it appears they were not provided to NCAT or the Builders until sometime later.
5. Because extensive reference was made to the Appellant's Submissions (Costs Judgment) throughout their submissions, it is apparent that the Builders had received that document prior to preparing their reply to the appeal.
6. The Appeal Panel is required to act with as little formality as the circumstances of the case permit and according to "... the substantial merits of the case without regard to technicalities or legal forms": s 38(4) of the NCAT Act and also Moloney v Taylor [2016] NSWCA 199 (at [30]).
7. Irritating as minor deviations from procedural requirements may be, the Appeal Panel must not be deflected from the "guiding principle": the just, quick and cheap resolution of the real issues in dispute: s 36(1) of the NCAT Act. The Builders have not been materially prejudiced by the failure of the Owners to duly complete the notice of appeal. In these circumstances, in our opinion it would be inappropriate to dismiss the appeal because of the Owners' failure to comply with a procedural requirement.

Grounds of appeal

1. The Costs Decision is an "ancillary decision" as defined by s 4 of the NCAT Act. Accordingly, the Owners may appeal against that decision as of right on any question of law, or with the leave of the Appeal Panel, on any other grounds: s 80(2)(b) of the NCAT Act.
2. The Owners rely on the following grounds of appeal, each of which they assert raises a question of law: 1. Whether by making a single costs order the Tribunal misapplied a legal principle. 2. Whether the Tribunal failed to have regard to, or give sufficient weight to relevant consideration(s) namely the offers of settlement made by the Owners and/or the finding that "both parties enjoyed a measure of success": Reasons for Costs Decision (at [28], [32]).
3. In addition, the Owners advance as a ground of appeal that the Costs Decision was not fair and equitable and/or against the weight of evidence. The Owners contend that they do not require leave to appeal on these grounds, and in the alternative, seek leave to appeal.

Power to award costs

1. The substantive proceedings, HB 12/59836 and HB 13/33297 were commenced in the CTTT. On the abolition of the CTTT on 1 January 2014, the proceedings were "unheard proceedings" as defined by cl 6(1) of sch 1 to the NCAT Act. Those proceedings are taken to have commenced in NCAT, and may be heard and determined instead by NCAT: cl 7(1) of sch 1 to the NCAT Act. As a consequence, NCAT can exercise all of the functions of the CTTT and "the provisions of any Act, statutory rule or other law that would have applied to or in respect of the proceedings had this Act and the relevant amending Acts not been enacted continue to apply": cl 7(3) of sch 1 to the NCAT Act.
2. The costs provisions in the Consumer, Trader and Tenancy Tribunal Act 2001 (NSW) (the CTTT Act) and the Consumer, Trader and Tenancy Tribunal Regulation 2009 (NSW) (the CTTT Regulation), were repealed on the commencement of the NCAT Act. However, by the operation of cl 7(3)(b) of sch 1 to the NCAT Act, they continue to apply in the substantive proceedings.
3. Section 53 of the CTTT Act provided: 53 Costs (1) Subject to this section and the regulations, the parties in any proceedings are to pay their own costs. (2) The Tribunal may, in accordance with the regulations, award costs in relation to any proceedings. (3) If costs are to be awarded by the Tribunal in accordance with the regulations, 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 Division 11 of Part 3.2 of the Legal Profession Act 2004 or on any other basis. (4) In this section, costs includes the costs of, or incidental to, proceedings. ...
4. Clause 20 of the CTTT Regulation, relevantly stated: 20 Costs generally (1) This clause applies to the awarding of costs by the Tribunal as provided by section 53 of the Act. ... (4) In any proceedings in respect of which the amount claimed or in dispute is more than $30,000, the Tribunal may award costs in relation to the proceedings in such circumstances as it thinks fit.
5. The Tribunal decided that the amount claimed or in dispute in the substantive proceedings was more than $30,000 and, as consequence the governing cost provision was cl 20(4) of the CTTT Regulation. The Owners do not challenge that conclusion.

Ground 1: Did the Tribunal err by making a single costs order?

1. The primary ground of appeal is that the Tribunal erred in making a single costs order in relation to the two proceedings: HB 12/59836; HB 13/33297
2. At first instance, the Tribunal heard the respective applications brought by the Owners and the Builders concurrently. In broad terms the application made by the Builders was for the recovery of fees for work performed; the application made by the Owners was primarily for the cost of rectifying defective work. The Owners do not suggest that the approach taken by the Tribunal was inappropriate but argue that although the applications had the same factual substratum, namely residential building work undertaken on their property, the two claims were of a "fundamentally different nature" and each had "an entirely different legal basis". It was, in essence, for this reason that the Owners contended during the substantive appeal that the Tribunal at first instance had erred in entering a single order. For largely the same reasons the Owners contend that the Tribunal erred by making a single costs order.
3. The only authority cited by the Owners in support of their argument that it was a misapplication of legal principle to make a single costs order was a statement of McHugh J in Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534, in which he said (at [6]): If a plaintiff sues on two causes of action and succeeds in one, he or she will obtain the general costs of the action and the costs of the cause of the action in which he or she succeeded, but the defendant will receive the costs of the cause of the action on which he or she was successful.
4. The issue in Latoudis v Casey was what criteria ought to be applied by courts of summary jurisdiction when considering whether to award costs to a successful defendant in a criminal prosecution. The whole paragraph reads: 6. In civil proceedings, the relevant statute or rule often provides that costs follow the event unless the court thinks that some other order should be made. But even when the discretion is uncontrolled, civil courts act on the basis that a successful party has a reasonable expectation of obtaining an order for costs and that the discretion to refuse to award costs should not be exercised against the successful party except for a reason connected with the case. Thus, if a plaintiff sues on two causes of action and succeeds on one, he or she will obtain the general costs of the action and the costs of the cause of action on which he or she succeeded, but the defendant will receive the costs of the cause of action on which he or she was successful: Greeves v Freshwater (1938) 55 WN (N.S.W.) 113.
5. The statement by McHugh J was made to contrast the approach taken by courts to awarding costs in civil proceedings with the more limited approach generally taken in criminal proceedings, for the purpose of determining whether the rule of costs following the event was applicable in criminal proceedings. The statement, and the case as a whole, is not a binding authority on the question of whether costs orders ought to be made singly or otherwise. With respect, the statement has been taken out of context and is not germane to the issue at hand.
6. The submissions made by the Owners in support of their argument that by making a single costs order the Tribunal adopted an "impermissible approach", essentially repeated their argument advanced in the appeal concerning the Substantive Decision. We rejected that argument: Decision in the Substantive Appeal (at [77]-[84]).
7. For the reasons that follow, in our view, the Tribunal did not misapply a legal principle by making a single costs order in respect of both proceedings. Whether the single order was appropriate in the circumstances is a separate issue.
8. First, the objects of the NCAT Act emphasise that proceedings in the Tribunal must be conducted so as "to resolve the real issues in proceedings justly, quickly, cheaply and with as little formality as possible", and "to ensure that the decisions of the Tribunal are timely, fair, consistent and of a high quality": ss 3(d), 3(e). These objects are reflected in the "guiding principle" referred to above: the just, quick, cheap resolution of the real issues in the proceedings. If the Tribunal adopts an approach in its practice and procedure calculated to comply with these objects and the guiding principle, subject to any countervailing consideration, error will not be demonstrated.
9. Second, in proceedings in which multiple issues are contested - a frequent occurrence in applications made under the Home Building Act 1989 (NSW) - the conventional approach is that costs will follow the event, that is, in accordance with the outcome of the proceedings as a whole without an attempt being made to differentiate between particular issues on which the successful party overall may not have succeeded: Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38]; James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [32]. But a court or tribunal may make a different order, particularly if the successful party overall raises an issue unreasonably or otherwise acts in such a manner that would make it unfair for them to receive all their costs: Rozniak v Government Insurance Office (1997) 41 NSWLR 608. More usually, however, a court or tribunal will only deprive a party successful overall of costs in relation to a particular issue when that issue was a dominant issue or clearly separable: Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 at [64], [65].
10. Third, as we noted in the reasons for Decision in the Substantive Appeal (at [76]-[84]), where multiple proceedings have been joined, there is generally no bar to the making of a single order disposing of the substantive application(s).
11. Similarly, in relation to costs orders, it may be appropriate for a court or tribunal to enter a single costs order. The claims in this case were in the nature of a claim and a cross-claim, an unremarkable state of affairs in applications made under Home Building Act.
12. In summary, it was open to the Tribunal to make a single costs order in respect of both proceedings. This ground of appeal must be dismissed.

Ground 2: Did the Tribunal fail to take into account relevant considerations?

1. The Owners submit that even if it was open to the Tribunal to make a single order, the Tribunal miscarried in the exercise of its discretion by failing to have regard to relevant considerations, namely their three offers of compromise made in the early stages of the proceedings and the fact, as acknowledged by the Tribunal, that each party enjoyed "a measure of success".
2. Before addressing these submissions it is necessary to consider the terms of the relevant costs provisions which are set out in full at [19], [20] above. Clause 20(4) of the CTTT Regulation states "the Tribunal may award costs in relation to the proceedings in such circumstances as it thinks fit". Section 53(3) of the CTTT Act states that if costs are to be awarded the Tribunal may determine by whom and to what extent costs are to be paid.
3. Neither party took issue with the Tribunal's statement that cl 20(4) of the CTTT Regulation conferred a broad discretion that must be exercised judicially: Reasons at [24]. Nor did they challenge its statement that the power conferred by cl 20(4) required the Tribunal "to assess what was fair in the circumstances" citing in support, McLaughlin v Dungowan Manly Pty Ltd [2010] NSWSC 306 (McLaughlin) (at [22]). (In McLaughlin, Ward J considered the power to award costs conferred by s 98(1) of the Civil Procedure Act 2005 (NSW). While not identical to cl 20(4), s 98 of the Civil Procedure Act also confers a broad power to award costs.)
4. Neither the CTTT Act nor its Regulation stipulate any factor the Tribunal is bound to take into account in exercising its discretionary power to make a costs order. Accordingly, it is necessary to have regard to the subject matter, scope and purpose of the conferring legislation: Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; (1985-6) 162 CLR 24 ("Peko-Wallsend") at 39 per Mason J; Lo v Chief Commissioner of State Revenue [2013] NSWCA 180 ("Lo") at [9] per Basten JA.
5. While the question of weight to be given to any relevant consideration is one for the decision-maker, nonetheless "proper, genuine and realistic consideration" must be given: Bruce v Cole (1998) 45 NSWLR 163 at 185-6 per Spigelman CJ. As explained by Basten JA in Lo at [10], a failure to give adequate consideration is probably best understood as a complaint of failure "to give adequate weight to a relevant factor of great importance": Peko-Wallsend at 41 (Mason J). The Tribunal will not have given adequate weight to a relevant consideration where its process is merely a formulaic reference: Azriel v NSW Land & Housing Corporation [2006] NSWCA 372 at [49] per Basten JA (with Santow and Ipp JJA agreeing).

Alleged failure to have regard to the Builders' "slender victory"

1. The parties agree that in the exercise of the power conferred by cl 20(4) of the CTTT Regulation, the identification of the successful party is a highly relevant consideration. This is because, where a discretionary power is conferred to award costs, generally the successful party has a reasonable expectation of being awarded costs: Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at [134].
2. In its Reasons, the Tribunal outlined the history of the first instance proceedings, including how the parties' respective applications came to be heard together: Reasons at [18]-[22]. The Tribunal summarised the outcome of those applications: 22 The result of the builder's application and the owner's application was: (a) the builders were granted leave to claim on a quantum meruit under section 94(1A) of the Act; (b) the owners were successful on their defective work claim to the extent of $39,507.60 out of a total of $84,178.00 claimed; (c) despite the owners' success on their defective work claim, the builders recovered $17,489.40 on their quantim meruit claim; and (d) the owners were not successful on their claim for restitution of money paid under a mistake of fact and/or law, decrease in the market value of their residence and retrospective council approval.
3. Posing the question: "who was the successful party?", the Tribunal wrote: 28 In my view both parties enjoyed a measure of success. In monetary figures the builders were successful in obtaining an order that the value of the quantum meruit was valued at $121,497.00 in relation to which the owners had paid $64,500.00, leaving the builders successful in the sum of $56,997.00. This amount was reduced taking into account the owners' defects claim. 29 To look at that issue another way at the commencement of the hearing the owners' expert contended that the value of the quantum meruit was $103,454.00. After deducting the amount paid by the owners, $64,500.00, the owners starting position on their own case was that they owed the builder $38,954.00 subject to their defects claim. Then there were their other claims as set out in the cross application. 30 As explained in the Principal Decision, the method of calculating the quantum meruit required the value of defective work to be deducted. In that regard the owners were successful in obtaining an order in their favour for defective work to the extent of $39,507.60 out of a total $84,178.00 claimed. However, they were unsuccessful on all other aspects of the cross application. 31 From the preceding three paragraphs it emerges that the builders were the more successful. Their success was founded upon: (a) establishing a slightly larger quantum meruit valuation than that contended for by the owners; (b) defeating a little more than half of the owners' defects claims; and (c) defeating the balance of the owners' claims in their cross application.
4. As the extracts from its Reasons set out above reveal, the Tribunal took into account the fact that the Builders had enjoyed a "slender victory". Nonetheless the Tribunal concluded: 32 Given the totality of the litigation, the builder's success was slender. Nonetheless, in my view it is fair that the builders be awarded their costs based upon their success having regard to the fact that they were obliged to litigate in order to recover money for work performed and in doing so were obliged to overcome the matters referred to in the preceding paragraph.
5. The Reasons reveal that the Tribunal made a careful evaluation of the success (or lack of) enjoyed by each party.
6. We are unable to accept the proposition that the Tribunal failed to take into account that each party enjoyed only partial success in their respective applications. Further, we are not satisfied that the Tribunal erred in finding that the Builders were the more successful party for the purpose of exercising the discretion in relation to costs.

Alleged failure to have regard to the Owners' offers of settlement

1. The Owners assert that the Tribunal failed to have regard to their offers of settlement made in the early stages of the proceedings. They contend that the Tribunal's consideration of this issue was confined to the type of costs and did not extend to the threshold question of whether costs should be awarded.
2. In its Reasons for the Costs Decision (at [39]), the Tribunal examined the offers made by the Owners. The Tribunal considered whether the decision to reject those offers was unreasonable and concluded it was not. While the reasonableness or otherwise of a decision to reject an offer of settlement is relevant to whether an order for indemnity costs can be made, it does not follow, as the Owners suggest, that the Tribunal's consideration of their offers to settle the proceedings was confined to the question of the type of costs to be awarded. A fair reading of the Costs Decision indicates that the Tribunal had regard to the offers of settlement made by the Owners in reaching its decision to award costs.
3. We are unable to accept the proposition that the Tribunal failed to give "proper, genuine and realistic" consideration to the offers made by the Owners in the exercise of its discretion to award costs.
4. For these reasons, Ground 2 of the Notice of Appeal should be dismissed.

Ground 3: Should leave to appeal be granted?

1. The Owners assert that the decision was against the weight of evidence and not fair and equitable and, as a consequence, they may have suffered a substantial miscarriage of justice. Citing Polovin v Miller [2015] NSWCATAP 63 at [70], they assert that they do not require leave to appeal against the Costs Decision.
2. The proposition that leave to appeal is not required is correct in relation to grounds of appeal that raise a question of law. However, if the Owners are suggesting that Polovin v Miller is authority for the proposition that leave is not required for a ground that does not give rise to a question of law, we are unable to agree. The issue addressed by the Appeal Panel in Polovin v Miller was whether a decision about costs, made in the course of an interlocutory hearing, was an interlocutory decision. (See definition of "ancillary decision" and "interlocutory decision" in s 4 of the NCAT Act.) The Appeal Panel concluded at [70] that the challenged decision was an ancillary decision and therefore leave to appeal on a question of law was not required.
3. An appeal against an interlocutory decision may only be made with the leave of the Appeal Panel, even on a question of law: s 80(2)(a) of the NCAT Act. In contrast, an appeal against an ancillary decision can be made as of right on any question of law, or with the leave of the Appeal Panel, on any other grounds: s 80(2)(a) of the NCAT Act. As we noted above, the Costs Decision is an "ancillary decision" because it concerns the awarding of costs in proceedings: see definition of "ancillary decision" in s 4 of the NCAT Act.
4. The Owners' alternative submission is that if leave is required to appeal on the ground that the decision is said to be against the weight of evidence and/or not fair and equitable, leave should be granted. The Owners have not explained why the decision is against the weight of evidence or not fair and equitable. Nor have they addressed any reasons in support of the argument that the power to grant leave should be exercised.
5. Absent some basis upon which to determine that the Costs Decision was not fair and equitable or against the weight of evidence, this ground of appeal must be dismissed.

Should the power to award costs in the appeal be exercised?

1. The Builders apply for the costs of the appeal and assert that "special circumstances" are established. Not surprisingly the Owners oppose that application.
2. Where, as in this case, an internal appeal was lodged before 1 January 2016, costs in the appeal can only be awarded if special circumstances are established: s 60 of the Act, r 38A(1) of the Rules.
3. Section 60(1) of the NCAT Act establishes the general principle that each party is to pay its own costs. The Tribunal may only award costs if satisfied that there are "special circumstances" warranting an award of costs: s 60(2) of the NCAT Act. Section 60(3) of the NCAT Act sets out a non-exhaustive list of factors the Tribunal may have regard to in determining whether are special circumstances warranting an order for costs: (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. The term "special circumstances" is not defined in the Act and has been interpreted to mean circumstances that are out of the ordinary but not necessarily extraordinary or exceptional. The discretion to award costs must be exercised judicially 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]; CPD Holdings Pty Ltd t/as The Bathroom Exchange v Baguley [2015] NSWCATAP 21 at [23]-[31].
5. It falls to the Builders to establish that the factors on which rely, separately or in combination, establish special circumstances warranting an award for costs in the substantive appeal.
6. The Builders assert that the Owners raised a number of grounds of appeal that were untenable, vexatious and/or frivolous and that therefore special circumstances arise. The Builders argue that this was not an appeal where the appellant identified a "genuine issue that required consideration" but rather one where the appellant "simply found anything in the decision they could possibly point to that they did not like … and attempted to throw everything possible forward in an attempt to have it changed". The Builders assert that the appeal was brought because the Owners did not like the decision, not "on the basis of a genuine belief that there was an error of law or fact". Further they assert that the appeal was clearly of a vexatious nature because it "was instituted without sufficient ground and only served to cause annoyance and further costs to the Builders".
7. The Appeal Panel will not readily embrace an argument that an appeal is "vexatious" or "frivolous" unless it is manifestly hopeless or brought with the clear intention of annoying another party. It will be a rare appeal that can be characterised in one of those ways.
8. In an ideal world, appellants and their legal representatives would be sufficiently wise and objective so that they would never advance poor arguments or make submissions with little or no basis for them. Reality is otherwise, even in the highest appellate courts. Parties and appellants will frequently put forward arguments more in hope than confidence that they will ultimately be accepted. To do so does not demonstrate them to be vexatious or frivolous. An argument that may seem compelling in the chambers or the office of a lawyer or litigant may, when exposed to close scrutiny in an adversarial setting, turn out to be a poor one. But a court or tribunal will be slow to label the party or advocate advancing that argument with the damning verdict of "vexatious" or "frivolous".
9. The mere fact that an appellant throws up a number of arguments in the hope that one of them may find favour is no basis for characterising the appeal as "frivolous", "vexatious" "manifestly hopeless" or "untenable". Yet that, in effect, is the substance of the Builders' argument. In our view, although the Owners' approach to the appeal could be characterised as something of a "scatter-gun" method, it was not so manifestly hopeless or doomed to failure that it deserves the sobriquet "vexatious" or "frivolous" or "lacking in substance". Indeed, rather than "hopeless" it might be called "hopeful".
10. We are not satisfied that special circumstances are established and therefore decline to exercise the power to award costs. Each party will therefore bear their own costs of the appeal. 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: 29 November 2016