Following our substantive decision in these appeal proceedings in Matterson v Sunrise Pools Australia Pty Ltd [2017] NSWCATAP 211 we are now concerned with three consequential matters. One of these is uncontroversial - it concerns the status of some work orders in respect of the spa which is the subject of this litigation. In view of the decision of Senior Member Thode on 8 February 2019 on the matter we remitted for a re-determination, both parties agree that these work orders should be set aside.
The other two matters to be dealt with concern costs. First, the costs of the appeal and, secondly, the costs of the first instance proceedings the subject of the appeal.
[2]
Background
The details of this dispute are recounted in our substantive decision on appeal and in the decision of Senior Member Thode.
Accordingly, a brief account of the background will suffice.
The appellant, Home Owner, contracted with the respondent, Builder, to build a spa as an addition to a pool at their home. The Home Owner was dissatisfied with the outcome and commenced proceedings in the Home Building list of the Tribunal raising a variety of claimed deficiencies with the spa.
The Tribunal dismissed all of the claims save for two minor items of work to be carried out - the installation of a Perspex strip to prevent overflow and some treatment for the water and instruction of the Home Owner on correct operation and maintenance of the spa (Orders 1 and 2 of Orders made on 24 November 2016).
The large measure of success achieved by the Builder at first instance was reflected in the costs order in its favour that the Home Owner pay 90% of the Builder's costs of the proceedings (Orders made on 27 April 2017).
On appeal, both parties enjoyed some success. The parties disagree about the measurement of such success.
The result of the appeal was that the dismissal of the Home Owner's application was upheld save for the claim that the spa was defective because it leaked. This aspect of the appeal succeeded because we concluded that the Tribunal's reasons were inadequate - the Tribunal had failed to address in the reasons material evidence given by Mrs Matterson about her observations that the spa leaked.
We remitted the claim based upon the spa leaking to the Tribunal for redetermination. We permitted new evidence to be adduced at that hearing: reasons at [59] - [60]. Senior Member Thode found that the spa did leak and made work orders for the leaking to be rectified.
It is agreed that those orders make Orders 1 and 2 made on 24 November 2016 redundant.
In finding that the spa leaked, Senior Member Thode relied upon the observations of Mrs Matterson and also on additional evidence that had not been presented at the first hearing.
In a decision issued on 18 May 2019 Senior Member Thode ordered that the costs of the determination of the remitted matter were to be paid by the Builder.
A significant part of the appeal that was unsuccessful concerned a contention that the height of the spa did not conform with the contract. Also, the Home Owner did not succeed in applying for leave to appeal on grounds that there was new evidence that the spa leaked and that the spa was too high. We refused leave to appeal on these grounds because the new evidence could have been obtained before the first hearing.
[3]
Costs of the appeal
Although, as a matter of form, this was not accepted by the Builder, there was no real dispute that the general discretion to award costs conferred by Rule 38 of the Civil and Administrative Tribunal Rules 2014 was enlivened in respect of the costs questions in this case because the amount in dispute exceeded $30,000 (pursuant to Rule 38A we must apply the cost provision in Rule 38). The reasons of Senior Member Thode at [21] and [35] make it clear that the amount in dispute exceeded $30,000 and that, therefore, Rule 38 applied.
In exercising the discretion in respect of both costs questions in this case, which discretion is a wide one, the starting point is that costs should follow the event and be awarded to the successful party but there is no rule that this result should follow; see, for example, Hanna v BOS Holdings Pty Ltd (No 2) [2019] NSWCATAP 73 at [9].
The parties took widely divergent positions about the costs of the appeal.
The Home Owner asks for all of his costs of the appeal even though he was unsuccessful on discrete aspects that occupied a substantial amount of appeal time.
On the other hand, in oral submissions, Mr O'Connor, who appeared for the Builder, says that it should have all of its costs of the appeal on an indemnity basis up until the time when an amendment of the Notice of Appeal was permitted at the hearing to allow the Home Owner to challenge the decision on the basis of inadequate reasons. For the costs after that time, the Builder submits that each party should bear their own costs.
No application for indemnity costs had been foreshadowed in the Builder's written submissions. Instead, in support of an application that the Home Owner should pay the Builder's costs of the appeal, it was submitted that this was because the Builder had been mostly successful in resisting the appeal, it was only after the Appeal Panel suggested a ground of appeal that may be meritorious that the Home Owner seized on this, allowing the amendment was an indulgence granted to the Home Owner and the price of that indulgence should be that the Builder is not out of pocket for the costs of the appeal.
In support of its position on costs the Builder relied upon the costs order made in Miller v Miller [1978] HCA 44; (1978) 141 CLR 269 and a short passage from the judgment of Barwick CJ explaining the order agreed to by all members of the Court. In that case the successful appellant was ordered to pay the respondent's costs of the day of the hearing in circumstances where the successful grounds of appeal (a new point about inconsistency under s 109 of the Constitution) were permitted to be added on the day of the hearing. It was only the costs of the day that was ordered and no order was made for indemnity costs. It seems that the new inconsistency point was quite independent of the existing grounds of appeal.
The Home Owner's position at the hearing also varied somewhat from that set out in his written submissions. In the latter, it was submitted that the appellant's success on appeal justified an order for costs in his favour, alternatively, it might be said that both parties had been equally successful and that each should bear their own costs.
In oral submissions, Mr Lloyd submitted that the claim that the spa leaked was the most significant claim and since they had succeeded on that aspect of the appeal the Home Owner should have his costs. In this regard, he relied upon the decision of the Appeal Panel in Deacon v National Strategic Constructions Pty Ltd [2018] NSWCATAP 31. Alternatively, the Home Owner should have 75%, or perhaps, 50 % of his costs of the appeal - a discount to take account of his lack of success on the other aspects.
Mr Lloyd put forward three reasons why the spa leak issue on which the Home Owner succeeded was the most important. First, it raised an error of law in contrast to the height issues which he said raised only errors of fact. Second, height was a matter of inconvenience only to the Home Owner whereas leakage was of critical importance to the longevity of the spa. Thirdly, as was now revealed by the redetermination, the spa did leak.
For the Builder, Mr O'Connor submitted that indemnity costs for the portion of costs described was justified because until the amendment to raise lack of reasons the appeal was bound to fail, as it did, on all other points. In any event, so it was submitted, the successful point had not been raised until mid- hearing with the result that the rest of the appeal concerning spa leakage had been a waste of time.
We have concluded that the Home Owner should pay 10% of the Builder's costs of the appeal on the ordinary basis and otherwise the parties should bear their own costs of the appeal. We reject the Builder's application for indemnity costs. In our view this costs order adequately reflects the greater degree of success enjoyed by the Builder on the appeal, whilst at the same time recognising the close connection between the various spa leak arguments raised on appeal even though only one of these arguments was successful.
Our reasoning in this regard is as follows:
1. The Builder was successful in respect of two out of three, readily discernible, separate aspects of the appeal. The Home Owner enjoyed some success in respect of one of these aspects.
2. These three aspects were, first, the spa leak arguments (Ground 1 of Mr Lloyd's written submissions dated 25 May 2017) in relation to which the Home Owner achieved some success. Second, the height arguments (Grounds 2, 3 and 4 of these submissions). Thirdly, the alleged significant new evidence arguments concerning both the spa leak and height issues (at [38] to [45] of these submissions). The Builder was completely successful on the height and significant new evidence arguments.
3. Whilst the Home Owner's success was only in respect of one of the spa leak arguments, namely whether there had been inadequate reasons, this issue was closely connected to the other arguments about the spa leak finding. In the first place, the successful spa leak argument drew upon much of the Home Owner's other submissions about alleged error by the Tribunal in finding that it had not been established that the spa leaked. This is apparent from our reasons on appeal where we closely analysed the evidence concerning whether the spa leaked: at [46] to [52]. Secondly, a central part of much of the complaint on appeal about the finding that it had not been established that the spa leaked was the failure of the Tribunal to refer to the evidence about this from Mrs Matterson who observed the spa more frequently and more recently than any other witness.
4. For these reasons, it seems to us that virtually all of the work done on the spa leak arguments was relevant to the argument upon which the Home Owner achieved success. This distinguishes the current situation from one where an appellant achieves success on one small, discrete issue. In saying this, we are conscious that we refused leave to appeal on any grounds, including those that related to the spa leak subject.
5. We think there was about an equal weighting of time occupied by the spa leak arguments on the one hand and the height arguments on the other. This is what was reflected by the written and oral submissions. Our reasons on the substantive appeal also reflect such equal weighting.
6. We estimate that about 10% of the hearing time on the appeal was occupied by the new evidence arguments.
7. For the above reasons, because of success on all the height and new evidence arguments, we conclude that the Builder achieved success in relation to about 55% of the work done on the appeal. On the other hand, the Home Owner was successful in relation to about 45% of the work done on the appeal.
8. Mr Lloyd's submission that the spa leak subject, in contrast to the height subject, was the most significant aspect of the appeal, according to the criteria he advanced, is not really to the point. Most relevantly, as we have explained, equal attention was paid by the parties to the height subject. Also, it is not correct to say that no error of law was raised in relation to the height subject (as is clear from our reasons). Furthermore, Deakin appears to have involved quite different circumstances, not the least of which was that the other party had been totally unsuccessful in its appeal.
9. In the circumstances of this case, the late raising of the inadequate reasons point (relying upon Miller) does not cause us to adjust the cost consequences that follow from our measurement of relative success. This is because of the close connection with the other spa leak arguments, to which we have already referred. We address the price of an indulgence argument about this below.
10. As for the Builder's case for indemnity costs, according to Mr O'Connor, until the late point about inadequate reasons arose, they believed they were bound to win the appeal. However, as appears from our reasons in the substantive decision, in our opinion, none of the grounds in Mr Lloyd's submissions were untenable.
11. We understood Mr O'Connor to contend that the late amendment (raising inadequate reasons) meant all the prior work on the appeal on behalf of the Builder concerning the spa leak subject was a waste of time. We do not agree. In this hard fought litigation, there has been no suggestion that the Builder would have capitulated on the spa leak subject if it had known of the inadequate reasons ground at an earlier stage. Furthermore, as we have already explained, there was a close connection between all the spa leak arguments.
12. Finally, concerning the Builder's indemnity costs application, we disagree that this should be the price of the indulgence of the amendment to the Notice of Appeal. For the reasons given in (11) above and in [24] and [25] of our substantive decision, no such price should be imposed upon the Home Owner.
[4]
Costs at first instance
The Home Owner submits that in view of the result of the appeal the costs order at first instance that he pay 90% of the Builder's costs cannot stand. This was because the Tribunal's assessment of 90% was based upon the rejection of both the Home Owner's height and spa leakage cases. He submits that each party should pay their own costs of the original first instance proceedings.
The Builder disagrees and submits that the costs order should be left unchanged. It submits that the Home Owner, ultimately, succeeded only because he was permitted to rely on new evidence and, accordingly, this should not be seen as affecting the success that the Builder achieved on the spa leak subject in the first trial or that, even if it did, it would be unfair to deprive the Builder of its costs in circumstances where the Home Owner had, originally, been unsuccessful because "it didn't get its act together" in the original proceedings.
In support of this submission the Builder relied upon aspects of the judgment of Chernov JA in Board of Examiners v XY [2006] VSCA 190 (a legal practitioner's admission case). In that case, one of the factors that deprived a successful appellant on an appeal de novo of her costs was that she had succeeded on appeal because fresh evidence established a change in her circumstances since the first instance decision: at [23]. In this context, Chernov JA referred to the decision in Luther v Sagor & Co [1921] 3 KB 532 in which an unsuccessful respondent on appeal was granted its costs in the matter below because that decision had been correct on the facts at the time.
However, we disagree that it is right to say in this case that the original first instance decision was correct on the facts at the time. The appeal did not succeed because of fresh evidence (we rejected that ground). It succeeded because of a deficiency of reasons sourced in the failure of the reasons to refer to significant evidence from a lay witness that the spa leaked. That evidence was part of the material relied upon in respect of the finding that the spa leaked when the matter was redetermined in conjunction with new evidence on the subject: reasons of Senior Member Thode at [23] and [24].
For these same reasons, it cannot be said that the Home Owner did not succeed at first instance because "it didn't get its act together" in relation to proof, even though it obtained an opportunity to improve upon the proof it had first provided.
In our opinion, the present case falls within that category of case that is concerned with the costs of an aborted trial, as referred to in Dal Pont, the Law of Costs, 3rd ed at 20.19 to 20.27. In such a situation, the so called general rule is that the costs of the abortive trial are to be paid by the party who is eventually unsuccessful: at [20.19]. We recognise that, in the exercise of our discretion, such an outcome, by no means, follows as a matter of course.
We proceed to consider the relative success of the parties at first instance in light of the determination on the remitted matter in which the Home Owner was successful on the spa leak issues.
It is clear from the reasons of the Tribunal in the original decision at first instance that there were more issues litigated about the spa at that hearing than were presented on appeal. In this regard, Mr O'Connor drew our attention to headings in the reasons indicating that there were seven issues - the spa leaking was only one of these. We also note the costs judgment at first instance issued on 27 April 2017 in which the Tribunal said that of the seven issues raised by the Home Owner he was successful in relation to only one of these issues (concerning the commissioning of the spa): at [13]. The Tribunal assessed this success as leading to only a minor order for remediation; at [13].
In response to the seven issues point, Mr Lloyd referred us to a passage in the reasons to there being "two aspects" of the applicant's claim, namely the height of the spa and the presence of leaks: at [32]. However, this passage was part of a summary of the Builder's case. The seven issues analysis does appear from the reasons when read as a whole.
We are in no position to measure success at first instance other than as revealed by the approach taken in the costs judgment of 27 April 2017 reinforced by the reasons in the original substantive decision addressing each of these seven issues.
Accordingly, it seems to us that in the overall result the Builder achieved a greater degree of success than the Home Owner - it succeeded on five out of the seven issues raised. In saying this, we recognise that, ultimately, the rectification order made in favour of the Home Owner was a substantial one but, on the other hand, it can equally be said that the relief which the Builder resisted by its success on issues such as spa not constructed to specified height, insufficient cover to pipes and reinforcement and materials used by the respondent not fit for purpose was likely to be significant.
We have come to the view that the Home Owner should pay 62 % of the Builder's costs of the original proceedings at first instance. This reduced percentage of costs to be paid by the Home Owner takes account of our conclusion that because the Home Owner was, ultimately, successful on the spa leak issue the Builder should pay a portion of the Home Owner's costs referable to that issue. This is consistent with the approach to the costs of an aborted trial already referred to.
Since the spa leak issue was one of seven issues in the original first instance proceedings, we attribute 14% of the costs to this issue. Not only should the Builder not have its costs attributable to this issue (reducing its recoverable costs by 14%), as we have said, it should also bear the burden of the Home Owner's costs attributable to this issue. This can be achieved by reducing the costs to be paid to the Builder by an additional 14%. Accordingly, we increase the discount of 10% applied by the Tribunal at first instance to the Builder's costs by 28 % to 38 %.
[5]
Orders
For the above reasons, we make the following orders:
1. Set aside Orders 1 and 2 of the Orders made by the Tribunal at first instance on 15 February 2017.
2. The appellant is to pay 10% of the respondent's costs of the appeal on the ordinary basis, as agreed or assessed, otherwise, the parties are to bear their own costs of the appeal.
3. Pursuant to s 81 (1) of the Civil and Administrative Tribunal Act, Orders 2 and 3 of the Orders made by the Tribunal at first instance on 27 April 2017 are set aside, and in substitution for such orders the appellant is to pay 62% of the respondent's costs of the proceedings in file number HB 16/15856, the subject of the decision issued by the Tribunal on 15 February 2017, on the ordinary basis, as agreed or assessed.
[6]
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
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Decision last updated: 20 June 2019