McPherson v Mace

NCAT Appeal Panel|2016-09-02

Background

These proceedings involved a building claim, made under the Home Building Act 1989 (HB Act). Mr Mace sought compensation from Mr McPherson in respect of 12 items in dispute. On appeal, the award in respect of two items was in dispute, item 2 (the retaining wall), and item 4 (the soffit lining). The Tribunal had allowed $14,299.27 for the rectification of the retaining wall and $5,366.44 for the cost of painting the soffit.
As we noted in par [26] of the Principal Decision, the appellant raised, in essence, two issues. The first issue was that there was a "constructive failure to exercise jurisdiction", in that the Tribunal gave no consideration to the issue of liability under the contract. The second issue was that the written reasons were inadequate. The essential question for the Appeal Panel was whether or not the Tribunal's reasons for making the awards for each of the two items was adequate. The Appeal Panel considered that it was necessary to consider what "liability and quantum" issues were to be determined and whether those issues were adequately addressed by the Tribunal in its reasons for decision.
In relation to item 4, the Appeal Panel was not satisfied that the reasons given by the Tribunal were inadequate, and this ground of appeal failed.
In relation to item 2, as the Appeal Panel was not provided with all of the evidence below, it was unable to resolve the appeal by determining whether or not the award made in relation to item 2 should stand. However, having regard to various matters including deficiencies identified by the Appeal Panel and the fact that there appeared to be a mathematical calculation error in the award originally made, the Appeal Panel varied the original money order to reduce it by an amount of $14,249.47 (being the value of item 2), and directed that the matter be remitted to the Tribunal as originally constituted to provide further reasons in respect of its decision in item 2 and to consider whether the total award should be varied by reason of any mathematical error which we identified above.

Submissions

Each party made an application for an order for costs in their favor.
The respondent seeks an order that the appellant pay his costs as agreed or as assessed. Alternatively, he submits that there be no order as to costs. He submits that there are "special circumstances" (s 60, Civil and Administrative Tribunal Act 2013 (NCAT Act)) warranting an award of costs, being the appellant's inclusion, and subsequent non-withdrawal, of "a serious allegation of fraud (including against the respondent) in its application" (the Impugned Conduct). The respondent submits that he was unnecessarily disadvantaged (s 60(3)(a)) by the Impugned Conduct, in that there was damage to his reputation, and he was put to considerable time and expense dealing with a serious allegation of fraud that was not withdrawn at the invitation of his solicitors prior to the appeal, and then not pressed at the appeal hearing.
In addition, the respondent submits that the inclusion of a groundless allegation of fraud in an application amounts to a breach of the obligation imposed on each party by s 36(3)(a) of the NCAT Act, in that false issues are raised between the parties, and that that is a relevant matter which alone justifies an order for costs. Here the respondent relies on s 60(3)(g) of the NCAT Act.
Alternatively, the respondent submits that there should be no order as to costs.
The appellant submits that, due to a solicitor lien maintained by his former solicitors, he was unable to gather and present the material he required to support the allegations of fraud, and accordingly withdrew those grounds of appeal.
However, the appellant also seeks an order for his costs. He submits that the decision of of the Appeal Panel in Mergerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120 is "plainly wrong", and that as the amount claimed in the proceedings was more than $30,000, the Appeal Panel may award costs in the proceedings in the absence of special circumstances. The appellant submits therefore that as he was successful in his appeal, the appeal related to a commercial transaction involving a substantial sum of money, and the appeal raised questions of law which justified representation, he was entitled to an award of costs in his favour.
As to the respondent's submission, the appellant submits that they should be rejected in their entirety. He notes that the allegation was withdrawn, there was no evidence to support the respondent's claims of damage to his reputation, that he was put to considerable time and expense dealing with the allegation of fraud, and that it was incorrect to assert (without evidence) that the allegation of fraud was made without any factual basis. The appellant submit that the burden of proof requires the respondent to establish that the appellant alleged fraud where there was no factual basis for the allegation: White Industries (Qld) Pty Ltd v Flower & Hart [1998] FCA 806.

Consideration

It is convenient to first deal with the appellant's application for costs and the challenge to the decision in Megerditchian.

Challenge to Megerditchian decision

The appellant submits that the Appeal Panel's power to award costs is not constricted by s 60 of the NCAT Act, and that Megerditchian was wrongly decided.
We do not accept that submission.
The appellant relies on the decision of Davies J in Jebb v Repatriation Commission (1988) 80 ALR 329 and says that the Appeal Panel "forms part of a decision-making 'continuum and [its] function [is] a part of a continuum". The appellant then refers to s81(2) of the NCAT Act and says that the power given to the Appeal Panel to exercise the all functions conferred or imposed on the Tribunal at first instance "is a statutory enunciation of that continuum".
There are a number of problems with this submission.
First, the decision of Jebb makes clear that on appeal the Court was dealing with a review by the Administrative Appeal Tribunal (AAT) of a decision made by the Repatriation Commission (Commission). It was not considering a situation where there was a right of appeal to an internal appeal panel from a decision of the Tribunal at first instance. Further, it was considering whether changes in circumstances of an applicant for a pension between the time of the initial decision by the Commission and the decision of the AAT on review should be taken account of by the AAT or whether there was a temporal limit to the matters that could be considered as part of the review process: see Jebb at 333-4.
Secondly, as said in Megerditchian at [6] and following, the appeal to the Appeal Panel is a separate proceeding to the proceedings at first instance in the Division.
Thirdly, the power granted under s81(2) of the NCAT Act allows the Appeal Panel to exercise the functions of the Division "in determining an appeal" in the manner allowed by s81(1) of the NCAT Act. This would include exercising the functions of the Tribunal at first instance in relation to costs of the proceedings at first instance. However it does not mean that the Appeal Panel is constituted as the Tribunal at first instance for the purpose of hearing the appeal and determining costs on appeal as opposed to costs of the proceedings at first instance.
This view is supported by considering the correspondingly wide power given to the Supreme Court of New South Wales when determining an appeal to the Court from a decision in an internal appeal pursuant to s83((3) of the NCAT Act. In this regard the Court "may make such orders as it considers appropriate". While the Court can deal with an appeal from the Appeal Panel in respect of an internal appeal decision, it is a separate proceeding and to categorise the nature of the decision making process as part of a "continuum" of the original decision by the Tribunal at first instance is to conflate discrete proceedings and ignore the separate character of each proceeding.
Finally, we note Megerditchian has been followed and applied in numerous decisions of the Appeal Panel and the correctness of the decision is supported by the recent amendment of the Civil and Administrative Tribunal Rules 2014 to add rule 38A. This rule provides that, 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. .
However, rule 38A only applies to appeals lodged on or after 1 January 2016. It has no application in this appeal. Accordingly, for either party to establish an entitlement to costs, they must establish that there are special circumstances warranting an award of costs in accordance with s 60 of the NCAT Act. That section provides: (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.

Appellant's Application for costs

In essence, the appellant seeks costs because he was successful, and says that costs should follow the event. Aside from the submission that rule 38 applies, a matter we have dealt with above, the appellant says that appeal proceedings are by their nature complex because of the issues as to what constitutes a question of law and when leave might properly be granted. The appellant also says that a significant amount of money was involved and the dispute arises in connection with a commercial transaction.
In our view the facts of this case and the issues raised are not out of the ordinary, save for the issue concerning the allegation of fraud.
Once it is accepted that: 1. s60 and the requirements to demonstrate special circumstance applies when seeking costs in an internal appeal; and 2. all internal appeals from final decisions are regulated by s80(2)(b) and, in the case of appeals from decisions of the Consumer and Commercial Division, Cl 12 of Sch 4 of the NCAT Act, in our view the fact of an appeal raising issues as to what is a question of law and whether leave should be granted is not of itself sufficient to demonstrate the appeal is out of the ordinary. To the contrary, aside from the issue of fraud and what occurred in that regard, the present case is quite ordinary.
This was a claim for compensation for defective work arising under a contract to do residential building work. The nature of the claim and issues raised on appeal are unremarkable.
Further, we do not accept that the submission "the Appellant was successful on his appeal", accurately summarises the result in the appeal. The appellant submissions were rejected entirely in relation to item 4. In relation to item 2, as noted above, the Appeal Panel was not provided with all of the evidence below, and was therefore was unable to resolve the appeal by determining whether or not the award made in relation to item 2 should stand. Finally, the matter was remitted to the Tribunal because of, amongst other issues, an arithmetic error being made by the Tribunal.
In these circumstances, it is not a case in which an order for costs should be made in favour of the appellant and the appellant's application for costs is dismissed.

The respondent's application for costs

As noted above, the respondent's sole argument establishing special circumstances is the allegation of fraud, not withdrawn by the appellant when invited to do so prior to the hearing, and then not pressed at the hearing.
The allegation of fraud appeared in par [7] of the appellant's amended ground of appeal in the following terms: 7 Whether the Tribunal's decision was infected by fraud? . . . Attached to the Amended Grounds of Appeal as Annexure A are two purported quotations that form "Annexure F" as referred to at paragraph 54 of the Statement of the Respondent Steven Mace dated 4 April 2013. The Respondent claimed that he obtained two quotations both dated 2 April 2013, for the alleged works based on the report of Angelo Antidormi also dated 2 April 2013, who also relied on a "quote" from a builder. The two quotations contain the words, "brick veneer wall" and "brick veneer fence" which are not words used by a builder. It is irregular that the words appear twice and three times respectively in the purported quotations herein referred to. Both quotations purport to rely on the Angelo Antidormi report, however, the words "brick veneer wall" and "brick veneer fence" do not appear at all in the Antidormi report. It is contended that these purported quotes were conjured, drafted or otherwise manufactured for the purpose of the Tribunal hearing. They formed the basis of the rectification costs as ordered by the Tribunal in the proceedings below. Were they be determined to be a fraud, the decision of the Tribunal is thereby impugned.
It is trite to note that it is a very serious matter to allege fraud. While the burden of proof requires a person alleging fraud was improperly pleaded to prove that fact: see White Industries (Qld) Pty Ltd v Flower & Hart [1998] FCA 806 at page 74, a practitioner must not make an allegation of fraud unless there is available material on which the allegation can be made: see for instance the Law Society of NSW Uniform Conduct, Practice and CPD Rules for Solicitors 2015, rule 21.4; Bar Association of NSW, Legal Profession Uniform Conduct (Barristers) Rules 2015, rule 65 and their predecessors.
The respondent received the notice of appeal on 27 October 2014. It then received the amended Notice of Appeal, relevantly raising the allegation of fraud, on 23 January 2015. On 4 February 2015, the respondent's solicitors wrote to the appellant's solicitors, denying the allegation of fraud, and asking the appellant to withdraw it, or alternatively to provide proper particulars. No response to that letter was received. As noted above, the allegation was not pressed at the appeal hearing.
The Appeal Panel considers that the making of the allegation, its denial by the respondent, the failure of the appellant to withdraw the allegation or to the provide particulars of it and that the allegation was not pressed on the day of the hearing are all matters properly raised by the respondent to demonstrate the respondent has been unnecessarily disadvantaged. The Appeal Panel accepts that the respondent may have been put to expense in considering the allegation. If nothing else, the respondent caused his solicitor to send the letter of 4 February 2015, and presumably there was other work undertaken and advice given in relation to the letter and the lack of response.
The Appeal Panel is satisfied that these circumstances are exceptional, that is out of the ordinary.
The respondent also submits that the inclusion of a groundless allegation of fraud in an application amounts to a breach of the obligation imposed on each party by s 36(3)(a) of the NCAT Act, in that false issues are raised between the parties, and that that is a relevant matter which alone justifies an order for costs. Here the respondent relies on s 60(3)(g) of the NCAT Act.
Section 36 relatively provides: 36 Guiding principle to be applied to practice and procedure (1) The "guiding principle" for this Act and the procedural rules, in their application to proceedings in the Tribunal, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. (2) The Tribunal must seek to give effect to the guiding principle when it: (a) exercises any power given to it by this Act or the procedural rules, or (b) interprets any provision of this Act or the procedural rules. (3) Each of the following persons is under a duty to co-operate with the Tribunal to give effect to the guiding principle and, for that purpose, to participate in the processes of the Tribunal and to comply with directions and orders of the Tribunal: (a) a party to proceedings in the Tribunal, (b) an Australian legal practitioner or other person who is representing a party in proceedings in the Tribunal.
The Appeal Panel accepts that the raising of a false issue and whether a party has satisfied their duty to co-operate with the Tribunal to "facilitate the just quick and cheap resolution of the real issues in the proceedings" may be a relevant matter to take into account in determining whether or not an order for costs should be made, and may of itself warrant such an order. That much is clear from the provisions of s 60(3)(f) of the NCAT Act. However, we do not consider that the respondent's submission is strengthened by the invocation of s36 in the present case. In this regard, we make no finding, and are not able to make any finding, as to whether or not the allegation of fraud was properly made. On the evidence before the Appeal Panel, it was simply not pressed at the hearing.
It follows from what we have said that in connection with the issue of fraud that there are special circumstances that would justify the making of an order for costs in favor of the respondent.
However, save for the issue of fraud, the appeal is not otherwise properly categorised as out of the ordinary for the reasons set out above. As with the position of the appellant, the respondent was only partially successful and, in any event, neither party provided all relevant evidence to enable all issues to be finally resolved by the Appeal Panel. In these circumstances and having regard to the partial success of the parties, a general order for costs should not be made in favour of the respondent.
Rather, the appellant should pay the respondent's costs limited to the allegation of fraud in ground 7 of the Amended Notice of Appeal. No evidence of the cost was provided to enable us to fix an amount. If the parties cannot agree on the quantum of those costs, costs should be assessed in the usual way. For clarity, the Appeal Panel confirms that the respondent is not entitled to any other costs of the appeal. He is to be compensated for those costs he incurred in responding to the issue of fraud in ground 7 of the Amended Notice of Appeal only.

Orders

For the above reasons, the Appeal Panel orders that: 1. The hearing of the application is dispensed with pursuant to s50(2) of the Civil and Administrative Tribunal Act, 2013. 2. The appellant is to pay the respondent's costs of responding to the allegation of fraud raised in ground 7 of the Amended Notice of Appeal, as agreed or as assessed. 3. The applications for costs are otherwise dismissed.

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: 02 September 2016

REASONS FOR DECISION

On 22 September 2015 the Appeal Panel published its reasons for decision in this matter: McPherson v Mace [2015] NSWCATAP 203 (Principal Decision). The Appeal Panel allowed the appeal in part, ordered that an award of $32,626.71 be varied to $18,394.44, remitted the proceedings to the Consumer and Commercial Division of the Civil and Administrative Tribunal constituted by the member who made the original decision, to determine in accordance with its reasons, and otherwise dismissed the appeal.
These reasons concern the costs of the appeal proceedings. The Appeal Panel has received written submissions from the parties. Neither party has objected to an order dispensing with a hearing.

At a glance

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Judgment (8 paragraphs)

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