McPherson v Mace

NCAT Appeal Panel|2017-04-28|Before: Bailey AM

Solicitors: Tiernan Lawyers (Appellant) GSG Legal (Respondent) File Number(s): AP 16/55162, AP 16/55251, AP 16/39190 Decision under appeal Court or tribunal: Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Citation: N/A Date of Decision: 21 November 2016 Before: Senior Member N. Vrbac File Number(s): HB 13/02916, HB 15/53637

Reasons for decision

These internal appeal proceedings involve appeals from two decisions by the Tribunal as to the costs of two separate decisions made in the course of home building proceedings which commenced on 12 January 2013, along with a determination by this Appeal Panel as to the costs of appeal proceedings AP16/39190 which were reserved in the decision of the Appeal Panel dated 12 January 2017.
For the purpose of consistency and to avoid confusion throughout this decision we refer to the parties as the Builder and the Owner. We also adopt and substitute these identifiers when referring to earlier decisions and submissions
These appeal proceedings are concerned with decisions of the Tribunal dated 21 November 2016: 1. in proceedings HB13/02916 (the Original Proceedings) that the Builder pay the costs of the Owner of those proceedings; and 2. that the Owner pay 75% of the Builder's costs of proceedings HB15/53637 (the Remittal Proceedings).

Procedural Background

The Original Proceedings, HB 13/02916, involved 12 separate Items of defective work in dispute. The hearing on 25 September 2014 addressed only two items.
In the orders made on 25 September 2014 the Tribunal noted that:
Items 1 and 12 were withdrawn, Items 6 and 7 were not pressed, Items 3, 8, 9 and 11: were resolved in conclave for $730, $6,743, $394 and $394 respectively and Items 5 and 10 were resolved in a hot tub for $4,000 and $800 respectively, and that,
Items 2 and 4 liability and quantum remained in dispute following hot tub of experts. They were to be determined by the Tribunal.
Item 2 concerned alleged defective work associated with an existing wall and footing and further brickwork which was built on top of the existing structure. The Tribunal, at first instance, allowed $14,229.27 for this item in favour of the Owner.
Item 4 concerned damage to an existing soffit for which the Tribunal allowed $5,366.44.
The Builder appealed the decision of the Tribunal in relation to Items 2 and 4 in AP14/51932. The Appeal Panel in the decision dated 22 September 2015 allowed the appeal in part, dismissed the appeal in relation to Item 4 and remitted Item 2 to the Tribunal.
The Remittal Proceedings HB15/53637 proceeded on the papers and on 3 August 2016 the Tribunal determined that the Builder was not liable for Item 2 and the work associated with additions to the existing brick wall and footing. The amount which the Builder was ordered to pay to the Owner was accordingly reduced by $14,229.27.
In AP16/39190 the Owner appealed against the Tribunal's determination that the Builder was not liable for Item 2. That appeal was dismissed by this Appeal Panel on 12 January 2016 and costs were reserved.
The outcome of the Original Proceedings as altered following the initial appeal, the Tribunal's finding in the Remittal Proceedings, and the dismissal of the later appeal by this Appeal Panel, is that the Builder has been ordered to pay $18,427.44 to the Owner. We understand that this amount has been paid by the Builder.
It is possibly of some significance that the amount involved in Item 2 was, by some margin, the largest of the amounts in dispute, representing approximately 43% of the total amount assessed by the Tribunal, in the Original Proceedings under the orders made on 25 September 2014 for an amount of $32,656.71.
The Tribunal's decision on costs in the Original Proceedings was made on the basis that the extent of the Builder's liability was $18,427.44, as it remains.

Costs Jurisdiction

Section 60 of the Civil and Administrative Tribunal Act 2013 (the 'Act') provides: 'Costs (1) Each party to proceedings in the Tribunal is to pay the party's own costs. (2) The Tribunal may award costs in relation to proceedings before it only if it is satisfied that there are special circumstances warranting an award of costs. (3) In determining whether there are special circumstances warranting an award of costs, the Tribunal may have regard to the following: (a) whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings, (b) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings, (c) the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law, (d) the nature and complexity of the proceedings, (e) whether the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance, (f) whether a party has refused or failed to comply with the duty imposed by section 36 (3), (g) any other matter that the Tribunal considers relevant. (4) If costs are to be awarded by the Tribunal, the Tribunal may: (a) determine by whom and to what extent costs are to be paid, and (b) order costs to be assessed on the basis set out in the legal costs legislation (as defined in section 3A of the Legal Profession Uniform Law Application Act 2014) or on any other basis. (5) In this section: costs includes: (a) the costs of, or incidental to, proceedings in the Tribunal, and (b) the costs of, or incidental to, the proceedings giving rise to the application or appeal, as well as the costs of or incidental to the application or appeal.'
Rule 38A of the Civil and Administrative Tribunal Rules 2014 states: '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.'
Part 4 of the Act deals with Practice and Procedure. Section 60 of the Act is in Part 4. Section 35 of the Act which is also in Part 4 states: 'Each of the provisions of this Part is subject to enabling legislation and the procedural rules.'
The effect of Section 35 of the Act makes it clear, in our view, that section 60 of the Act is subject to Rule 38A.
Both Costs Appeals were lodged on 19 December 2016. The procedural rule which applied to the proceedings at first instance was Rule 38 of the Civil and Administrative Tribunal Rules 2014 which states: 'This rule applies to proceedings for the exercise of functions of the Tribunal that are allocated to the Consumer and Commercial Division of the Tribunal. (2) Despite section 60 of the Act, the Tribunal may award costs in proceedings to which this rule applies even in the absence of special circumstances warranting such an award if: (a) the amount claimed or in dispute in the proceedings is more than $10,000 but not more than $30,000 and the Tribunal has made an order under clause 10 (2) of Schedule 4 to the Act in relation to the proceedings, or (b) the amount claimed or in dispute in the proceedings is more than $30,000.'
The Original Proceedings were brought under the Home Building Act 1989. Pursuant to section 3 of Schedule 4 of the Act, proceedings under the Home Building Act are allocated to the Commercial and Consumer Division of the Tribunal. The amount claimed by the Owner in the Original Proceedings was $61,644.00.
By reason of the matters stated in the preceding paragraph, Rule 38 applied to the proceedings at first instance. The provisions of Rule 38 are different to the content of section 60 of the Act. By reason of this fact, pursuant to Rule 38A(2) we must apply Rule 38 when deciding whether to award costs in relation to any of the three matters involved in this this Appeal.
By reason of the foregoing, the appeal Panel is not constrained by the need to find special circumstances when making a costs order in this Appeal. The position is as stated by the Appeal Panel in Thompson v Chapman [2016] NSWCATAP 6 at [76]: In short, the proper exercise of the discretion requires the Tribunal to do justice between the parties and to exercise the discretion having regard to relevant considerations and in a manner which is not arbitrary or capricious: see Oshlack v Richmond River Council per Gaudron and Gummo JJ at [22] and McHugh J at [65].

Costs Order under Original Proceedings

The order appealed is that the Builder is to pay the Owner's costs of the Original Proceedings as agreed or assessed.

Grounds of Appeal

The Grounds of Appeal raise issues as to whether: 1. The Tribunal's discretion miscarried in the decision as to costs. 2. The Tribunal failed to consider properly the principles attaching to Calderbank offers. 3. The Tribunal failed to consider the effect that the various Calderbank Offers exchanged between the parties had for the exercise of the discretion to order costs in the circumstances of this case. 4. The Tribunal gave inadequate reasons for the decision with respect to costs.
The Builder seeks an order that the Owner pay the Builder's costs on an indemnity basis. It seems that the Builder seeks this order as one alternative.

Reply to the Appeal

The Reply to the Appeal addresses the Grounds: 1. The exercise of discretion ground does not raise a question of law. Leave is required, has not been sought and is opposed. 2. The Owner says that the Tribunal properly considered the principles attaching to Calderbank offers. The Builder has not identified how there was a failure to properly consider the relevant principles. 3. The consideration of the effect of Calderbank offers does not involve a question of law. Leave is required, has not been sought and is opposed. 4. The Tribunal gave adequate reasons. The Builder has not identified the claimed inadequacy.

Builder's Submissions

The Builder submits that the discretion associated with the award of costs miscarried.
Reliance was placed upon the principles set out in House v The King (1936) 55 CLR 499 at 505.
In order to interfere with the decision of the Tribunal the Appeal Panel must be satisfied that: 1. the Tribunal: 1. acted on a wrong principle; 2. allowed extraneous or irrelevant matters to guide or affect it below; 3. mistook the facts; 4. did not take into account some material consideration; or 1. the Tribunal's failure properly to exercise the discretion may be inferred from the character of the result being unreasonable or plainly unjust.
The grounds in the Notice of Appeal are consistent with an appeal from an exercise of discretion and do not require leave, as an error going to the proper exercise of the discretion is a question of law. The Builder has identified various errors (falling within the above) in the exercise of the discretion such that the Appeal Panel is empowered to substitute its own decision.
The Tribunal only had to address 2 of the 12 Items in dispute. Of those two items the Builder was ultimately successful in one.

Owner's Submissions

Whilst it is accepted that the Appeal Panel has power pursuant to s81(1)(d) of the Act to substitute its own decision such an exercise must be in accordance with legal principle, as explained in Preston v Panyiotou [2015] NSWCATAP 71. The Appeal Panel in this decision observed: "…the principles enunciated in House v The King, (1936) 55 CLR 499, supra, applied such that it is not enough that the Appeal Panel considers it would have reached a different conclusion if it were exercising the discretion, but that there must be some error in the exercise of the discretion by the Tribunal making it plainly unreasonable or unjust."
The basis for constraint in the context of costs appeals lies in the need for litigation to be dealt with expeditiously and efficiently as possible and for costs to bear some relativity to the value of the assets the subject of the dispute: Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar, the Diocesan Bishop (2008) 237 CLR 66 at [190].
The Builder has not established an error with the meaning of House v The King in either appeal.
The Builder's submissions and reliance upon the principles set out by McHugh J at 624 in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 are misplaced. The categorisation of the Initial Proceedings as involving no hearing on the merits is incorrect.

Costs Order under Original Proceedings - Determination

The Owner was the successful party in the Original Proceedings receiving an order for payment of $18,427.44. The Tribunal Member found at [46] that because the amount claimed by the owner in the Original Proceedings was more than $30,000.00, Rule 38(2)(b) of the Civil and Administrative Tribunal Rules applied. There is no challenge to that finding. We accept that as stated in Thompson v Chapman, the starting position should be that the Owner is entitled to recover the costs of, and incidental to, the Original Proceedings in circumstances where there has been no submission that there was disentitling conduct on his part to cause the discretion to award costs in his favour not to be exercised.
The costs order made by the Tribunal on 21 November 2016 was that the Builder pay the Owner's costs of the proceedings.
The reasoning supporting the Tribunal's decision referred to in the preceding paragraph is at [57] -[59] where the Tribunal Member stated: 'I am not persuaded that a cost order ought to be made in the original proceedings on the basis of the Calderbank Offers. It is not possible to ascertain whether any of the offers made was unreasonably rejected because of the way the proceedings were resolved at the hearing. That is, some items were withdrawn, some were not pressed. There were items in the Scott Schedule which were settled at the hearing, whilst a determination was made by the Tribunal in respect of the Scott Schedule, Items 2 and 4. It is not possible therefore to determine, in all the circumstances set out in 57 above, whether one party or the other ended worse off if their offer of compromise had been accepted. The discretion to award costs is broad and unfettered, save that it must be exercised judicially, Ruddock v Vardalis (No 2) (2001)115 FCR 229. In the original proceedings the amount in dispute was in excess of $30,000. In these circumstances the usual rule should apply, namely that costs follow the event and accordingly the builder should pay the homeowner's costs, in the original proceedings, as agreed or assessed.'
However the Builder seeks a costs order in his favour on an indemnity basis. The indemnity costs application rests upon the submission that Tribunal failed to correctly apply the legal principles applicable when 'Calderbank' offers have been made and not accepted.
We understand from the submission in paragraph 19 of the Builder's Submissions that the contention as to an entitlement to indemnity costs is based upon the exchange of offers just prior to 24 September 2014.
The offers (numbered 1 to 8) exchanged between the parties were as follows and in each reference was made to Calderbank v Calderbank (1975) All ER 333 and advice that the principles arising from that decision would be relied upon: 11 November 2013 the Builder offered to carry out certain rectification works. 12 November 2013 the Owner offered to accept $50,000.00 not including legal and expert costs estimated at $10,000.00. 28 February 2014 the Builder offered to arrange to pay for the performance of certain rectification work by others. 11 March 2014 the Owner offered to permit the Builder to engage and pay others to perform all Items 1 to 12 of defective work, and if payments were not made to consent to judgement in the sum of $60,000 in favour of the Builder. 17 April 2014 the Builder offered to pay $8,000 plus $5,000 for costs. Several letters exchanged following and concerning this offer. 22 September 2014 the Owner offered to accept $35,000 in relation to defective and incomplete work along with $15,000 for legal and expert costs. 23 September 2014 the Builder rejected Offer 6 and offered to pay $35,000 by instalments over 12 months each of $11,666.65 and referred to an amount of $10,000.02 which remained owing to the Appellant. Also on 23 September 2014 the Owner rejected Offer 7 and proposed payment of $45,000 by instalments of $21,680, $11,660, and $11,660, on condition that if the amounts were not paid, then the Builder would consent to judgement of $65,000 less any amount paid. There was no mention of the amount of $10,002 said to be outstanding in favour of the Builder.
The making of a 'Calderbank Offer' that is bettered by the offeror does not of itself entitle the offeror to an order for indemnity costs, see Jones v Bradley (No. 2) [2003] NSWCA 258.
We refer to the recent Court of Appeal decision in Miwa Pty Ltd v Siantan Properties Pte Ltd (No. 2) [2011] NSWCA 344. In that case Basten JA identified two questions which are relevant to a 'Calderbank' offer and a claim for indemnity costs. They are whether: 1. there was a genuine offer of compromise, and 2. it was unreasonable for the offeree not to accept it.
In Miwa Pty Ltd v Siantan Properties Pte Ltd Basten JA (with whom McColl and Campbell JJA agreed) adopted the non-exclusive list of factors identified by the Victorian Court of Appeal in Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435 at [25]: 'The discretion with respect to costs must, like every other discretion, be exercised taking into account all relevant considerations and ignoring all irrelevant considerations. It is neither possible nor desirable to give an exhaustive list of relevant circumstances. At the same time, a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard at least to the following matters: (a) the stage of the proceeding at which the offer was received; (b) the time allowed to the offeree to consider the offer; (c) the extent of the compromise offered; (d) the offeree's prospects of success, assessed as at the date of the offer; (e) the clarity with which the terms of the offer were expressed; (f) whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejecting it.'
The Builder's submissions are that it was unreasonable for the Owner to reject its Calderbank Offer 7. We accept that the Builder's Calderbank Offer 7 was genuine. There is however no finding by the Tribunal as to whether the Builder was in fact entitled to the amount said to be "owing". Accordingly we cannot take the contention in the offer into consideration. The next consideration is whether the rejection of the offer by the Owner was reasonable.
The Owner identifies the following as reasons why the rejection was not unreasonable: 1. The offer was for payment over a 12 month period; 2. The offer was inclusive of costs; 3. At the time of the offer almost $9,000 of defects had been agreed; and 4. The offer was made just prior to the hearing and was open for only one day.
We note that Offer 7 was preceded by an offer from the Owner to accept $35,000 for the claims and $15,000 for costs. The Builder's offer to pay $35,000, whilst being inclusive, might reasonably be understood as being to pay $20,000 for the claims and $15,000 for costs. As such it could be said that the offer, at least as to the amount of the claims, marginally exceeded the ultimate result.
We consider it appropriate to assess the adequacy or otherwise of the Tribunal's costs order in the Original Proceedings with a narrow focus upon the position which prevailed in or about September 2014.
The Builder's 'Calderbank' offer which is identified in these Reasons as 'offer 7' was dated 23 September 2014. A copy was provided to us as part of the material annexed to its counsel's submissions in this Appeal. The offer was as stated a payment to the owner of $35,000.00 in instalments. Importantly, the offer was open for acceptance until 5 pm 24 September 2014. The hearing of the Original Proceedings took place on 25 September 2014.
The Tribunal Member considered whether it was unreasonable for the Owner not to have accepted the 'Calderbank' offer dated 23 September 2014 and in so doing satisfied one of the criteria referred to as being necessary in Miwa Pty Ltd v Siantan Properties Pte Ltd. However we are of the opinion that the way in which the Tribunal Member carried out that consideration was not in accordance with established principles relevant to the consideration of such offers.
The Tribunal Member considered the reasonableness of the non-acceptance of the Calderbank offer in context of the way in which the proceedings were resolved at the hearing. Refer [39] of these reasons.
In SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323, approved in Jones v Bradley, Giles JA stated at [37]: "The making of an offer of compromise in the form of a Calderbank Letter … where the offeree does not accept the offer but ends up worse off than if the offer had been accepted, is a matter to which the court may have regard when deciding whether to otherwise order, but it does not automatically bring a different order as to costs. All the circumstances must be considered, and while the policy informing the regard had to a Calderbank letter is promotion of settlement of disputes an offeree can reasonably fail to accept an offer without suffering in costs. In the end the question is whether the offeree's failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs, and that the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure."
In our view the way in which the Tribunal Member considered the reasonableness of the failure to accept the offer was not in accordance with established principle. The passage cited above indicates that the Tribunal Member was required first to consider whether the Owner who did not accept offer 7 ended up worse off than if the offer was accepted. Next he was required, if the failure to accept the offer was unreasonable, to consider whether all the circumstances warranted a departure from the ordinary rule as to costs.
It is our view that the consideration of the element of unreasonableness in a party rejecting a Calderbank offer is to be made at the point in time the offer was made. We have referred to the decision of the Victorian Court of Appeal in Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2). It is notable that none of the matters referred to in that decision refer to a consideration of the way in which the proceedings were resolved at the hearing.
As a result we consider that the Tribunal Member erred in the sense referred to in House v The King. We accept that it is not enough that we consider that we would have reached a different conclusion if we were exercising the discretion, but as we have found as stated above, there was an error in the exercise of the discretion by the Tribunal making it potentially unreasonable or unjust.
We find that the Builder has been successful in establishing an error of law.
The Appeal Panel has power pursuant to s81(1)(d) of the Act to substitute its own decision. The question for us to decide was whether the rejection was unreasonable.
The factors which we consider have particular relevance to the exercise of discretion by us are that the relevant offer was made only two days before the hearing, was only open for one day, involved payment over a 12 month period, and notwithstanding the proposition in the last sentence in [48], was inclusive of costs.
In Jones v Bradley where a Caldebank offer was open for less than one and a half days, the Court of Appeal stated at [13]: 'when considering whether the time in which a Calderbank offer must be accepted is reasonable, it is necessary to look at all the circumstances surrounding the making of the offer.'
The Court of Appeal held at [16] that where the offer under consideration made by the appellant had been preceded by an offer from the respondent: 'In light of the ultimate verdict on the appeal and the history of the matter leading to the appellant's offer of 26 October, including the counter offer made the by respondent on 23 October which demonstrated that she had the verdict under active consideration, it was unreasonable for the respondent to reject the appellant's Calderbank offer of 26 October.'
The Builder's Calderbank Offer 7 was received by the Owners' solicitors and considered and rejected. This is made clear in Calderbank Offer 8 sent by the Owners' solicitors to the Builder's solicitors on the same day as Calderbank Offer 7 was made, namely 23 September 2014. As was the position in Jones v Bradley, we are of the view that on 23 September 2014 the outcome of the Tribunal hearing was under active consideration by both parties, by reason of their respective Calderbank offers made that day.
Because the outcome of the Tribunal hearing was under active consideration by both parties on 23 September 2014, it is our opinion that Calderbank Offer 7 being open for acceptance for only one day was not a factor which made it reasonable for the Owners not to have accepted it.
The Builder's Calderbank Offer 7 contained a term that the amount offered, if accepted, would be paid in three instalments over a period of twelve months. The Owners submit that this is a factor why their rejection was not unreasonable. The Owners' Calderbank Offer 8 proposed that the settlement amount be paid in three instalments over 11 months. Given that payments by instalments over a period of 11 months was acceptable to the Owners, it is our view that the fact that the Builder's Calderbank Offer was for payment by instalments over a 12 month period was not a factor which made it reasonable for the Owners not to have accepted it.
The Owners have also submitted that because Calderbank Offer 7 was inclusive of costs, it was reasonable for them to have rejected it. We have referred at [48] to the fact that having regard to the Owners previous offer, Calderbank 7 might reasonably be understood as being to pay $20,000 for the claims and $15,000 for costs. In Elite Protective Personnel Pty Ltd & Anor v Salmon [2007] NSWCA 322 Beazely JA stated at [5] - [7]: '5 Leaving to one side the rules and principles that apply in the case of offers of compromise made under r 42.12 of the Uniform Civil Procedure Rules, I do not agree that an offer which is inclusive of costs cannot ever be the basis upon which the court exercises its discretion to award indemnity costs. The award of indemnity costs involves the exercise of a discretion. The application of an overarching 'rule' or 'principle' that only offers exclusive of costs could ground a favourable exercise of the court's discretion would operate as a fetter on that discretion and would introduce a rigidity to the making of so called Calderbank offers which has no basis in principle. 6 There is, however, as discussed in the judgments of McColl JA and Basten JA, some disputation in the authorities as to whether an offer that is inclusive of costs may be the basis upon which an indemnity costs order can be made. Notwithstanding a number of first instance decisions that state that an offer inclusive of costs does not operate as a Calderbank offer, there are authorities of this Court that an offer of compromise which is inclusive of costs may form the basis upon which the court awards indemnity costs. 7 As is apparent from the short remarks I have made, I consider that the proper approach to any such offer of compromise is to consider it according to its terms and determine whether, in all the circumstances, the court should exercise its discretion to award indemnity costs. Having said that, there may be difficulties in the path of a party who seeks indemnity costs when the application is based upon an offer inclusive of costs, as is examined and explained by Basten JA'
Given that as found by Beazely and Basten JJA an offer inclusive of costs can form the basis of a Calderbank offer, and since as we have observed Calderbank Offer 7 might reasonably be understood as being to pay $20,000 for the claims and $15,000 for costs, we find that the fact that Calderbank Offer 7 was inclusive of costs was not a factor which made it reasonable for the Owners not to have accepted it.
In addition the Owners submit that it was reasonable to have rejected Calderbank Offer 7 because at the time almost $9,000.00 of defects had been agreed. The fact that the builder had agreed $9,000.00 of defects was no doubt an issue to be taken into account in the consideration of Calderbank Offer 7. However we do not regard that to be a factor which justified rejection of the offer.
The Builder's Calderbank Offer 7 set out a number of factors which were relevant to the forthcoming hearing, the Owners prospects of success and the offer itself. Some of the matters raised were: 1. The Owners had refused the Builder access to carry out rectification work; 2. There were exclusions from the Builder's scope of work; 3. The Builder's expert had identified anomalies in the Owner's expert's report; 4. An assertion that the Tribunal did not possess the jurisdiction to hear the Owner's negligence claim; and 5. The offer was made in an effort to avoid a hearing the costs of which were anticipated to be 'exorbitant' for both parties.
A copy of the Builder's Counsel's Outline of Submissions was attached.
In addition, Calderbank Offer 7 stated that the Builder reserved his right to seek an order for indemnity costs from the date of the letter in the event that the offer was not accepted.
As we have stated, the Builder's Calderbank Offer 7 understood as being to pay $20,000 for the claims and $15,000 for costs exceeded the amount found in the Owners favour of $18,427.44. In our view having regard to the matters referred to in the offer, the fact that when the offer was made there had been previous offers, at the time the offer was made all evidence would have been served and the outcome of the Tribunal hearing was then under active consideration by both parties, it was unreasonable for the Owners not to have accepted it.
As a result pursuant to s 81(1)(d) of the Act we make the following orders in the Original Proceedings: 1. The Builder must pay the Owners costs of the proceedings up to and including 24 September 2014, the time when the offer lapsed, on the ordinary basis, such costs if not agreed to be assessed on the basis set out in the legal costs legislation (as defined in section 3A of the Legal Profession Uniform Law Application Act 2014). 2. The Owners must pay the Builder's costs of the proceedings as from 25 September 2014, on an indemnity basis, such costs if not agreed to be assessed on the basis set out in the legal costs legislation (as defined in section 3A of the Legal Profession Uniform Law Application Act 2014).

Costs Order in Remittal Proceedings

The order appealed is that the Owner is to pay 75% of the Builder's costs of the Remittal Proceedings.

Grounds of Appeal

The Grounds of Appeal raise issues as to whether: 1. The Tribunal's discretion miscarried in the decision as to costs. 2. The Tribunal gave adequate reasons for the decision with respect to costs.
The Builder seeks an order that the Owner pay the Builder's costs of the Remittal Proceedings.

Reply to the Appeal

The Reply to the Appeal states: 1. The exercise of discretion ground does not raise a question of law. Leave is required, has not been sought and is opposed. The Owner disputes that there has been a miscarriage of the discretion. 2. The Tribunal have given adequate reasons. The Builder has not identified the claimed inadequacy.
The Owner does not dispute the decision of the Tribunal or rely on additional reasons in support of that decision.

Builder's Submissions

The Tribunal's acceptance of the Owner's submissions that a reduction in the percentage of the recoverable costs by the Builder because of additional costs incurred by the Owner as a result of the Builder's delay in attending to the proceedings was an error. There was no evidence that additional costs were incurred. The decision was arbitrary, contrary to the judicial approach required in the exercise of the power under Rule 38 of the Civil and Administrative Tribunal Rules.
There was no sound basis for the reduction of 25% in the Builder's costs.

Owner's Submissions

There is no basis on which the Appeal Panel should substitute its own decision in the exercise of its discretion under s81(1)(d) of the Act.
The Builder was the successful party in the Remittal Proceedings given that on the remittal the Tribunal dismissed item 2 of the Owner's claim.
The Appeal Panel in Thompson v Chapman considered the discretion to award costs as contained in regulation 20(4) of the Consumer, Trader and Tenancy Tribunal Regulation. At [66 - 70] of the decision the Appeal Panel stated: `Each of Regulation 20 of the CTTT Regulation and Rule 38 provide a general discretion in respect to the award of costs. The starting point in exercising such discretion is that the "usual order for costs" is that a successful party should be entitled to an order for costs in their favour: see Latoudis v Casey [1990] 170 CLR 534 per Mason CJ at 554 and Oshlack v Richmond River Council per McHugh J at 97. The reason for such an order is that it is appropriate for the party who incurred costs caused by the other party in litigation to be reimbursed. Further, an award of costs is by way of an indemnity to the successful party and not as punishment of the unsuccessful party: see Latoudis v Casey per Mason CJ at 543 and McHugh J at 567'
In Oshlack v Richmond River Council [1998] HCA 11, 193 CLR 72 at [67] of the judgment, McHugh J stated ''The expression the "usual order as to costs" embodies the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.'
The costs order made in the Builder's favour in the Remittal proceedings awarded him 75% of his costs. The loss of 25% of his costs was found by the Tribunal Member at [64] to be attributable to the Builder's failures to comply with directions and extensions of time of the Tribunal in the period 12 January 2016 and May 2016. The Tribunal Member stated: 'There were additional costs in dealing with these delays'
The Builder was successful in the Remittal Proceedings which dealt only with the issue of whether the Builder was liable for the cost of Item 2 in the Owner's claim.
The Tribunal, when dealing with the costs of the Remittal Proceedings, had a slightly more narrow focus than we have in dealing with this appeal.
The Builder contends that the reliance by the Tribunal upon the assumption that the Owner incurred additional costs as a consequence of some procedural delay on the part of Builder in the conduct of the Remittal Proceedings was unsupported by evidence. We consider that such reliance could amount to a misapplication of principle. In John Prendergast & Vanessa Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 an Appeal Panel stated that an error of law would include whether there was no evidence to support a finding of fact.
We are satisfied that the Builder's appeal against the costs order in the Remittal Proceedings based on a finding unsupported by evidence constitutes an error of law. The appeal is therefor as of right.
Pursuant to s 81(1)(d) of the Act we would set aside the Tribunal order that the Owner is to pay 75% of the Builder's costs of the Remittal Proceedings. We find that the usual order as to costs should apply, namely that the successful party in the Remittal Proceedings, the Builder, is entitled to an award of costs in his favour.
To the extent that the Tribunal Member referred to the Owners' submissions of the Builder's failure to comply with Tribunal directions, we note that at [61] the Tribunal Member recorded the fact that the Builder was ordered to pay the Owners' costs of his failure to attend at a mediation on 30 March 2016. This leads us to agree with the Builder's submission that costs orders relating to delay had been made in the owners' favour.
Pursuant to s 81(1)(d) of the Act we make the following orders in the Remittal Proceedings. 1. The Owners must pay the Builder's costs of the proceedings on the ordinary basis, such costs if not agreed to be assessed as set out in the legal costs legislation as defined in section 3A of the Legal Profession Uniform Law Application Act 2014.

Costs - Reserved Order in AP 16/39190

On 12 January 2017 this Appeal Panel dismissed the Appeal by the Owner from the Tribunal's decision in the Remittal Proceedings and reserved the issue of costs of the Appeal.

Builder's Submissions

The submissions by the Builder include reference to the fact that the Builder was successful, the amount involved in the claim was more than $30,000 and the Builder should therefore have his costs, no special circumstances being required: Rules 38 and 38A of the Civil and Administrative Tribunal Rules.
The Builder in his submissions states that he should receive an order for his costs of the appeal but on the indemnity basis, relying on his submissions on costs in the Remittal Proceedings. "When viewed through the prism of the litigation's history in this Tribunal, there are very sound reasons, why the Builder should have his costs paid on an indemnity basis from 23 September 2014."

Owner's Submissions

The Owner accepts that Rule 38 applies to this appeal but contends that the offer of compromise of 23 September 2014 is not relevant to this appeal, and that both parties proceeded on the basis that the Item 2 issue should be heard by way of rehearing and no suggestion is made in the Builder's submissions that the Owner "conducted the proceedings inappropriately".
Further if the Appeal Panel does not accept the above submission, the Owner refers to his submission in the costs appeals and says that the rejection of the Builder's offer was reasonable in the identified circumstances.
The Owner's submission in conclusion was that there should be no order as to costs on AP 16/39190.

Costs - Reserved Order - Determination

On 12 January 2017 this Appeal Panel dismissed the Appeal by the Owner from the Tribunal's decision in the Remittal Proceedings.
The Builder places some reliance upon the 'Calderbank' offer 'number 7' dated 23 September 2014, see [42], in support of the contention at [96 & 97]. The Owner contends that the offer is irrelevant to the consideration of costs in this matter.
As stated in the Costs Jurisdiction section of these Reasons, Rule 38 of the Civil and Administrative Tribunal Rules applies to the determination of the costs of AP 16/39190. The Builder was the successful party in that appeal and consistent with the authorities referred to earlier in these reasons is entitled to his costs of the appeal, absent disentitling conduct on his behalf.
We conclude that, in the absence of proof by the Builder of misconduct by the Owner in the Appeal, the Builder is entitled to costs on the ordinary basis.
The Owner is to pay the Builder's costs of AP 16/39190.

Orders 1. In AP 16/5521 the appeal is allowed and: In HB 13/02916 1. the Builder must pay the Owners costs of the proceedings up to and including 24 September 2014, on the ordinary basis, such costs if not agreed to be assessed as set out in the legal costs legislation as defined in section 3A of the Legal Profession Uniform Law Application Act 2014, and 2. the Owners must pay the Builder's costs of the proceedings as from 25 September 2014, on an indemnity basis, such costs if not agreed to be assessed as set out in the legal costs legislation as defined in section 3A of the Legal Profession Uniform Law Application Act 2014. 1. In AP 16/55251 the appeal is allowed and In HB 15/53637 1. The Owners must pay the 100% of the Builder's costs of the proceedings on the ordinary basis, such costs if not agreed to be assessed as set out in the legal costs legislation as defined in section 3A of the Legal Profession Uniform Law Application Act 2014. 1. In AP 16/39190 the Owner is to pay the Builder's costs on the ordinary basis.

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

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: 08 December 2017

At a glance

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Judgment (22 paragraphs)

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Cases Cited (14)

Cited By (1)