Megerditchian v Kurmond Homes Pty Ltd

Costs of Appeal

1. The general costs rule is that each party is to pay their own costs: Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act), s 60. Costs may only be awarded if the Tribunal "is satisfied that there are special circumstances warranting an award of costs": NCAT Act, s 60(2). Subsection 60(3) specifies the matters to which the Tribunal may have regard when considering whether or not special circumstances exist.
2. The respondent has submitted that rule 38 of the Civil and Administrative Tribunal Rules 2014 (NSW) applies to the appeal proceedings and that that provision "gives the Tribunal an unfettered discretion to award costs where the amount in issue is greater than $30,000" or that "the usual rule in civil litigation (applies) that 'costs follow the event'".
3. Rule 38 (1) says: (1) This rule applies to proceedings for the exercise of functions of the Tribunal that are allocated to the Consumer and Commercial Division of the Tribunal. (2) Despite section 60 of the Act, the Tribunal may award costs in proceedings to which this rule applies even in the absence of special circumstances warranting such an award if: (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
4. Contrary to the respondent's submission, this rule does not apply to proceedings before the Appeal Panel when exercising its powers in connection with costs of an appeal. As was pointed out by the respondent in paragraph 9 of its submissions, s 16 (4) of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act) provides: However, the functions of the Tribunal when constituted by an Appeal Panel or in exercise of its enforcement jurisdiction are not allocated to any particular Division of the Tribunal.
5. The Appeal Panel has power under s 80(2) of the NCAT Act in determining an appeal to exercise all functions that are conferred or imposed by the NCAT Act or other legislation on the Tribunal at first instance when varying or making a decision in substitution for the decision under appeal. But an order in relation to costs of the appeal is not a function of the Tribunal at first instance. Rather, it is a decision of the Appeal Panel in the appeal proceedings. The exercise of the power to make an order in respect of the costs of an appeal is not a "function of the Tribunal… allocated to the Consumer and Commercial Division of the Tribunal" and Rule 38(1) does not apply.
6. Consequently, the respondent is required to demonstrate there are special circumstances within the meaning of section 60 of the NCAT Act.
7. The special circumstances relied upon by the respondent are as follows: (i) the nature and complexity of the proceedings; (section 60(3)(d)) The present proceedings required an understanding of contract law, how they are interpreted and how the contract regulated the commercial relationship between the parties over a period of 22 months. The parties had been represented by a solicitor and counsel and the appellant was prosecuting a counterclaim claim for more than $400,000. (ii) any other matter the Tribunal considers relevant; (section 60(3)(g)) Rule 38 reflects a policy that there should be a discretion to award costs in the Consumer and Commercial Division where more than $30,000 is "in dispute". It would be illogical if this policy did not apply to an appeal from a decision of the Tribunal involving an award of more than $30,000.
8. The appellant contended that there were no special circumstances, the present dispute being "unexceptional" because they relate to the correct construction of a written contract.
9. The expression "special circumstances" was considered by the Court of Appeal in the context of section 88(1) of the Administrative Decisions Tribunal Act 1997 (NSW). Santow JA said in Cripps v G & M Mawson [2006] NSWCA 84 at [60]: I consider that the Tribunal was in error in failing to conclude that special circumstances apply here. For this purpose it suffices that the circumstances are out of the ordinary. They do not have to be extraordinary or exceptional."
10. In that case the Court of Appeal awarded costs on the basis that the conduct of the appellant was out of the ordinary and grossly unreasonable. There is no such egregious conduct on the part of the appellant in this case. But the nature and complexity of the proceedings and the fact that the Tribunal has a less fettered discretion in relation to the awarding of costs at first instance make the circumstances special.
11. The contract was a domestic building contract. An award was made against the appellant, who is the homeowner, of $125,704.00. However, the appellant claimed that the respondent, who is the builder, should be ordered to pay the appellant $432,495.55. These are substantial amounts considering the dispute was between a consumer and a commercial contractor.
12. The grounds of appeal related to the meaning of the contract. While the appellant was unsuccessful, there was a real issue as to how the contract should be interpreted. It would have been difficult for a person who was not a lawyer to have given meaningful submissions on the proper construction of the contract. The decision of both parties to instruct lawyers was understandable given the nature of the legal dispute and the amount of money involved.
13. Because the amount in dispute was more than $30,000, the Tribunal may award costs at first instance "in such circumstances as it thinks fit": Consumer Trader and Tenancy Act 2001 (NSW), repealed, s 53; Consumer Trader and Tenancy Regulation 2009 (NSW) repealed, cl 20. While that rule does not apply on appeal, it is a factor which the Appeal Panel may take into account in deciding whether special circumstances exist on appeal: NCAT Act, s 60(3)(g). One reason for its relevance is that parties have the expectation of an unfettered discretion being applied in relation to an application for costs at first instance and will make decisions about the merits of their case and the desirability of legal representation partly on that basis.
14. In summary, we have decided that the appellant should pay the respondent's costs because the appeal relates to a commercial transaction involving a significant amount of money, a question of law was raised on appeal which justified representation by lawyers and the wider discretion to award costs at first instance, tends to favour an award of costs on appeal.
15. The Appeal Panel makes the following orders:
16. The Appeal Panel declines to determine the application for costs of the proceeding in applications HB 12/39964 and HB 12/63558.
17. The appellant is to pay to the respondent the respondent's costs of the appeal proceedings, to be agreed or assessed on the basis set out in Division 11 of Part 3.2 of the Legal Profession Act 2004. 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. 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