Mison v Bennett Property

NCAT Appeal Panel|2018-05-31

Introduction

This is an application for costs of an internal appeal under s 80(2) of the Civil and Administrative Tribunal Act 2013 (the NCAT Act), which was brought against a decision made in the Consumer and Commercial Division of the Tribunal on 15 January 2018.
In the proceedings brought in the Consumer and Commercial Division, the appellants sought an order from the Tribunal requiring the respondents to pay them $55,440.00, being a refund of an agent's commission fee the appellants allege was inadvertently and wrongly distributed to the first respondent by their conveyancer upon settlement of the sale of one of their properties. The appellants also sought costs of the proceedings. The Tribunal dismissed the application and the appellants appealed that decision.
On 18 April 2018, we allowed the appeal for reasons given orally at the appeal hearing and ordered the remittal of the proceedings to the Consumer and Commercial Division for re-hearing, with fresh evidence allowed.
The appellants sought an order for costs. We made procedural directions for the filing and serving of submissions on costs. The parties were put on notice that subject to their submissions, the costs application would be dealt with on the papers. Neither party has sought a hearing of the costs application.
We note that the appellants also seek an order for costs of the Tribunal proceedings. However, it would not be appropriate to make an order in relation to costs of the proceedings in the Tribunal when the outcome of the proceedings won't be known until after the re-hearing. Costs of the Tribunal proceedings can be dealt with once that has occurred. This decision only concerns costs of the appeal.
For the reasons set out below, we have decided that the respondents should be ordered to pay the appellants' costs of the appeal, on the ordinary basis.

Submissions and evidence

In making a decision in relation to the costs application, we have considered: 1. The appellants' submissions on costs dated 26 April 2018; 2. The respondents' submissions on costs dated 3 May 2018; 3. The appellants' submissions in reply dated 10 May 2018; and 4. The material that was before us on the internal appeal.

Issues

The issues to be determined on the costs application are: 1. Should a hearing on costs be dispensed with? 2. What provisions apply to the costs application? 3. What legal principles apply to the costs application? 4. Should the respondents be ordered to pay the appellants' costs of the appeal? 5. If so, on what basis should the costs order be made?

Should a hearing on costs be dispensed with?

Section 50 of the NCAT Act relevantly provides: 50 When hearings are required (1) A hearing is required for proceedings in the Tribunal except: … (c) if the Tribunal makes an order under this section dispensing with a hearing, or … (2) The Tribunal may make an order dispensing with a hearing if it is satisfied that the issues for determination can be adequately determined in the absence of the parties by considering any written submissions or any other documents or material lodged with or provided to the Tribunal. (3) The Tribunal may not make an order dispensing with a hearing unless the Tribunal has first: (a) afforded the parties an opportunity to make submissions about the proposed order, and (b) taken any such submissions into account. (4) The Tribunal may determine proceedings in which a hearing is not required based on the written submissions or any other documents or material that have been lodged with or provided to the Tribunal in accordance with the requirements of this Act, enabling legislation and the procedural rules. … The parties were given an opportunity to make submissions concerning whether costs could be determined on the papers. Neither party objected to that course of action. We are satisfied that the issue of costs can be adequately determined in the absence of the parties by considering the parties' written submissions. The parties would be put to unnecessary expense if required to argue the costs application at a hearing. The order under s 50(1)(c) of the NCAT Act has accordingly been made.

What provisions apply to the costs application? The general rule in relation to costs in the Tribunal is that unless special circumstances are established, the parties pay their own costs: s 60(1) of the NCAT Act.

However, r 38 of the Civil and Administrative Tribunal Rules 2014 (the Rules) modifies the application of s 60 in proceedings before the Consumer and Commercial Division of the Tribunal and r 38A modifies the position in respect of appeals.
Rule 38 provides: 38 Costs in Consumer and Commercial Division of the Tribunal (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.
Rule 38A provides: 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.
Rule 38A applies to the present appeal because: 1. The appeal was lodged after 1 January 2016; and 2. The first instance cost provisions differ from those set out in s 60 because of the operation of the "procedural rules" in that: 1. the proceedings in the Tribunal were for the exercise of functions under the Fair Trading Act 1987 and the Property, Stock and Business Agents Act 2002; 2. Schedule 4, cl 3 of the NCAT Act allocates such proceedings to the Consumer and Commercial Division; 3. In those proceedings "the first instance costs provisions" included r 38 of the NCAT Rules, which modifies the operation of s 60 (1).
In the present appeal, r 38A(2) requires us to apply the first instance costs provisions, which is s 60 as relevantly modified by r 38(2), when deciding whether to award costs of the appeal.
Rule 38(2) allows us to award costs in the absence of special circumstances if either of the requirements in (a) or (b) of that sub-rule is satisfied. The requirement in r 38(2)(a) has not been satisfied since we have not made an order under cl 10(2) of Sch 4.
Therefore, we can: 1. Award costs even in the absence of special circumstances under r 38(2)(b) if the amount claimed or in dispute in the proceedings is more than $30,000; or 2. Award costs under s 60(2) if the amount claimed or in dispute is $30,000 or less, but only if we are satisfied that there are special circumstances warranting such an award.
In Allen v TriCare (Hastings) Ltd [2017] NSWCATAP 25 the Appeal Panel found at [43]: In the case of an internal appeal, the "amount claimed … in the proceedings" can be determined by considering what orders the appellant seeks on the appeal. If those orders sought include an order that the respondent pay a sum of more than $30,000, expressly or impliedly, then the Tribunal should conclude that the amount claimed in those proceedings was more than $30,000. If the substantive orders sought do not involve any express or implied claim to any amount, it is difficult to see how there is any "amount claimed" for the purposes of r 38(2)(b).
The same reasoning applies when what is at stake in an internal appeal can be characterised not as an amount claimed in the proceedings but as an "amount …. in dispute". In this case, the appellants appealed the dismissal of an application in which they sought payment of $55,440.00, plus costs.
As the amount in dispute in the appeal proceedings exceeds $30,000, r 38(2)(b) applies and we can make an order for costs in the absence of special circumstances.

What legal principles apply to the costs application?

Rule 38(2)(b) gives us a wide discretion to make an order for costs. It does not specify the factors we must take into account in exercising the discretion, although the discretion must be exercised judicially: see, for example, Ruddock v Vadarlis [2001] FCA 1865 at [9].
In Thompson v Chapman [2016] NSWCATAP 6, the Appeal Panel discussed the exercise of the discretion, stating at [69[ to [72]: 69. 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. 70. 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 and in Oshlack v Richmond River Council per Brennan CJ at 75. 71. Where there is a general discretion for costs there is no absolute rule that, absent disentitling conduct, a successful party is to be compensated by the unsuccessful party nor is there any rule that a successful party might not be ordered to bear the costs of an unsuccessful party: see Oshlack v Richmond River Council per Gaudron and Gummo JJ at 88 and Kirby J at 121 - 123. 72. The factors to be considered in awarding costs in a particular case are not to be confined as to do so would constrain the general discretion. However it is clear from the authorities that factors that might influence whether the usual order for costs should apply and, if so, to what extent include: (1) Whether, by reason of the relative success of the parties on different issues and the time taken to determine those that an order for costs based on issues should be made: see for example Bostick Australia Pty Ltd v Liddiard (No 2) [2009] NSWSCA 304; and (2) Whether, by reason of the nature of the proceedings the usual rule should otherwise be displaced in whole or in part: see Oshlack v Richmond River Council per Gaudron and Gummo JJ at 41 - 44.

Should the respondents be ordered to pay the appellants' costs of the appeal?

The appellants were successful on the appeal. The appeal was allowed and the matter was remitted to the Consumer and Commercial Division for rehearing. The re-hearing has not yet taken place.
The outcome of the re-hearing may be the same as the outcome of the original hearing before the Tribunal. The parties were put on notice of this during the hearing of the appeal. However, the fact that the appellants may be unsuccessful on the re-hearing of the application does not mean that they should be deprived of the fruits of their success on appeal. If the respondents are successful at the re-hearing, then they will be able to apply for costs of the Tribunal proceedings. If the appellants are successful at the re-hearing, they will have the opportunity to apply for costs.
There is nothing in the submission provided by the respondents to suggest that the appellants should be deprived of their costs because of misconduct. Further, we do not accept the respondents' submission that an order for costs in favour of the appellants "would be punitive in nature" or that it "would have the effect of unfairly compensating the appellants in matter or matters which remain undetermined". Rather, we are satisfied that an order for costs in favour of the appellants is consistent with applicable legal principles in that it would provide compensation to the appellants for the expense they have been put to in prosecuting their successful appeal.
We see no reason why the usual rule in relation to costs should be displaced either in whole or in part. Accordingly, we find that the discretion to make an order for costs should be exercised in favour of the appellants.

On what basis should the costs order be made?

The appellants seek an order that costs be paid on an indemnity basis. This is because prior to the hearing of the original proceedings in the Tribunal and then again prior to the appeal hearing, they made a settlement offer to the appellants.
The settlement offer made prior to the appeal hearing is contained in a letter from the appellants' solicitor dated 9 April 2018. It relevantly states: We have been instructed to formally put an offer to your clients to resolve the proceedings. 1) Judgment for the Appellant in the sum of $57,900; and 2) This offer remains open for acceptance until 16th April 2018; 3) This offer is made in accordance with Rule 20.26 of the Uniform Civil Procedure Rule (sic) 2005. This offer will be relied upon in the costs application made by the Appellant.
The settlement offer is effectively identical to that made to the respondents prior to the Tribunal hearing, in a letter dated 13 September 2017. The respondents rejected the offer.
It is not clear why the appellants made a settlement offer to the respondents in the form of an offer of compromise under r 20.26 of the Uniform Civil Procedure Rules 2005 (UCPR), given that their solicitor presumably knows that the UCPR do not apply in the Tribunal. A litigant in the Tribunal would ordinarily make such a settlement offer in the form of a Calderbank letter. However, even though the offer was made under the UCPR and not in a Calderbank letter, we can still take it into account in determining costs.
There is no presumption that a party who rejects an offer of compromise and does not obtain an outcome more favourable than the offer will be ordered to pay indemnity costs from the date of the offer: Leichhardt Municipal Council v Green [2004] NSWCA 341 at [19] (Santow JA, Stein AJA agreeing). In Miwa Pty Ltd v Siantan Properties Pte Ltd (No. 2) [2011] NSWCA 344 at [8], Basten JA identified two questions relevant to whether costs should be awarded on an indemnity basis. They are whether: 1. there was a genuine offer of compromise; and 2. it was unreasonable for the offeree not to accept it.
In relation to the first issue, for an offer of compromise to be valid, an offer must involve "a real and genuine element of compromise": see, for example, Prosperity Advisers Pty Ltd v Secure Enterprises Pty Ltd [2012] NSWCA 192 at [109] (Prosperity Advisers); Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [9]; Barakat v Bazdarova [2012] NSWCA 140 at [51(e)].
Whether a settlement offer is "real" or "genuine" does not depend on the intentions of the party making the offer. As stated by Giles J in Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358 at 368: Compromise connotes that a party gives something away. A plaintiff with a strong case, or a plaintiff with a firm belief in the strength of its case, is perfectly entitled to discount its claim by only a dollar, but it does not in any real sense give anything away, and I do not think that it can claim to have placed itself in a more favourable position in relation to costs unless it does so.
Further, an offer of compromise must not be derisory, requiring capitulation by the party to whom it is addressed: Prosperity Advisers at [109]. In view of this, an offer to accept payment of the claim in full would not usually qualify as an offer of compromise: Richardson v Hough [1999] NSWSC 448.
In this case, the appellants offered to settle for $57,900, even though their application to the Tribunal sought an order for payment of $55,400. The settlement offer does not mention costs, even though UCPR r 20.26(3) permits an offer of compromise to include an offer in relation to costs.
In the absence of an explanation for why the appellants offered to settle for more than the amount of the claim, we conclude that the offer sought capitulation by the respondents. In such circumstances, we are not satisfied that the offer contained a genuine element of compromise. It follows that it was not unreasonable for the respondents to reject it.
Accordingly, we refuse the application for costs to be paid on an indemnity basis. Costs are to be paid on the ordinary basis.
We have considered whether to make a gross sum costs order. We have the power to do so under s 60(4) of the NCAT Act.
A gross sum costs order can only be made in circumstances where a Court or Tribunal can be confident that the approach taken to estimate costs is logical, fair and reasonable: Beach Petroleum NL v Johnson (1995) 57 FCR 119 at [16]. In this context, the concept of "fairness" includes the Court or Tribunal having sufficient confidence in arriving at an appropriate sum on the materials available: Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738, per Giles JA at [22].
The appellants' solicitor has provided a number of invoices. Although some of these invoices relate to work apparently undertaken in respect of the proceedings before the Tribunal, it is possible to determine what costs were invoiced in respect of the appeal proceedings. However, no evidence has been provided concerning such matters as the number of hours invoiced or the rate at which work was charged. Nor has evidence been provided concerning which of the amounts charged would properly constitute party/party as opposed to solicitor/client costs, or the appropriateness or otherwise of a discount being applied to the invoiced costs.
In these circumstances, we are not satisfied that the costs should be awarded as a gross sum. Rather, we order that costs be paid as agreed or assessed. We have made that order accordingly.

Order

We make the following orders: 1. A hearing on costs is dispensed with in accordance with s 50(1)(c) of the Civil and Administrative Tribunal Act 2013. 2. Bennett Property (NSW) Pty Limited and Michael Bennett are to pay Matthew Scott Mison's and Anne Elizabeth Lyell's costs of the appeal, on the ordinary basis, as agreed or assessed.

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: 31 May 2018

At a glance

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Judgment (11 paragraphs)

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Cases Cited (12)

Cited By (5)