In this case, concerning construction works carried out at Lake Macquarie; over distinct periods between August 2013 and September 2016, I published reasons for judgment on 12 December 2019 [1] . One of the orders was for referral of the question of rectification costs to a referee. On 23 April 2020 [2] , I published my reasons for the almost entire adoption of the referee's report. This, then, leaves the Court to make orders for the disposition of the proceeding, including the order for costs. On the issue of costs, I indicated my preliminary view that costs of the referral process (including the application for adoption) should be subsumed within the general order of costs for proceedings. No party subsequently took issue with this view.
With the exception of the issue of costs, the parties have substantially agreed on dispositive orders. I will deal with those orders after addressing the question of costs.
[2]
Preliminary observation
Curiously, the respective versions of short minutes handed up to the Court both provided that costs are to be determined at a later date. This is not only contrary to earlier directions and communications made by the Court, but also to the circumstance that the parties have, in fact, and, in accordance with the Court's directions, made submissions on costs. I presume it was a typographical mistake left over from earlier versions of short minutes of order.
I note that at paragraphs 46-47 of my reasons for judgment on 23 April 2020, the parties were directed to prepare short minutes of order, including provision of costs, in an ordered sequence. On 12 May 2020, and due to some expressed uncertainty by one or both of the parties as to whether they should be making submissions as to costs, I arranged through my Associate to email the parties to confirm that this was the case.
It has since transpired that the defendants ('the Builders') and, thereafter the plaintiff ('the Owner') (purportedly in reply to the Builders' submission), served written submissions on costs outside of the periods of time provided for in the directions and, in the case of the Owner, purporting to be a submission in reply when the directions made no provision for submissions in reply. This has left the Court with two sets of written submissions on costs for each party, where the Court's directions only contemplated one set of submissions. Where the Court makes directions for costs applications, it expects its directions to be complied with. Although this is partly explicable by the circumstance that the Builders represented themselves, the Court's willingness to indulge the parties by considering the supplementary submissions should not be taken to be a precedent.
[3]
The parties' contentions
The Owner submitted that:
1. he should obtain costs for the entirety of the proceedings, including the costs of the dispute when it was before the NCAT;
2. he has been practically successful in the proceeding and that, to the extent that there were certain issues upon which the Builders succeeded, those issues did not justify any apportionment;
3. accordingly, he should receive the costs of the proceedings entirely;
4. it is inappropriate for the Court to make an order for costs for a fixed sum; and
5. because of the Builders' conduct in the proceeding, essentially putting the Owner to proof on the existence and quantum of defects when it had no reasonable basis for doing so, the plaintiff should recover his costs on an indemnity basis.
The Builders' submissions were that:
1. the Court should recognise that there were two claims: the Builders' claim for termination against the Owner for failure to pay; and the Owner's claim against the Builders for defective works. The costs order should recognise that each party had a measure of success;
2. the Builders were, in fact, more successful on the claim for defective works;
3. there was no conduct by the Builders that would warrant the imposition of an order for indemnity costs; and
4. the Owner should not have his costs during the phase of the dispute in the NCAT.
[4]
Determination of the question of costs
I agree with the Builders that the Owner's submissions pays little or no regard to the circumstance that in the face of the Owners' opposition, the Builders incurred not insignificant expense in having to prove its claim that it validly terminated the contract. The Builders' claim, though of course related to the Owner's claim, was distinct to the Owner's claim. A significant array of factual issues, as well as some issues of mixed fact and law, needed to be determined.
On the other hand, I accept that a large proportion of the costs of the main proceeding and, plainly, the process of referral dealt with the issues upon which the Owner was substantially successful: proving a large number (although not all) of the claimed defects and the adoption of the referee's report quantifying the costs of the rectification.
In this regard, contrary to the Builders' submission, determining which party was more successful is not to be considered in an arithmetical exercise by adding up all of the items found to be defective, quantifying them and comparing these calculations with the items found not to be defective. The exercise calls for practical judgment. The fact is that the Owner was practically successful in obtaining a significant number of findings of defective works which were of substantial value.
In my opinion, there is no cause to engage in any further refinement when considering the issues as a whole. In my view, the Owner should recover 70% of its costs.
The Builders do not urge the Court to make any order for a fixed sum.
In relation to the costs of the dispute before NCAT, it is a commonplace that where, because of jurisdictional reasons, a dispute originally commenced in that Tribunal needs to be finally adjudicated in the Court, the costs incurred by the parties in the Tribunal will be determined consistently with the costs outcome of the proceedings in the Court. There is no material placed before the Court to suggest why that ordinary course should not be followed here. The Owner should have his costs in the NCAT.
This finally leaves the issue of indemnity costs. I am not persuaded that, insofar as the Builders' defence of the Owner's claim of defective works is concerned, its conduct was so manifestly unreasonable as to warrant the imposition of an order for indemnity costs. What was plainly apparent to the Court was that a large number of alleged defects were disputed and following the expert evidence, differences were narrowed; obviating the need for the Court to make determination on items originally claimed as defects at the outset. This is a commonplace feature of construction litigation. It does not signify any lack of bona fides in the Builders' original opposition to the Owner's claim.
The costs order, therefore, will be that the Defendants/Cross-claimant (the Builders) pay 70% of the Plaintiff/Cross-defendant's (the Owner's) costs of the proceeding.
[5]
Interest on Builders' claim
The only other dispute is the time from when interest should be awarded on the Builders' clam for non-payment. The Builders say interest should run at the contractual rate from the date of the invoice. The Owner says it should only run from the date the Builders' claim was filed in the District Court.
The parties did not make any submissions or refer to any evidence to support their respective positions. Consistent with underlying principles, absent contractual provision to the contrary, I do not see why interest should not run from the date that payment is owed. That being so, I accept the Builders' submission in relation to this issue. That is, the interest on the Builders' cross-claim is $27,743.60 - not the sum of $23,094.23 asserted by the Owner.
As indicated, the parties agree with the balance of the orders required; although, given that I have accepted the Builders' submission on interest, the total judgment sum to be awarded to the Owner, after set off, has been adjusted, from $282,906.66 to $278,257.29.
[6]
ORDERS
The Court orders:
1. To the extent necessary, save for the narrative at the second last bullet point of paragraph 7.4.1 of the referee's report, the referee's report is adopted.
2. Judgment for the plaintiff on its claim for defective works for the sum of $301,849.00.
3. The plaintiff is entitled to interest on the judgment sum of $56,622.45.
4. The Court sets off from the combined amount for judgment and interest ($358,471.45) in favour of the plaintiff:
1. the amount of $52,470.56 awarded to the cross-claimants on their cross-claim; and
2. interest on that award in the sum of $27,743.60.
1. The defendants are to pay 70% of the plaintiff's costs of the proceeding, which costs included the costs of the proceeding before the NCAT and the costs of the application for adoption of the referee's report.
The Court notes that the plaintiff is to be awarded the sum of $278,257.29 inclusive of interest, after the set-off.
[7]
Endnotes
Morrison v Moss & Anor [2019] NSWDC 746.
Morrison v Moss (No.3) [2020] NSWDC 136.
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Decision last updated: 27 May 2020