MSP Consulting and Building Constructions Pty Ltd v Karkoulas

Legislative provisions in relation to costs

1. The Tribunal's discretionary power to make an award of costs in this matter is contained in section 60 of the Civil and Administrative Tribunal Act. That section provides as follows: 60 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.
2. The provisions of rule 38 of the Civil and Administrative Tribunal Rules are as follows: 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.
3. It can be seen that the provisions of the legislation and the rule are not consistent in relation to the way in which a discretionary award of costs in an appeal from the Consumer and Commercial Division and the award of costs in the Consumer and Commercial Division are to be decided.
4. The resolution of this tension is referred to later in these reasons.

Relevant Background

1. The relevant building contract was entered into on 6 September 2011 and works were commenced on or about October 2011.
2. The decision appealed by MSP Consulting and Building Constructions Pty Ltd ("the builder") provided that the builder pay to the respondent homeowners the sum of $298,105.67 within 60 days of the date of the reasons which were delivered on 25 September 2015.
3. The homeowners argued that the builder breached statutory warranties referred to in the Home Building Act 1989 (NSW). The amount originally claimed by the homeowners was $350,000 for the cost of rectification works in relation to alleged defects, relocation during the rectification period, and $360 in liquidated damages pursuant to the contract. The builder filed a cross-claim seeking payment of $124,321.02 outstanding payments owed to the builder by the homeowners. This cross claim was dismissed.
4. The appellant sought a stay of the original decision in the Consumer and Commercial Division of the Tribunal. Principal Member Higgins in the Appeal Panel granted a stay on 10 November 2015 on condition that the appellant pay into the respondents' solicitor's trust account the amount of $298,105.67 to be held on trust pending further order of the Tribunal. In the event that the payment was not made, the stay order was expressed to immediately lapse. It was agreed that no such payment had been made. The stay order therefore lapsed.

The Appeal Panel's decision

1. The builder failed to establish that there was an error of law. The appellant was unable to clearly identify an error of law due in part to his lack of legal knowledge. The Appeal Panel understood the complaint of the appellant concerning an apprehension of bias or conflict of interest could have constituted an error of law and proceeded to consider the ground which raised that complaint. The appellant was not able to establish any conflict of interest or any apprehension of bias, or actual bias, as alleged by the grounds of appeal. There was no other ground upon which the appellant moved which could have conceivably established an error of law. The appellant having failed to establish an error of law was therefore required to establish that there was a basis for leave to appeal.
2. The appellant was unable to persuade the Appeal Panel that leave to appeal should be granted. The first instance decision determined that the homeowners' case and evidence was more compelling than the evidence provided by the builder. The appellant did not establish any issue of principle, question of public importance, or an injustice which is reasonably clear, nor did the appellant establish that the findings at first instance were against the weight of the evidence.

The parties' submissions

1. The respondents submit that rule 38(2)(b) of the Civil and Administrative Tribunal Rules 2014 has application to this appeal. It is also submitted by the respondent homeowners that rule 38A of those Civil and Administrative Tribunal Rules does not apply as the Notice of Appeal was lodged before 1 January 2016. The appeal was lodged on 26 October 2015 and was lodged within time: the appealed decision was made on 25 September 2015.
2. The respondents in their submissions relied upon the decisions of Oshlack v Richmond River City Council [1998] HCA 11;(1998) 193 CLR 72, Megerditchian v Kurmond Homes Pty Limited [2014] NSWCATAP 120 and Alexander James Pty Limited v Pozetu Pty Limited (No 2) [2016] NSWCATAP 75. The submission of the respondent is in essence that the special circumstances requirement of section 60 of the Act is satisfied because: 1. "the appeal was misconceived and was lacking in substance"; 2. "the appeal was grounded on a misapprehension of bias"; 3. the balance of the appeal relied upon factual matters which were sought to be re-agitated before the Appeal Panel ; 4. the commercial transaction involves a significant amount of money and the discretion to award costs tends to favour an award of costs on appeal; 5. the nature and complexity of the proceedings warrants an award of costs in favour of the successful party in the Appeal Panel proceedings; 6. costs should follow the event.
3. The respondent homeowners submitted that the order of the Appeal Panel should be that the appellant pay the costs of the respondents as agreed or assessed.
4. The appellant submitted that it followed correct legal avenues to pursue its right to appeal from the decision in the Tribunal. The appellant did not accept that the legal costs of the respondents would be more than $30,000. The appellant opposed the award of indemnity costs. The appellant submitted that the costs, if any are ordered, should be scrutinised and assessed. The appellant submitted that "both parties be accountable for their respective legal fees/bills."

Consideration

1. Generally, by reason of the provisions of subsection 60(1) of the Civil and Administrative Tribunal Act, the starting point in the respondent's application for costs is that each party should pay its own costs. This, essentially, is the submission of the appellant. There is a discretion to award costs by reason of subsection 60(2) if there are "special circumstances warranting the award of costs."
2. The issue is whether the factors relied upon by the respondents, separately or in combination, establish special circumstances warranting an award for costs in the appeal. The matters the Tribunal can have regard to in determining whether there are special circumstances warranting an award of costs are those set out in subsection 60(3) which are now set out in the following subheadings.

(a) whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings,

1. The appellant was not legally represented. The respondent homeowners have been legally represented in the Tribunal and in the Appeal Panel hearings. It was not submitted by the respondent homeowners that they were unnecessarily disadvantaged.

(b) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings,

1. It was not submitted by the homeowners that the appellant was 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,

1. This is a subsection upon which the respondent homeowners rely. Although the appellant was unsuccessful, it does not necessarily follow that the claim had no tenable basis. However, the appellant's case was not a strong one. The respondent's case had more basis to it because of the evidence which was presented to the Tribunal was more persuasive. There is still a presumption, however, that each party shall bear its own costs contained in section 60(1) of the Civil and Administrative Tribunal Act, even if one party has a stronger case and succeeds. It is usual for one party to prevail.

(d) the nature and complexity of the proceedings,

1. The respondent homeowners rely upon this subsection and submit through reliance upon Alexander James Pty Limited v Pozetu Pty Limited (No 2) [2016] NSWCATAP 75 at [13]-[16], that even ordinary claims can become complex because of the nature of the evidence required, or because of the legal principles which are encountered. These proceedings did not in the Appeal Panel show any great complexity or require consideration of unusual legal principles.

(e) whether the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance,

1. The respondent homeowners submit that these appeal proceedings were misconceived or lacking in substance. It is submitted by them that the allegation of apprehended bias or actual bias "was misconceived and scandalous". It is further submitted that the arguments raised on appeal "were simply misconceived or wrong".
2. These submissions are accurate and correct.

(f) whether a party has refused or failed to comply with the duty imposed by section 36 (3),

1. This subsection refers to the guiding principle of the Tribunal which is to facilitate the just, quick and cheap resolution of the real issues in the proceedings.
2. It is not submitted by the respondent homeowners that the appellant failed to comply with the duty imposed upon the appellant by reason of the guiding principle to participate in the processes and comply with the orders of the Tribunal.

(g) any other matter that the Tribunal considers relevant.

1. The respondent homeowners submit that because the appeal relates to a commercial transaction involving a significant amount of money, this is a factor which tends to favour an award of costs on appeal.
2. In Megerditchian v Kurmond Homes Pty Ltd ("Megerditchian") at [11], the Appeal Panel cited with approval the meaning of the expression "special circumstances" that had been given to the same expression in the former section 88 of the Administrative Decisions Tribunal Act 1997 (NSW) by the Court of Appeal in Cripps v G & M Mawson [2006] NSWCA 84, per Santow JA at [60], Mason P and Brownie AJA agreeing. That is, special circumstances are "circumstances that that are out of the ordinary" but the circumstances do not have to be "extraordinary or exceptional". The respondent homeowners relied upon the decision in Megerditchian even though the issue there was that in a commercial case a question of law was raised on appeal which justified representation by lawyers. That is not the present scenario.
3. In ACT Builders v Haridemos (No 2) [2016] NSWCATAP 118 at [41], the Appeal Panel noted that the mere fact a party was unsuccessful in their appeal does not of itself give rise to special circumstances warranting an order for costs in favour of the other party. The same principle is applicable when the appealing party is successful.
4. The onus is on the party seeking an order for costs to satisfy the Appeal Panel that there are special circumstances warranting an award of costs in their favour.
5. While the respondents essentially contend the appellant's appeal had no reasonable prospect of success, the appeal was frivolous and vexatious, and the appellant's applications had no basis in fact or law, this is not a sufficient basis to give rise to special circumstances warranting an exercise of the discretion to depart from the general rule that each party pay its own costs.
6. In Augustus v Mohammed (No.2) [2016] NSWCATAP 165 at [7] and [8] the Appeal Panel referred with approval to precedent decisions in relation to costs. "[7] Guidance concerning a costs order under this provision is conveniently presented in eMove Pty Ltd v Dickinson [2015] NSWCATAP 94 at [37] and [48]: It must be remembered that where a court or a tribunal is conferred with the discretion to award costs, such a discretion must be exercised judicially and not capriciously (Oshlack v Richmond River City Council (1998) 193 CLR 72 at 81). It must also be remembered that the fundamental rationale for the awarding of costs is such that such an award is compensatory, not punitive: Latoudis v Casey (1990) 170 CLR 534 at 543; Oshlack v Richmond River Council (1998) 193 CLR 72 at 97). … The authorities considering the meaning of the expression "special circumstances" were recently reviewed in CPD Holdings Pty Ltd t/as The Bathroom Exchange v Baguley [2015] NSWCATAP 21 at [23]-[31]. From those authorities, it can be seen that "special circumstances" are circumstances that are out of the ordinary, they do not have to be extraordinary or exceptional. Further, the discretion to award costs must be exercised judicially and having regard to the underlying principle that parties to proceedings in the Tribunal are ordinarily to bear their own costs. Each situation must, of course, be assessed on a case by case basis to see whether or not special circumstances exist so as to warrant the award of costs. [8] ...Again in eMove Pty Ltd v Dickinson at [43], there are comments that have present relevance, dealing with the situation, as here, of parties appearing in person: As in this case, the Tribunal is often confronted with litigants in person, or corporations represented by directors. The Tribunal must in these cases ensure that it makes appropriate allowances for the fact that submissions made by such parties may not have been expressed in the same way, or may have been expressed more felicitously, if they were represented by legal practitioners. There are authorities which indicate that courts are entitled to regard as a relevant factor in determining the scope of a costs order, the fact that a party is unrepresented. Generally, courts are more reluctant to order indemnity costs against a litigant in person as litigants in person can suffer the limitations arising from a lack of knowledge of the law, familiarity of court practices and the risk of a lack of objectivity (see the discussion in Dal Pont: The Law of Costs, 3rd Ed., at 16.50 pp 548-549). A recent decision of the Appeal Panel noted the difference of approach that may be necessary where a litigant in person, rather than a lawyer appears before it and make submissions which otherwise perhaps would not have been made: Pillay v Ku-ring-Gai Council [2015] NSWCATAP 83 at [36]-[41]. We agree with that approach.
7. It is a relevant factor in determining the imposition of a costs order, to consider the fact that the appellant is unrepresented or at least represented by a company director of a small and unsophisticated enterprise. This factor helps to explain why it is that these appeal proceedings were misconceived or lacking in substance. It is clear that the claim of bias or conflict of interest was misconceived and scandalous but appears to have been based upon wrongly held beliefs which explain ex post facto the failure to succeed. It helps explain why the arguments raised on appeal "were simply misconceived or wrong".
8. The respondents submitted that rule 38(2)(b) of the Civil and Administrative Tribunal Rules has application to this appeal. It is also submitted by the respondent homeowners that rule 38A of those Civil and Administrative Tribunal Rules does not apply because the Notice of Appeal was lodged before 1 January 2016. The provision of rule 38A was introduced by the Civil and Administrative Tribunal (Amendment No 3) Rule 2015, and it states that where an internal appeal was lodged on or after 1 January 2016 and the "first instance costs provisions" differ from those set out in s 60 of the Act, the Appeal Panel must apply the former when deciding whether to award costs in relation to the internal appeal. Therefore it cannot be correct that rule 38 (2) (b) of the Civil and Administrative Tribunal Rules has direct application to this decision.
9. The amendments were evidently introduced to rectify the anomaly applying to that class of matters caught by rule 38(2) of the Civil and Administrative Tribunal Rules, whereby the power to award costs in first instance proceedings could be exercised in the absence of special circumstances, but on appeal could only be exercised if special circumstances are established. However, the amendments are not retrospective in their operation and are not applied here. If they were to be applied the discretion to award costs is still activated and to be exercised "judicially and not capriciously".

Conclusion

1. Having regard to all the factors referred to previously it is determined that the onus on the applicant for costs has not been discharged. The factors relied upon by the respondents, separately or in combination, do not establish special circumstances warranting an award for costs in the appeal. Accordingly, the respondent homeowners have failed to establish special circumstances to warrant the exercise of discretion in their favour for an order that the appellant pay their costs of the appeal.
2. If, contrary to the ruling made earlier in these reasons, rule 38(2)(b) of the Civil and Administrative Tribunal Rules has application to this appeal then having regard to the discretionary matters referred to previously, the discretion is exercised so that the result is the same. That is, there shall be no award of costs and each party shall bear their or its own costs.

Order 1. The application for costs is 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: 10 August 2016