Murphy v All Steel Sheds

NCAT Consumer and Commercial|2021-06-24

Application

This dispute arises out of residential building work carried out by All Steel Sheds Pty Ltd ("All Steel Sheds") for Michael Murphy ("the Homeowner"). The Homeowner commenced proceedings seeking damages as follows:

for completion of the house $42,000.00 (being $75,000 less $33,000 outstanding under the contract)
for consequential loss for delay (rent paid for alternate premises) $5,106.37
Interest on the sum of $42,000.00 from 27 May 2019 to 28 September 2020 (and continuing at the rate of $4.97 per day) $2,811.52

The Tribunal found that the Homeowner was entitled to damages of $45,000 for the incomplete work, but that $41,000 outstanding under the contract with the respondent had to be offset against the amount of damages. The Tribunal also allowed an offset for an agreed variation in the sum of $735.00. On 20 May 2021 the Tribunal ordered All Steel Sheds to pay the Homeowner. the sum of $3265.00 on or before 18 June 2021.
The Tribunal provided for submissions as to costs. Both parties seek that the Tribunal make an order that the other party pay its costs: 1. The Homeowner seeks his costs on an ordinary basis; 2. All Steel Sheds seeks that the Homeowner pay its costs on an ordinary basis up until 19 March 2020, and on an indemnity basis thereafter, or alternatively, each party pays its own costs up until 19 March 2020, and the Homeowner pay the respondent's costs on an indemnity basis thereafter.
This is the decision in respect of the cost applications.

The law

The matter of costs is governed by s 60 of the NCAT Act and Rule 38 of the Civil and Administrative Tribunal Rules ("the NCAT Rules") which provide 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. 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.

The effect of these provisions is that, unless Rule 38 applies or there are special circumstances, each party to the proceedings should pay his or its own costs. If Rule 38 applies, the Tribunal can award costs in the absence of special circumstances. The Tribunal has discretion as to whether to make an award of costs but must act judicially. Costs are awarded not to punish an unsuccessful party but to compensate a successful party.
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.
In Mison v Bennett Property (NSW) Pty Ltd [2018] NSWCATAP 138 the Appeal Panel discussed the making of indemnity costs orders: 30 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. 31 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)]. 32 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. 33 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.

.Who was successful?

The Homeowner was successful in obtaining an order for damages for completion. However the quantum of damages was considerably less than the amount sought. The Homeowner had conceded a set off of $33,000 but the Tribunal also allowed a set off in respect of monies owing on the shed in the sum of $8,000, and a variation in the sum of $735. This had been opposed by the Homeowner.
The Homeowner was unsuccessful in respect of his claim for rent and interest.
Shortly before the hearing the Homeowner withdrew a claim for compensation for diminution in value, related to the fact that no Home Owners Warranty insurance was provided by All Steel Sheds, in breach of the HBA.
Prior to the hearing All Steel Sheds conceded that it needed to be licensed, but only in respect of the "installation contracts". It also conceded that it was in breach of the HBA by failing to provide Home Owners Warranty insurance. It did not concede that the termination of the contract by the Homeowner was lawful until its final submissions, filed after the hearing.
Thus I am satisfied that both parties had a measure of success in the proceedings. In addition, both conducted the proceedings in a manner which tended to increase the costs. The Homeowner maintained his claim for diminution in value, only to withdraw it shortly before the hearing. The respondent refused to concede the need for appropriate licensing, or to acknowledge that the termination was valid, until after the completion of the hearing. Both thereby increased the costs of the proceedings.

What effect did the offer of compromise have?

On 19 March 2020 All Steel Sheds made an offer of compromise, to pay the Homeowner $30,000 inclusive of costs. The respondent also offered to obtain retrospective Home Owners Warranty insurance, but required the Homeowner to provide written confirmation stating that there was no dispute in respect of the works. If the insurance could not be obtained, the respondent offered to pay an additional amount of $8750.00.
The applicant submits that the offer was not a genuine offer of compromise, and it was not unreasonable for the applicant to reject it. This is said to be because, amongst other reasons, at that time, the applicant had incurred costs of $37,572.75, and the offer was an incl costs offer. There was no offer in respect of the claim for diminution in value.
I do not accept the applicant's submission. The offer addressed the claims made by the applicant and set out the reasoning behind the offer. Whilst there was no monetary offer for diminution, the offer to obtain insurance would have mitigated that loss. As the applicant states, at the time of the offer the evidence was substantially complete. The shortcomings identified by the respondent's lawyers in the applicant's case, and articulated in the offer, were ultimately found to be shortcomings by the Tribunal.
The applicant has achieved an outcome which is less than the amount of the offer. The offer was a genuine offer of compromise and it was unreasonable for the applicant not to accept it.

What order should the Tribunal make?

I am satisfied that each party should pay his or its own costs up until the date of the offer of compromise (19 March 2020). This takes account of the way in which each of the both parties conducted the proceedings, and the fact that both had some measure of success. The applicant should then pay the respondent's costs on an ordinary basis from 20 March 2020. I decline to order indemnity costs, because I am not satisfied that the way in which the respondent conducted the case (in refusing to acknowledge the requirements of the HBA in respect of licensing, and in refusing to accept the validity of the termination), warrants an indemnity cost order.
I decline to order the applicant to pay the respondent's costs in respect of the diminution claim. The bringing of the claim itself was not without some basis. The respondent had breached the HBA and had not provided the insurance. I am satisfied that the orders I have made will adequately address the late withdrawal of the claim.

Orders

Pursuant to s 50 (2) of the Civil and Administrative Tribunal Act 2014, a hearing of the costs application is dispensed with.
Each party is to pay his or its own costs up until 19 March 2020.
Michael Murphy is to pay All Steel Sheds Pty Ltd's costs of the proceedings from 20 March 2020, on an ordinary basis, as agreed or assessed.

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: 17 August 2021

At a glance

Court

Decision date

Source

Judgment (9 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (8)