Noureddine v Barbalace Construction Pty Ltd

Scope and nature of internal appeals

1. Internal appeals may be made as of right on a question of law, and otherwise with leave of the Appeal Panel: s 80(2) NCAT Act.
2. In Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 the Appeal Panel set out at [13] a non-exclusive list of questions of law: 1. Whether there has been a failure to provide proper reasons; 2. Whether the Tribunal identified the wrong issue or asked the wrong question; 3. Whether a wrong principle of law had been applied; 4. Whether there was a failure to afford procedural fairness; 5. Whether the Tribunal failed to take into account relevant (i.e., mandatory) considerations; 6. Whether the Tribunal took into account an irrelevant consideration; 7. Whether there was no evidence to support a finding of fact; and 8. Whether the decision is so unreasonable that no reasonable decision-maker would make it.
3. The circumstances in which the Appeal Panel may grant leave to appeal from decisions made in the Consumer and Commercial Division are limited to those set out in cl 12(1) of Schedule 4 of the NCAT Act. In such cases, the Appeal Panel must be satisfied that the appellant may have suffered a substantial miscarriage of justice on the basis that: 1. the decision of the Tribunal under appeal was not fair and equitable; or 2. the decision of the Tribunal under appeal was against the weight of evidence; or 3. significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with).
4. In Collins v Urban [2014] NSWCATAP 17 (Collins v Urban), the Appeal Panel stated at [76] that a substantial miscarriage of justice for the purposes of cl 12(1) of Schedule 4 may have been suffered where: … there was a "significant possibility" or a "chance which was fairly open" that a different and more favourable result would have been achieved for the appellant had the relevant circumstance in para (a) or (b) not occurred or if the fresh evidence under para (c) had been before the Tribunal at first instance.
5. Even if an appellant from a decision of the Consumer and Commercial Division has satisfied the requirements of cl 12(1) of Schedule 4, the Appeal Panel must still consider whether it should exercise its discretion to grant leave to appeal under s 80(2)(b).
6. In Collins v Urban, the Appeal Panel stated at [84] that ordinarily it is appropriate to grant leave to appeal only in matters that involve: (a) issues of principle; (b) questions of public importance or matters of administration or policy which might have general application; or (c) an injustice which is reasonably clear, in the sense of going beyond merely what is arguable, or an error that is plain and readily apparent which is central to the Tribunal's decision and not merely peripheral, so that it would be unjust to allow the finding to stand; (d) a factual error that was unreasonably arrived at and clearly mistaken; or (e) the Tribunal having gone about the fact finding process in such an unorthodox manner or in such a way that it was likely to produce an unfair result so that it would be in the interests of justice for it to be reviewed.

Submissions and evidence

1. In deciding the appeal, we have had regard to the following:

• The Notice of Appeal lodged on 21 December 2018;
• The Reply to Appeal lodged on 12 February 2019;
• The Owners' written submissions lodged on 20 February 2019;
• The Builder's written submissions lodged on 5 March 2019;
• The procedural directions made at callover;
• The First and Second Reasons for Decision;
• The Owners' application to the Tribunal dated 12 January 2017; and
• The oral submissions made at the hearing.

Notice of Appeal

1. The Notice of Appeal was lodged on 21 December 2018, which is within the 28 day time period specified in cl 25(4) of the Rules.

Grounds of Appeal

1. The grounds of appeal specified in the Notice of Appeal are: 1. The orders are inconsistent with the findings of fact the Tribunal made in the "primary judgment". 2. The Tribunal erred in determining that because the parties agreed on the rectification of seven items the Owners were not entitled to a costs order in their favour as the Tribunal did not make an independent determination of the seven items. 3. The Tribunal failed to find that the Owners were justified in commencing the proceedings and should have their costs paid by the Builder. 4. The Tribunal erred in determining the costs payable only on the result of the contested matters and failed to properly consider the fact that the matters consented to were agreed after proceedings commenced, after experts were retained and after a Scott Schedule was filed 14 days prior to the hearing. 5. The Tribunal failed to consider the Calderbank offer made by the Owners when determining costs.
2. In written submissions, the Owners contended that the Tribunal erred in the following respects: 1. The Tribunal erred in determining that the Builder was the successful party. 2. The Tribunal erred in placing significant weight on the Builder's Calderbank offers without first determining whether the offers were validly made, whether they were a genuine attempt to compromise and whether the Owners unreasonably rejected the offers.
3. The Owners did not seek leave to appeal in the Notice of Appeal. However, they were given leave to do so orally at the hearing.

Issues

1. In accordance with the position taken in the Owners' written submissions, the issues to be determined in the appeal are: 1. Did the Tribunal err in determining that the Builder was the successful party? 2. Did the Tribunal err in its conclusions concerning the Builder's Calderbank offers? 3. Have the Owners suffered a substantial miscarriage of justice for one of the reasons set out in cl 12 Schedule 4 and, if so, should leave to appeal be granted?

Did the Tribunal err in determining that the Builder was the successful party?

1. The Tribunal's findings in relation to this issue are set out at [18] to [23] of the Second Reasons for Decision. The Tribunal stated that: 18 The Tribunal agrees with the Builder's submission that the successful party in the proceedings is determined by considering who succeeded on the matters in dispute, rather than the party who obtained an order in its favour: paragraph 5 citing John Conrad Hansen trading as Derrawee Pastoral Company v Monterey (Coolah) Pty Limited [2012] NSWSC 1383 at [29]. The reference to paragraph [29] of her Honour Justice Schmidt's decision was to the following: Under Part 42.1 of the Rules, the usual order is that costs follow 'the event', although there too reference is made to the discretion to make some other order. It follows that how the Rule operates in a particular case, depends on what 'the event' in question is. This requires consideration to be given to the practical outcome of the proceedings, that is, by reference to who the successful party in the proceedings was, having in mind the matters over which the parties joined issue and who succeeded on them. That is not necessarily the party who has had an order made in their favour in the proceedings. 19 The Tribunal makes a finding of fact that the Builder was the successful party in this litigation. The practical outcome of the proceedings was that the Tribunal made orders, without much consideration other than those imposed upon it in s.59 of the NCAT Act, for those items about which the parties agreed, and did not make orders in favour of the Homeowners about those items which were contentious. The Tribunal did not make an independent determination that the seven items to be rectified, were defective and needed to be rectified, rather the Tribunal made those work orders by consent: Decision [29] and [30] and [34]. The seven aspects or items of the work order made were on the basis that the Builder conceded to carry out that rectification work: cf Homeowners' submissions, paragraph 18. 20 The applicants submitted that there was no reasonable basis for a conclusion to be drawn that the builder was the successful party in these proceedings: paragraphs 17 and 20. The Tribunal disagrees. 21 While the applicants obtained rectification orders in their favour, they were all by consent. Each of the items in contention (Decision at [31] and [34]) were resolved in favour of the Builder. ….. 23 Costs should generally 'follow the event'. The event is that the Tribunal's decision reflected those items the parties agreed upon only, and demonstrates the Homeowners were entirely unsuccessful in having orders made in their favour about the contentious items. There is nothing before the Tribunal which would displace the general position, that the Builder should have its costs as it is the successful party.
2. The Owners submit that the Tribunal erred in concluding that the Builder was the successful party because: 1. The Builder denied liability for the agreed items prior to the final hearing. 2. The proceedings were necessary to compel the Builder to agree to "reparation orders". The Builder had earlier denied responsibility and referred the Owners to Fair Trading. 3. The Builder abandoned the position that defects were caused by storm and related tree damage on but not before the first day of hearing. 4. The Tribunal ordered the Builder to complete rectification of items 2, 3, 4, 5, 9, 11 and 12 on or before 31 August 2018. This was significant because between February 2016 and the date of the order the Builder had been on notice of the defects but had denied liability for them and did not agree to rectify them until the date of the hearing. The order was also significant because it gave finality to the issues, which had been disputed since February 2016. 5. The Tribunal erred in finding that the Builder's consent to the Tribunal making orders in respect of matters for which it had previously denied it was responsible should alter the complexion of the outcome so as to displace the usual order that costs follow the event. 6. The Tribunal erred in determining that the Owners should pay costs from the beginning of the proceedings. The formality of the litigation, the engagement with experts, the conclave process and the final hearing compelled the Builder to make concessions. 7. Even if the Owners were properly determined to be the unsuccessful party, the "above facts" should have displaced the ordinary costs rule.
3. The primary position taken by the Owners in their submission on this ground is that the Owners were in fact the successful party and that in making a costs order in favour of the Builder, the Tribunal made an order displacing the usual position that applies in cases in which r 38 applies; that is, that costs follow the event unless there is some disentitling behaviour: Thompson v Chapman [2016] NSWCATAP 6 at [69], citing Latoudis v Casey [1990] 170 CLR 534 per Mason CJ at 554 and Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 per McHugh J at 97.
4. The Owners' alternative position is that even if they were not the successful party, the costs discretion should not have been exercised in their favour.
5. We do not agree that the Owners' primary position accurately characterises the Tribunal's findings. The Tribunal did not find that the Owners were the successful party and the usual position in respect of costs was displaced. Rather, the Tribunal clearly found that the Builder was the successful party on the basis that it found against the Owners in respect of each of the contested items.
6. In our view, the Tribunal's conclusion in this regard is not inconsistent with the Tribunal's conclusions in the First Reasons for Decision. In relation to this, in the First Reasons for Decision, the Tribunal did not find that the agreed items were defective. Rather, the Tribunal found, at [22] of the First Reasons for Decision, that the Owners' insurer had told the Owners that the items were building defects. The Tribunal then found at [24] that a Fair Trading Inspector had issued a rectification order. Neither of these findings amount to a finding that the agreed items were defective. Further, the fact that the Tribunal made a work order in respect of the agreed items also does not amount to a finding that the items were defective. The Tribunal made a work order in relation to the agreed items because they were agreed and not because it had found the items to be defective.
7. The Tribunal also refers to "defects" at [19] of the First Reasons for Decision, stating that from mid-2012 the Owners and their children "started to notice defects in the building, which are now the subject of these proceedings". In our view, the reference to "defects" in this paragraph can only be read as "claimed defects" in the context of the decision as a whole. Further, the reference to "defects" in [66] of the First Reasons for Decision in which the Tribunal stated that it did not accept "that the other items constituted defects in breach of s 18B of the Act" cannot reasonably be taken as a finding that the agreed items were defects, unless the Builder had conceded that the item was defective, as it did, for example in respect of item 2: see [36] of the First Reasons for Decision.
8. The Builder submits that its position in relation to the agreed items was as set out in the submissions made to the Tribunal at first instance: that is, that from approximately six weeks after the Owners articulated their claim in Points of Claim, the Builder had conceded one minor item and agreed to rectify four other items without conceding liability for defective work. In the Joint Scott Schedule the Builder conceded a sixth item, worth $330, which was claimed in the context of the Owners conceding three other items. The seventh agreed item was not resolved until the hearing. The amount claimed in respect of that item was $1,685.24.
9. The Builder further submits that items worth an amount of $64,821.06 remained contested. Each of those items was determined against the Owners. At the appeal hearing, it was conceded by the Owners that they were unsuccessful on the higher value items that formed part of their claim.
10. In these circumstances, it appears that the Builder conceded liability for three relatively low value items, agreed to perform work in respect of four other items without conceding and without the Tribunal finding that those items were defective and successfully defended the balance of the claim, which consisted of higher value items.
11. At the appeal hearing, the Owners submitted that in agreeing to a work order in respect of the agreed items, the Builder had admitted that the items were defective. The Owners submitted that there was "no such thing as a judgment without an admission of liability". In this regard, they relied on French J's judgment in Kovalev v Minister for Immigration & Multicultural Affairs [1999] FCA 557 (6 May 1999) (Kovalev).
12. Kovalev relevantly involved a proposed consent order by which the parties agreed that a decision of the Refugee Review Tribunal would be set aside and the matter would be remitted to the Tribunal for determination according to law. French J stated that in making a consent order the Court exercised judicial power, the exercise of which bound the parties. The order must be clear and complete and the Court must be satisfied that it is appropriate. His Honour required the parties to state the basis for the order setting aside the previous decision and the matters to be addressed at the rehearing.
13. In our view, Kovalev is not authority for the proposition argued for by the Owners. When making a work order in relation to the agreed items, the Tribunal was obliged to ensure that it was appropriate to do so in the sense that the order was clear and that the Tribunal's jurisdiction extended to making the order. In this case, the order was clear and there is no dispute that the Tribunal had the power to make the work order. However, the Tribunal was not obliged to determine whether the agreed items in fact involved defective work that was the responsibility of the builder.
14. Just as the Tribunal was not obliged to determine whether the agreed items were defects that were the responsibility of the Builder, the fact that the Builder agreed to undertake work in respect of those items does not mean that the Builder conceded that the work was defective and that it was responsible for the defects. Parties may agree on issues during the course of litigation for a number of reasons, very often to save hearing time and therefore costs.
15. In such circumstances, we see no error in the Tribunal concluding that the Builder was the successful party in respect of those matters upon which the Tribunal was required to adjudicate. Further, the fact that the Owners needed to commence proceedings in order for the Builder to agree to rectify those items that were agreed does not mean that the Owners should be characterised as the successful party, given that four of the seven agreed items were agreed without concession of liability.
16. We are not satisfied that the Tribunal erred in finding that the Builder was the successful party.

Did the Tribunal err in its conclusions concerning the Builder's Calderbank offers?

1. At [22] to [23] of the Second Reasons for Decision, the Tribunal stated: 22. The Tribunal makes a finding of fact that the applicants [sic] did not engage in any conduct which could be considered "disentitling": see Oshlak v Richmond River Council referred to above. The Tribunal finds that there are no factors that exist to militate against the successful party recovering all of its costs. In making this finding, the Tribunal took into account the parties' conduct prior to the lodgement of the application in the Tribunal, and since the commencement of these proceedings. Most relevant to the exercise of the discretion to award to the successful party, the Builder, its costs, were the two Calderbank offers made by the Builder to the Homeowners, both of which were rejected. 23. Costs should generally "follow the event". The event is that the Tribunal's decision reflected those items the parties agreed on only, and demonstrates the Homewners were entirely unsuccessful in having orders made in their favour about the contentious items. There is nothing before the Tribunal which would displace the general position, that the Builder should have its costs as it is the successful party. 24. Having so found, the Tribunal considers it in the interests of justice, in the exercise of its discretion, to order the respondent pay the applicants' legal costs of these proceedings on the ordinary or party-party basis, as agreed or assessed. There is no basis upon which the Tribunal would order, in this case, that the successful party pay the unsuccessful party's costs. The Homeowner's application is dismissed. 25. The Builder only sought an order that costs be paid on the ordinary basis. Therefore this is the basis the Tribunal will order. 26. Given the two Calderbank offers, the Builder may have been entitled to costs on an indemnity basis from a certain point in the proceedings, however as the Builder has, quite properly, not pressed for such an order, the Tribunal makes no findings about this issue.
2. There are clearly some errors in the terminology used to describe the parties in the above paragraphs. When the Tribunal refers to the "applicants" in [22] it is evident from the rest of the paragraph that this is in fact a reference to the Builder. Likewise, when the Tribunal refers to "the respondent" and "the applicants" in [24], this clearly should have been a reference to "the Builder" and "the Homeowners" respectively.
3. The Owners submit that the Tribunal determined the Builder's two Calderbank letters to be matters "most relevant" to the discretion to award costs in the Builder's favour, without first determining whether the Calderbank offers were genuine offers and that the Owners had unreasonably rejected those offers.
4. We are of the view that this ground of appeal is misconceived. While the Tribunal stated that the Calderbank letters were "most relevant" to the exercise of its discretion, this was in the context of considering whether the Builder had engaged in conduct that would disentitle it to the usual order for costs. The Tribunal found that the Builder had not done so. In circumstances where the Builder did not seek an order for costs on an indemnity basis, it was not necessary for the Tribunal to consider the Calderbank letters. However, we are not satisfied that there was an error of principle in the Tribunal doing so in the context of considering whether the Builder had engaged in disentitling conduct. It is difficult to envisage circumstances in which the making of a settlement offer in a Calderbank letter would be considered disentitling conduct warranting a successful party being deprived of a costs order. In our view there was no basis to do so in this case.
5. We note that at [26] the Tribunal stated that it made no findings in relation to indemnity costs because the Builder had not pressed for such an order. Had the Builder done so, then the Tribunal would have been obliged to make findings concerning whether the offers represented a genuine offer of compromise and whether the Owners' refusal of the offers was unreasonable. In the absence of an application for indemnity costs, the Tribunal was under no obligation to make such findings.
6. This ground of appeal is refused.

Leave to appeal

1. We are not satisfied that the Owners have established a basis for leave to appeal in accordance with the principles enunciated in Collins v Urban, as set out above. We are not satisfied that the Owners may have suffered a substantial miscarriage of justice for one of the reasons set out in cl 12 of Schedule 4 of the NCAT Act. Even if that were the case, we would not grant leave to appeal. In relation to this, we disagree that there is any question of principle or matter of public importance involved in this appeal or that any other basis has been established to warrant the exercise of the discretion to grant leave to appeal.
2. In relation to this issue, it is relevant that the Tribunal's costs decision was made in the exercise of its wide discretion concerning the making of a costs order. The principles to be applied in considering whether a discretion has miscarried are set out in House v The King (1936) 55 CLR 499, at pp 504-505: It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.
3. While we accept that the discretion could have been exercised in a manner that led to a different outcome - such as a decision that the parties pay their own costs - that is not the test to be applied. In our view, the Tribunal made a finding that was open to it; that is, that the Builder was the successful party. The finding that the Builder had not engaged in disentitling behaviour was also open to the Tribunal. In such circumstances, it was open to the Tribunal to order the Builder to pay the Owners costs. The Tribunal's discretion did not miscarry. This is so even if another Tribunal Member may have exercised the discretion differently.

Costs

1. There is no dispute that r 38 applied to costs in the proceedings before the Tribunal. We conclude that r 38 also applies to costs of the appeal proceedings, because of the operation of r 38A.
2. The appeal has been unsuccessful. We conclude that the Owners should be ordered to pay the Builder's costs of the appeal on the ordinary basis, as agreed or assessed. We have made directions in the event that either party contends for a different order.

Orders 1. Leave to appeal is refused. 2. The appeal is dismissed. 3. The appellant is to pay the respondent's costs of the appeal, on the ordinary basis, as agreed or assessed. 4. In the event that a party contends for a different costs orders, order 3 above ceases to have effect and the following orders apply. 5. Not later than 14 days after publication of these orders, the party seeking a different costs order (the costs applicant) is to file and submissions not exceeding five pages in length in support of the costs order sought. 6. Not later than 14 days thereafter, the other party (the costs respondent) is to file and serve any submissions in response, also not exceeding five pages in length. 7. Not later than 7 days thereafter, the costs applicant is to file and serve any submissions in reply not exceeding three pages in length. 8. Subject to the parties' submissions, the Appeal Panel will determine any application for a different costs order without a hearing, on the basis of the written submissions provided.

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 September 2019