respondent in HB 17/40804 & HB 17/21112)
Phillip Paraskevopoulos (applicant in HB 17/21112
Source
Original judgment source is linked above.
Catchwords
respondent in HB 17/40804 & HB 17/21112)
Phillip Paraskevopoulos (applicant in HB 17/21112
Judgment (4 paragraphs)
[1]
REASONS FOR DECISION
On 22 May 2018, my Orders and Reasons were published in the proceedings constituted by File Nos. HB 17/13535, HB 17/21112 and HB 17/40804.
The proceeding HB 17/13535 brought by Alexsander Bajic (the "builder") was dismissed.
In the proceedings HB 17/21112 and HB 17/40804 brought by Phillip Paraskevopoulos, Margaret Paraskevopoulos and Dobrinka Lazarevich (the "home owners"), I ordered that the builder pay the home owners $86,431.52.
I made other orders and directions for written submissions and written submissions in reply in any applications for costs of the three proceedings (see orders 3, 4 and 5 of 22 May 2018). Order 5 also asked for the parties' written submissions and written submissions in reply to indicate whether the parties consented to a decision on costs being made 'on the papers': see s 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW) ("NCAT Act").
By written submissions received by the Tribunal on 15 June 2018, the home owners exercised their liberty under the orders and directions of 22 May 2018 to apply for their costs in the three proceedings. They sought orders that the builder pay their costs in the proceedings as agreed or as assessed, including on an indemnity basis (s 60(4) of the NCAT Act).
The time has now passed (see order 4 made on 22 May 2018, extended to 30 July 2018 by order of 11 July 2018) for receipt of submissions in reply from the builder. The Tribunal has received no written submissions from the builder in reply to the home owners' application for costs in the three proceedings.
The home owners consented to the Tribunal dispensing with a formal hearing on the question of costs. I am satisfied that the issues for determination in the home owners' application for costs in the three proceedings can be adequately determined in the absence of the parties by considering the written submissions provided by the home owners' legal representative and having regard to the fact that the builder was afforded an opportunity by the earlier orders to make submissions in reply. Accordingly, I find that this is an appropriate case to exercise the Tribunal's discretion under s 50(2) of the NCAT Act to dispense with a formal hearing requiring the parties to be present and to proceed to determine the application for costs on the papers.
Paraskevopoulos v Bajic [2018] NSWCATCD 40 | Case summary | Zoe
The starting point in any application for costs is that parties to proceedings in the Tribunal are to pay their own costs: see s 60 of the NCAT Act. Section 60(2) provides costs are awarded only if the Tribunal is satisfied that there are 'special circumstances warranting an award of costs'.
Section 60 is subject to the provisions of the NCAT Act. The Civil and Administrative Tribunal Rules 2014 (NSW) (the "NCAT Rules") are made pursuant to the NCAT Act. Relevantly, Rule 38 states:
(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 is more than $30,000.00.
The three proceedings were heard in the Consumer and Commercial Division of the Tribunal and the amounts claimed by the home owners and the builder, respectively, exceeded $30,000.00. As I observed at [199] of the Reasons for Decision published on 22 May 2018, Rule 38 of the NCAT Rules applies in the three proceedings. The Tribunal has discretion to award costs in the proceedings irrespective of whether or not there are 'special circumstances'.
The discretion to award costs is broad and unfettered, save that it must be exercised judicially: see, for example, Ruddock v Vardalis (No 2) (2001) 115 FCR 229, and also "according to rules of reason and justice, not according to private opinion … or even benevolence … or sympathy": Williams v Lewer [1974] 2 NSWLR 91 at [95].
The usual principle in determining costs is that a successful party should be awarded costs in its favour (i.e. that costs 'follow the event') and that the purpose of a costs order is to compensate or indemnify a successful party against the expenses to which it has been put: see Latoudis v Casey (1990) 170 CLR 534; Oshlack Richmond River Council [1998] HCA 11; (1998) 193 CLR 72. In Oshlack [1998] HCA 11, [67], McHugh J (in dissent but with the tacit agreement on this issue of other members of the Court) said:
The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended by, the unsuccessful party the successful party would not have incurred the expenses which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.
Further, notwithstanding the fact that Rule 38 of the NCAT Rules applies in the three proceedings, the Tribunal retains the discretion as to whether or not it will award costs even in circumstances where costs ordinarily follow the event: see Nguyen v Perpetual Trustee Co Ltd; Perpetual Trustee Co Ltd v Nguyen [2015] NSWCATAP 264 where the Tribunal's Appeal Panel stated at [95]:
While the discretion to award costs under Rule 38 is unfettered, in our view costs should generally 'follow the event' recognising however that factors may exist that militate against the successful party recovering all of its costs: Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at [134]. Fairness dictates that the unsuccessful party typically bears the liability for costs unless it is demonstrated that some other order is appropriate …
I determine that there are no factors in the three proceedings which would warrant a departure from the usual principle that costs follow the event. In this respect, I observe that all of the evidence on which the home owners relied upon at the hearing on 1 and 2 February 2018, including the evidence of the home owners' expert, Mr Nisbett, was accepted by the Tribunal. The defences of the builder to the home owners' claim and the builder's prosecution of his claims in the proceeding in File No. HB 17/13535 was wholly unsuccessful. The home owners did not participate in any disentitling conduct so as to prevent the Tribunal from making any costs order in the home owners' favour.
I find that there are no factors which militate against the home owners having a costs order in their favour in the three proceedings as agreed or as assessed in accordance with the applicable costs assessment legislation. However, it remains for me to determine in what respects the costs of the proceedings should be paid by the builder; specifically, whether, and for what periods of time, the costs of the proceedings should be paid on the ordinary basis or on the indemnity basis.
The home owners' written submissions on costs (received by the Tribunal on 15 June 2018) are that I should consider in what respects the costs of the proceedings should be paid by the builder on a series of alternative bases, as follows:
1. On the indemnity basis for the entirety of the three proceedings, on the grounds that the builder's claim against the home owners and the builder's defences to the home owners' claims were hopeless from the outset;
2. On the ordinary basis up to and including 5 October 2017, and thereafter on the indemnity basis, on the grounds that the builder conducted his cases and provided instructions to his expert witness (in particular, not to value the builder's claim in HB 17/13535 on a quantum meruit basis), in circumstances where it is said that this allowed the continuation of the proceedings with no chance of success;
3. On the ordinary basis up to and including 24 January 2018, and thereafter on the indemnity basis, having regard to offers of compromise contained in correspondence from the home owners' solicitors to the builder solicitors of that date which were made in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333 (the "January Calderbank offers");
4. On the ordinary basis up to and including 2 February 2018, and thereafter on the indemnity basis, having regard to a further letter sent to the builder's solicitors on that date in accordance with the principles in Calderbank v Calderbank (the "February Calderbank offer").
As the Appeal Panel has observed, the Tribunal's discretion to award indemnity costs is exercised in limited circumstances and it must be the subject of careful reasoning: see Mendonca v Tonna [2017] NSWCATAP 176 at [59] - [60], [62] - [64] and the cases cited therein by the Appeal Panel.
When costs follow the event, as I have decided they should in the three proceedings, then usually they are awarded on the ordinary basis. In Oshlack at [44], Gaudron and Gummow JJ stated that before the Court can order indemnity costs, it is necessary to find what their Honours described as: "some relevant delinquency on the part of the unsuccessful party". As McHugh J explained in the same case at [67], the indemnity costs order is made not to punish the unsuccessful party but because "[a]s between the parties, fairness dictates that the unsuccessful party" should bear those additional costs.
Where Indemnity costs are ordered based upon a "relevant delinquency" it is normally a case of misleading a court or tribunal, or bringing proceedings for collateral or ulterior purposes and not for the purposes of having a court or tribunal adjudicate on the issues to which they give rise, or if, irrespective of the motive of the litigant, they are so obviously untenable or manifestly groundless as to be utterly hopeless: Wentworth v Rogers [1999] NSWCA 403; Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401; Cultus Petroleum v OMV Australia [1999] NSWSC 435.
The home owners submitted that indemnity costs must be ordered for the entirety of the three proceedings, or at least from after 5 October 2017, on the basis that the home owners were put to the trouble and expense of dealing with the builder's claims against them and the builder's defences to their claims, and that the builder's claims and defences were hopeless from the outset or at least from when a decision was made not to lead any quantum meruit evidence from the builder's expert; and further that as early as 10 May 2017, during exchanges with the presiding member of the Tribunal at a directions hearing, the home owners had indicated their preparedness to settle all issues in dispute on a 'walk away basis': see home owners' written submissions on costs at [13] - [20]). In the Reasons for Decision dated 22 May 2018 at [176] - [180], I considered the evidentiary deficiencies in the builder's (lately made) claim in HB 17/13535 for $40,266.60 on a quantum meruit basis. Nevertheless, I am not satisfied that there was any "relevant delinquency" in the builder's conduct of the proceedings; nor am I persuaded either at the outset of the three proceedings, or on 5 October 2017, when the builder's solicitor gave instructions to the builder's expert, that the builder's claims and defences in the three proceedings were so obviously untenable and manifestly groundless that they could be stigmatised as utterly hopeless.
However, a further basis (other than as stated above) on which an order for costs on the indemnity basis may be made is where during the course of proceedings an offer of compromise was made which was no worse than the result ultimately achieved by the party against whom the indemnity costs order is sought.
The January Calderbank offers were to resolve the three proceedings on the following basis:
1. Separate and distinct offers were contained in each of the January Calderbank offers;
2. In the proceeding brought by the builder (HB 17/13535) the offer, which remained open for acceptance until 4:00 PM 30 January 2018, was for the builder to withdraw the proceeding and pay the home owners' costs on the ordinary basis as agreed or as assessed;
3. In the proceedings brought by the home owners (HB 17/21112 & HB 17/40804) the offer, which remained open for acceptance until 4:00 PM 30 January 2018, was that the builder pay the home owners the sum of $25,000.00 within 28 days and also pay the home owners' costs on the ordinary basis as agreed or as assessed.
The builder did not accept the January Calderbank offers.
At the conclusion of the hearing on 2 February 2018, the home owners' solicitors put the February Calderbank offer to the builder's solicitors, as follows:
1. The builder to pay the home owners the sum of $65,000.00 within 28 days;
2. The builder to pay the home owners' costs of the proceedings on the ordinary basis as agreed or as assessed;
3. The offer to remain open for acceptance until 4:00 PM 12 February 2018.
The builder did not accept the February Calderbank offer.
The general function of a letter containing a Calderbank offer is to promote settlement of disputes, in addition to its more particular application in claims for indemnity costs: Rickard Constructions v Rickard Hails Moretti [2005] NSWSC 481, [12]. I find that the amount ($86,431.52) ultimately awarded by the Tribunal in the proceedings constituted by File Nos. HB 17/21112 & HB 17/40804 was considerably higher than the settlement sums, $25,000.00 and $65,000.00, respectively, contemplated by the January Calderbank offer in the proceedings constituted by File Nos. HB 17/21112 and 17/40804, and the February Calderbank offer, and further that the settlement sums represented significant compromises on the home owners' part.
Nevertheless, the making of a Calderbank offer does not automatically result in a favourable costs order, even if the ultimate judgement of the Tribunal is more favourable to the party making the offer than the terms of the offer. The party making a Calderbank offer still carries the onus of satisfying the Tribunal that it should exercise the discretion as to costs in that party's favour: Jones v Bradley (No 2) [2003] NSWCA 258, [5]; Old v McInnes and Hodgkinson [2011] NSWCA 410, [22].
Furthermore, in determining whether to make an indemnity costs order pursuant to a Calderbank offer, the Tribunal is to have regard to the relevant principles identified in SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323, Miwa Siantan Properties Pty Ltd (No 2) [2011] NSWCA 344, and Nu Line Construction Group Pty Ltd v Fowler [2012] NSWSC 816. Such principles are:
1. There must be a real and genuine element of compromise;
2. The refusal must be unreasonable;
3. The reasonableness in rejecting an offer must be considered at the time the offer is made, not with the benefit of hindsight;
4. Relevant factors in relation to whether the rejection was reasonable include the stage of the proceedings at which the offer was received, the time allowed to consider the offer, the extent of compromise offered, the offeree's prospects of success (assessed at the date of the offer), the clarity with which the terms of the offer were expressed and whether the offer foreshadowed an application for indemnity costs in the event of rejection.
I am satisfied that each of the January Calderbank offers contained a genuine element of compromise in that the home owners were prepared to settle their claims for $25,000.00 plus costs on the ordinary basis as assessed or as agreed. This reflected, in my view, a considerable discount on the home owners' claim taken at its highest, which was approximately $90,000.00.
Moreover, as already observed, the January Calderbank offers were separate and distinct offers. Therefore, it was entirely possible for the builder to accept the Calderbank offer with respect to builder's claim in the proceeding constituted by File No. HB 17/13535. Given the evidentiary deficiencies in the builder's (lately made) quantum meruit claim, as referred to at [176] - [180] of the Reasons for Decision dated 22 May 2018, and also the close proximity of the offer made to the commencement of the hearing on 1 February 2018, I find that the builder's conduct not to accept the January Calderbank offer in respect of HB 17/13535 was unreasonable in all the circumstances.
There is no doubt that on 24 January 2018, when the January Calderbank offers were made, all written material in the three proceedings had been served. I am satisfied that the builder was fully apprised of the cases he had to meet in all of the three proceedings and of the issues of fact and law which the Tribunal would have to determine.
The January Calderbank offers contemplated a 6 day acceptance period. I find that such period of time was a reasonable period for acceptance, in light of the upcoming hearing specially fixed for 2 days commencing on 1 February 2018 and the burden placed on each party to prepare properly for that hearing. In my opinion, the (legally represented) builder had ample opportunity to consider his position and to take appropriate advice. I am satisfied that the terms of the January Calderbank offers were clear and that the offers foreshadowed an application for indemnity costs in the event of the builder's rejection of the January Calderbank offers. As I observed in Kursun v Gareffa (No 2) [2017] NSWCATCD 23 at [28]: "The Tribunal encourages the settlement of matters for reasons both of public policy and private interest. The Tribunal's guiding principle is the just quick and cheap resolution of the real issues in the proceedings: see s 36 (1) of the NCAT Act."
In the circumstances, I find that the home owners' costs in the three proceedings following the making of the January Calderbank offers should be on the indemnity basis.
Given my finding in the preceding paragraph, it is not necessary for me to consider the further and alternative submission of the home owners that their costs in the three proceedings should be paid on the indemnity basis after 2 February 2018 (i.e. the February Calderbank offer).
[2]
Orders
1. Pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW), in respect of the in respect of the application by Phillip Paraskevopoulos, Margaret Paraskevopoulos and Dobrinka Lazarevich for their costs of the proceedings constituted by File Nos. HB 17/21112, HB 17/13535 and HB 17/40804, the Tribunal dispenses with a hearing requiring the parties to be present and proceeds to determine the costs application on the basis of the papers lodged with the Tribunal in accordance with orders 3, 4 and 5 of the Tribunal made on 22 May 2018.
2. Alexsander Bajic is to pay the costs of Phillip Paraskevopoulos, Margaret Paraskevopoulos and Dobrinka Lazarevich on the ordinary basis up to and including 24 January 2018 and thereafter on the indemnity basis as agreed or as assessed in accordance with the applicable costs assessment legislation.
[3]
Civil and Administrative Tribunal of New South Wales
[4]
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: 23 October 2018