Parry-Husbands v Roffe

SUBMISSIONS OF THE PARTIES

1. The Tribunal does not propose to set out in detail the legal authorities referred to by the parties in their submissions at this point of this decision. It is sufficient to summarise the position of each party.

Applicants

1. The applicants submit that the respondents should pay their costs of the transfer application on the ordinary basis to 19 September 2023 and on an indemnity basis from 20 September 2023 because:
2. The applicants succeeded in the transfer application, and the starting point is that costs follow the event.
3. The respondents knew from the service of its expert evidence that the evidentiary basis of its application to transfer was that the amount claimed or in dispute would exceed the jurisdictional limit of the Tribunal.
4. It was clear that the applicants would succeed on their argument that there was a sufficiently good reason to transfer proceedings. The respondents chose to oppose the application when they could have consented, and unsuccessfully maintained that the Tribunal needed to grant leave to the applicants to amend their claim and rely upon the evidence of Mr Brennan; Mr Winton; and quote of HoverCo Building when there was no such requirement to satisfy the applicable legal test for transfer.
5. The application for transfer had been made a relatively early stage of the proceedings.
6. The respondents had unreasonably refused an offer by email expressed as "Without Prejudice Save As to Costs" sent at 5.59 pm on Tuesday 19 September 2023 and open to 4.00pm on Friday 22 September 2022 that the respondents consent to the transfer with an order that there be no order as to costs "with the intent that the parties bear their own costs". That offer was expressed to be "to the extent it is necessary" made pursuant to Calderbank principles.

Respondents

1. The respondents submit that the applicants should pay their costs of the transfer application, or in the alternative there be no order as to costs because:
2. The applicants required the "indulgence" of the Tribunal to transfer the proceedings and parties who require an indulgence (such as when leave is required to amend proceedings) usually pay the cost of the other party even when there is success in the application; or in the alternative are not entitled to obtain a costs order in their favour.
3. The applicants had failed to comply with various procedural directions of the Tribunal regarding the filing and serving of evidence. Expert evidence had been served late; the purported expert evidence of Mr Brennan and HoverCo Building was weak (and likely inadmissible); no lay evidence had been served; and there was no evidence to support the claims against the first respondent for the torts of deceit or negligent misstatement.
4. The respondents had reasonable grounds for opposing the transfer application.
5. It was not unreasonable for the respondents to fail to accept the Calderbank offer.

CONSIDERATION

1. Neither party in their submissions referred in any detail to costs decisions dealing with the analogous transfer of proceedings provisions under s 140 of the CP Act in circumstances where a transfer application has been successful (as distinct from costs orders made against parties who were unsuccessful in their application to transfer).
2. The Tribunal does not propose to engage in a lengthy discussion of those authorities. Often, the issue of costs is dealt with very succinctly. It is sufficient to note that there are a number of decisions where the exercise of discretion in a successful transfer application is that there be no order as to costs; or that cost of the transfer application be costs in the cause of the primary proceedings (e.g. Swan v All Construction Engineering Pty Ltd [2021] NSWSC 665; SW v The Sydney Children's Hospital's Network t/as Westmead Children's Hospital [2022] NSWSC 293; Boland v MGF Holdings Pty Ltd [2022] NSWSC 451; Li v Wang and Anor [2022] NSWSC 653; State of NSW & Anor v The Broken Hill Town Employees Union on behalf of employees [2022] NSWSC 961).
3. A successful transfer application made late which causes the vacation of a hearing date can lead to a costs order being made regarding costs thrown away by reason of the vacation of the hearing date (Smith v Baker [2022] NSWSC 1521). However, this transfer application was made well before any hearing date had been allocated.
4. This cost application involves an interlocutory order (the transfer of proceedings). Costs can be awarded to a successful party in an interlocutory application, but it is not inevitable that a Court or Tribunal will do so, and it remains within the discretion to make no order as to costs in an interlocutory application; or an order that costs be costs in the cause.
5. A successful party can be deprived of their costs if they engaged in disentitling conduct in the proceedings (Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [40] and [69]). Further, the general rule that costs follow the event depends upon the circumstances of the case viewed against the wide discretionary powers regarding the award of costs (State of NSW v Stanley [2007] NSWCA 330 at [18]; Elite Protective Personel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 at [8]).
6. Although the applicants were the successful party in the contested costs application, the Tribunal is of the view that they engaged in disentitling conduct that justifies no costs order being made in their favour in the interlocutory application and that the appropriate order is that there is no order as to costs in the transfer application, with the costs of the transfer application being costs in the cause of the transferred proceedings.
7. Part of the applicants' claim in the proceedings involved claims in the torts of deceit and negligent misstatement against the first respondent as vendor of the residential premises. The other claims are based on defective works that the applicants' alleged were performed by the first and/or second respondent.
8. In the application that was filed in the Tribunal by the applicants Solicitors on 11 April 2023 it was asserted against the first respondent that: In addition, prior to the sale of the Property to the Applicants, the First Respondent represented to the Applicants, including through advertisements of the Property, that: (a) The Property and the Works were free from defects; and (b) There was a compliant and operational underfloor heating system; and (c) The underfloor heating system was advertised as a premium feature of the Property; (together, the Representations). In relation to the underfloor heating system: (a) In breach of clause 52 of the Protection of the Environment Operations (Noise Control) Regulation 2017 (NSW), noise from the unit was not to be audible within any room in any other adjacent residential premises; (b) Contrary to this clause, noise was in fact audible within rooms in adjacent residential premises; (c) There was a history of complaints with Waverly Council involving the First Respondent on the above issues including informing the First Respondent that the underfloor heating system was not to be used; (d) The underfloor heating system was therefore not compliant with noise control regulations, was defective and could not be used because of its excess noise; (e) Further, and in any event, the underfloor heating system is: i. not operational; ii. cannot be turned on; and iii. is defective. The First Respondent knew about each item in the preceding paragraph, and the Representations were made notwithstanding the above. The First Respondent knew that the Representations were false or, in the alternative, were reckless or indifferent about its truthfulness. The Applicants relied on the Representations when entering into the Contract for Sale including agreement on the contract price and the decision to enter into the Contract for Sale. The Applicants suffered loss and damage in terms of: (a) Cost to rectify the underfloor so that it is compliant with regulations and operational; or (b) In the alternative, if rectification is not possible, the loss in value of the land.
9. It was abundantly clear, or should have been abundantly clear, when the applicants raised such claims in the proceedings that it was strongly arguable the Tribunal had no jurisdiction under the HB Act to hear and determine such claims.
10. That was obviously raised with the applicants by Robertson SM at the directions hearing on 15 May 2023, when he directed the applicants to file and serve Points of Claim that included the basis upon which it is alleged the Tribunal has jurisdiction to make the orders sought.
11. In a letter of 1 June 2023 to the respondents' Solicitors the applicants Solicitors state as follows: … Our client's claim comprises of : (a) a claim against the respondents for defective works; and (b) a tort of deceit claim as outlined in paragraphs 13-18 on page 5 of our clients' Application filed 11 April 2023. … Our client's view is that NCAT does not have jurisdiction to hear the tort of deceit claim and therefore it is appropriate the matter be transferred. …
12. In a letter of 16 August 2023 notifying the respondents that they sought to transfer the proceedings to the District Court, the Solicitor for the applicants stated as follows: In addition, our client seeks further relief against the First Respondent as follows: (a) a tort of deceit claim against the First Respondent in relation to the underfloor heating and the sale of the Property; and (b) a negligent misstatement claim against the First Respondent in relation to representations made the First Respondent during the sale of the property. The Tribunal does not have jurisdiction to determine either of these causes of action.
13. As the Tribunal stated in its decision of 1 December 2023 at [67]: …the fact that the applicants (via their legal representatives) chose to bring the tort proceedings against the first respondent in the Tribunal in the first place in conjunction with the proceedings against the second respondent, and the Tribunal had no jurisdiction in the proceedings against the first respondent, the applicants could (and arguably should have) commenced proceedings against both respondents in a court that clearly had jurisdiction.
14. There was no lay evidence filed and served by the applicants, and there was no explanation as to why they were bringing claims (or sought to bring claims) in the Tribunal to which the Tribunal, on the basis of the express view of their own legal representatives, had no jurisdiction to hear in addition to claims under the HB Act that the Tribunal did have jurisdiction to hear based on allegations that either or both the respondents performed defective residential building works in breach of statutory warranty obligations under the HB Act.
15. Accordingly, this was not a transfer application simply based on new owners commencing proceedings for damages for breach of statutory warranties under ss 18B and 18D of the HB Act against a former builder and/or owner builder where the new owners have obtained expert evidence during the course of proceedings that the cost of rectifying defects exceeds the jurisdictional limit of the Tribunal.
16. Rather, it is a transfer application in circumstances where a respondent to proceedings was being sued from the commencement of the Tribunal proceedings in part on the basis of a cause of action that the applicants asserted the Tribunal had no jurisdiction to hear, irrespective of the jurisdictional limit of the Tribunal under the HB Act.
17. Further, this is not a matter were the proceedings were commenced by an unrepresented litigant, and Solicitors were later engaged. The applicants were legally represented at all relevant times.
18. Additionally, the applicants did not comply with procedural directions of the Tribunal, as set out in the decision of 1 December 2023.
19. However, the Tribunal is not satisfied that conduct is sufficient to make an order that the applicants pay the respondents costs of the transfer application.
20. The respondents had amply opportunity to consent to the transfer application, but did not do so. Their arguments in opposing the transfer application were primarily based upon the applicants requiring leave to amend the Tribunal application; that the evidence of the applicants on the cost of rectification of defects being arguably sufficient to exceed the jurisdictional limit of the Tribunal was inadmissible; and late service of expert evidence. Those arguments were all unsuccessful, for reasons detailed in the decision of 1 December 2023.
21. The Tribunal does not regard it as appropriate in all the circumstances of the matter to make a costs order in favour of respondents who unsuccessfully opposed a transfer application.
22. The Tribunal does not accept the submission of the respondents that the applicants were seeking an "indulgence" in making the transfer application and that ordinarily a party who is granted the benefit of the indulgence pays the other parties costs.
23. The applicable authorities on this issue are summarised in the Judicial Commission of NSW Civil Bench Book-Costs as follows: Indulgences Where a party seeks and obtains some favour or dispensation from the court (such as leave to amend or an extension of time), and although the starting point remains the general rule under UCPR r 42.1, so that the inquiry is whether in the exercise of the court's discretion, that rule should be departed from or some other order preferred: (Nowlan v Marson Transport Ltd (2001) 53 NSWLR 116 at [37]), ordinarily (though not invariably) the party seeking the indulgence is required to pay the costs of the application irrespective of the outcome, unless the other party has unreasonably opposed it: Holt v Wynter (2000) 49 NSWLR 128 at [121]; Nardell Coal Corporation v Hunter Valley Coal Processing (2003) 178 FLR 400 at 435-6; Celermajer Holdings Pty Ltd v Kopas [2011] NSWSC 619 at [24], citing The Presbyterian Church (NSW) Property Trust v Scots Church Development Ltd (No 2) [2007] NSWSC 797 at [6]. However, whether this was a general rule was doubted in Fordham v Fordyce [2007] NSWCA 129 at [50]; see also The Salvation Army (South Australia Property Trust) v Rundle [2008] NSWCA 347 at [109]-[111] and [144]-[153]; and Mamfredas Investment Group Pty Limited (formerly known as MAM Marketing Pty Ltd) v PropertyIT and Consulting Pty Ltd [2013] NSWSC 929 at [85], where the existence of such an overarching principle was said to be "not clear". This rule is of particular application where the party seeking the indulgence requires relief from some relevant delinquency, in which case costs are ordinarily awarded in favour of the unsuccessful opposing party (Pascoe v Edsome Pty Ltd (No 2) [2007] NSWSC 544) whereas unsuccessful opposition to a reasonable application for leave to amend is in a different category and might result in no order, or even an order that the respondent pay the applicant's costs. An application to vary an order where the judge rather than a party has made an error is not an application for an indulgence: Jaycar Pty Ltd v Lombardo at [67].
24. The only relevant arguable "indulgence" was that the applicants had not served their expert evidence within the procedural directions timetable of the Tribunal made on 15 May 2023; and that the applicants were seeking to rely on such evidence to support their argument that it was arguable the amount claimed or in dispute in the proceedings would exceed the jurisdictional limit of the Tribunal.
25. However, the reports of Mr Winton and Mr Brennan were filed and served in accordance with the procedural directions of the Tribunal made on 1 September 2023 in respect of the transfer application. The quote from HoverCo Building was served on 26 September 2023, but that was still a considerable period of time prior to the listing of the transfer application for hearing on 6 November 2023.
26. It was clearly of relevance to the transfer application that such evidence be considered by the Tribunal, as it formed basis of the part of the application based on the jurisdictional limit of the Tribunal to award damages. There was no prejudice or unfairness to the respondents in the applicants relying upon those reports.
27. To the extent that it was an "indulgence" to allow the applicants to rely upon such material in the transfer application, the "indulgence" was not of a type that justifies a costs order against the applicants.
28. The Tribunal does not accept that making a transfer application is, of itself, seeking an "indulgence" and to make orders to transfer is the granting of an "indulgence." This is not a situation where there has been amendment to a pleading that causes costs to be thrown away. The applicants had the right to make the transfer application under cl. 6 of sch. 4 of the NCAT Act. They made it at a relatively early stage of proceedings.
29. In any event, if the applicants fail in the transferred proceedings, the cost orders in favour of the respondents will include the costs of the transfer application, as without a discrete order for costs in favour of either party the costs of the proceedings in the Tribunal (including the transfer application) will be costs in the cause of the transferred proceedings.
30. In respect of the Calderbank offer that the applicants seek to rely upon, the Tribunal is satisfied that there were reasonable grounds not to accept the offer by the respondents.
31. It is well established that a Calderbank offer is a discretionary basis for departing from usual costs orders. The starting point is whether the offer was a genuine compromise and whether it was unreasonable in all the circumstances (assessed prospectively at the time the offer was made) not to have accepted that offer where ultimately the offeree did not achieve a better outcome in the litigation (Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8] per Basten JA, with whom McColl and Campbell JJA agreed; Tati v Stonewall Hotel Pty Ltd (No 2) [2012] NSWCA 124 at [10] per Bathurst CJ, with whom Allsop P and Beazley JA agreed).
32. The Calderbank offer made was that the respondents consent to the transfer on basis there would be "no order as to costs of the application with the intent that the parties bear their own costs" (emphasis added). It was not an offer that there be "no order as to costs of the application with the intent that the costs of the application be costs in the cause;" or an offer to consent to the transfer with costs in the cause of the transferred proceedings.
33. That offer is not a better outcome for the respondents than achieved in this costs decision, nor was it unreasonable for them to have rejected it.
34. Rather, if the respondents had accepted that offer, they would have likely been in a worse position.
35. As discussed previously, when proceedings are transferred, they proceed in the Court as if commenced there. Thus, unless otherwise ordered, the costs of the transfer form part of the costs in the cause of the transferred proceedings. If the offer of the applicants was accepted, then, if the respondents are successful in the transferred proceedings, they would have to bear their own costs of the transfer application, and any order that the applicants pay the respondents the costs of, and incidental to the proceedings would not include the costs of the transfer application.
36. In making no order as to costs in the transfer application, the Tribunal is not intending that each party bear its own costs of the transfer. Rather, there is simply no order as to costs in the transfer application, which means that whichever party is the successful party in the transferred proceedings will obtain, as part of its costs, the costs of the transfer (subject to any other orders the District Court makes in the proceedings; or any future consent orders of the parties that deal with the issue of costs).

ORDERS 1. An oral hearing is dispensed with under s 50 (2) of the Civil and Administrative Tribunal Act 2013 (NSW). 2. The stay granted by reason of order 2 of the Tribunal dated 1 December 2023 is lifted. 3. The respective costs applications of the parties are dismissed. 4. There is no order as to costs in respect of the application to transfer the NCAT proceedings to the District Court of NSW. 5. Costs of the transfer application are costs in the cause of the transferred proceedings.

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: 13 August 2024