In these proceedings final orders supported by detailed reasons for decision were made on 1 April 2016.
The orders and reasons were provided in two sets of proceedings. First in proceedings HB 15/ 32089 instituted by Porthaze Pty Ltd who I will refer to as the contractor, it was successful in obtaining an order that the owners pay it the sum of $5,819.10.
Secondly, in HB 15/41204 instituted by the owners, they were successful in obtaining an order that the contractor pay them the sum of $9,304.00 in connection with defective work.
The contractor's application sought the sum of $5,819.10 against the owners.
In their application against the contractor, the owners claimed the sum of $29,063.10. As recorded in the Reasons for Decision that amount was broken up into a request for an order that the owners did not have to pay the contractor the sum of $5,819.10 and an order that the contractor pay the owners $23,244.00. However the owners amended their claim as shown in exhibit D. the amount of $30,610.00 was claimed. In total the owners amended claim was for $34,310.00 excluding expert's costs.
As stated in the Reasons for Decision the owners amended their application as follows:
1. Work order to complete outstanding defects;
2. costs of expert witness reports $4,100.00;
3. costs for delays and compensation for damage to walls, $3,000.00; and
4. time in dealing with the proceedings, $700.00.
Section 60 of the Civil and Administrative Tribunal Act 2013 (the 'Act') provides that:
'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.'
Rule 38 of the Civil and Administrative Tribunal Rules 2014 provides:
'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.'
I will only have the jurisdiction to award costs under section 60 of the Act if I am satisfied that there are special circumstances warranting an award of costs.
In CPD Holdings Pty Ltd t/as The Bathroom Exchange v Baguley [2015] NSWCATAP 21 Principal Member Titterton stated after considering the relevant authorities:
'The authorities are consistent in stating that "special circumstances" are circumstances that are out of the ordinary; they do not have to be extraordinary or exceptional circumstances'
Each party has had the opportunity to file and serve written submissions on the costs issues. I will deal with each party's application for costs separately rather than viewing both applications as one set of proceedings and then ascertaining which party was successful.
[2]
HB 15/ 32089
In HB 15/ 32089 which I will call the contractor's application, the contractor was completely successful in its claim. However it must nonetheless show special circumstances in order to receive a costs order in its favour. In MSP Consulting and Building Constructions Pty Ltd v Karkoulas (No 2) [2016] NSWCATAP 183, the appeal panel at [31] - [32] stated:
'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.
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.'
That statement is applicable in these proceedings in that the fact that the contractor was successful does not equate to special circumstances. Without anything more I am unable to conclude that there were any special circumstances associated with the contractor's application, even if that phrase is understood to mean circumstances that were out of the ordinary. The facts were that the contractor instituted proceedings to claim an amount said to be the balance due under the contract. The owners responded with a cross application raising defective work. At the hearing the contractor's case received little if any attention. Without anything more I am of the view that in HB 15/ 32089 the appropriate order is that each party to the proceedings is to pay its or their own costs.
However the contractor's solicitor made a number of offers to the owners.
The first offer was made orally at a conciliation conference when a representative of the contractor made an offer to the owners. In my view although not expressed, that offer was 'without prejudice' as it was intended to settle the disputes between the parties. There is no evidence that the contractor's representative indicated that if the offer was not accepted the contractor reserved its right to rely on the offer in a costs application if the disputes proceeded to litigation. It is on this basis that I have decided not to take this offer into account when deciding the question of costs.
[3]
The 'Calderbank Offer'
The contractor's 'calderbank offer' on 1 July 2015 provided alternative offers 1 and 2.
Alternative offer 1 was that the contractor would waive the amount of $5,819.10 claimed by it and that the parties would release each other from any claim or liability arising from the installation of the kitchen. Further the contractor would terminate its proceedings against the owners and they would terminate the claim they had against the contractor.
The offer was open for a period of 15 days.
Alternative offer 2 was that the contractor would remove the kitchen before 31 July 2015, it would make good walls, floors, ceiling, plumbing and electrical fittings and it would pay the owners $23,244.00 being the entirety of the amount paid by the owners to the contractor. In addition the offer required each party to release the other from claims and liabilities arising from or in connection with the contractor's installation of the kitchen. The contractor was to terminate its proceedings and the owners were to terminate their claim. The offer was open for a period of 15 days.
The making of a 'Calderbank Offer' that is bettered by the offeror does not in itself entitle the offeror to an order for indemnity costs. That was decided in Jones v Bradley (No. 2) [2003] NSWCA 258.
I refer to the recent Court of Appeal decision in Miwa Pty Ltd v Siantan Properties Pte Ltd (No. 2) [2011] NSWCA 344. In that case Basten JA identified two questions which are relevant to a 'Calderbank' offer and a claim for indemnity costs. They are whether:
there was a genuine offer of compromise, and
it was unreasonable for the offeree not to accept it.
Although there is no claim for indemnity costs made by the contractor, I will treat the above authorities as being applicable to an order for party/party costs.
I have no doubt that the offers made by the contractor on 1 July 2015 were genuine. The offers if accepted gave the owners a discount on the price of $5,819.10 or a refund of the money paid by them and removal of the kitchen and make good.
In Boorer v HLB Mann Judd (NSW) Pty Limited (No. 2) [2012] NSWSC 1584 Adamson J stated:
'In answering the second question, whether it was unreasonable for the offeree not to accept it, the following principles guide the exercise of discretion:
(1)The reasonableness of the offeree's response must be assessed at the time the offer was made, and not with the benefit of hindsight: Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 per Spigelman CJ, Beazley & McColl JJA at [33];
(2)It is undesirable that there be a detailed investigation into the state of preparation or knowledge of the offeree as at the date of the offer; MIWA Pty Limited v Siantan Properties Pte Ltd [2011] NSWCA 344 at [11] per Basten JA;
(3)Relevant factors may include:
(a)the stage of the proceeding at which the offer was received;
(b)the time allowed to the offeree to consider the offer;
(c)the extent of the compromise offered;
(d)the offeree's prospects of success, assessed at the date of the offer;
(e)the clarity with which the terms of the offer were expressed; and
(f)whether the offer foreshadowed an application for indemnity costs in the event the offer was rejected.'
At the time of the contractor's calderbank offer the owners had commenced proceedings in the Tribunal. They did that on 30 June 2015. However at that time they did not have the benefit of an expert's report. Their expert's report was dated 9 September 2015.
The calderbank offer was made at a very early stage in the proceedings and it required the owners to release all of their claims against the contractor. At that time they did not have the benefit of an expert's report regarding what they considered was defective work performed by the contractor. As a result they were, I find, in no position to assess the value of their claim that would have to be released had they accepted the calderbank offer. It is for this reason that I find that it was not unreasonable for them not to have accepted either alternative in the contractor's calderbank offer of 1 July 2015.
As a result in HB 15/ 32089 I will order each party to pay its own costs.
[4]
HB 15/41204
In these proceedings the owners were successful in obtaining an order for $9,304.00. They seek an order that the contractor pay them the sum of $4,100.00 in connection with the fees they incurred in obtaining an expert's report and testimony in the proceedings.
At paragraph 6 of the Reasons for Decision the owners' application to amend was noted.
Their amended claim was in effect as follows:
1. work order to complete the outstanding defects - $30,610.00;
2. Costs for delays and compensation for damage to walls, $3,000.00; and
3. time in dealing with the proceedings, $700.00.
The reasons stated above in connection with the contractor apply equally to the owners. Namely:
1. In connection with section 60 of the Act :
'The authorities are consistent in stating that "special circumstances" are circumstances that are out of the ordinary; they do not have to be extraordinary or exceptional circumstances'
1. Following MSP Consulting and Building Constructions Pty Ltd v Karkoulas and ACT Builders v Haridemos the mere fact a party was unsuccessful in their case 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 a party is successful.
The owners submit that they are entitled to costs under section 60(3)(d) of the Act because of 'the nature and complexity of the proceedings'. I disagree that the case was complex. It was a standard case of a claim for defective work, made more detailed by the nature of the owner's expert's report. It must be kept in mind that the owner's expert's report was detailed but that 4 heads of claim were dismissed. In the owners main claim the amount of $17,367.00 was claimed, but $4,248.00 was found in their favour.
I find that there are no special circumstances present for the purposes of the the owners' claim for costs under section 60 of the Act.
Under Rule 38 of the Civil and Administrative Tribunal Rules 2014 I have the discretion to award costs in these proceedings by reason of the fact that pursuant to section 3 of Schedule 4 of the Act, proceedings under the Home Building Act 1989 are allocated to the Commercial and Consumer Division of the Tribunal and the amount claimed in these proceedings was more than $30,000.00
My discretion as regards an order for costs must be exercised judicially.
Oshlack v Richmond River Council (1998) 193 CLR 72 holds that the general law position is that a successful party has a "reasonable expectation" of being awarded costs against the unsuccessful party at [67] and at [134].
At paragraph 67 of the judgement McHugh J. stated:
'The expression the "usual order as to costs" embodies the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. 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 [96]. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.'
At paragraph 134(2) of the judgement Kirby J stated:
'2. Notwithstanding the width of the statutory language by which the discretion was conferred on the trial court, it came to be said in civil non-jury trials that a successful party, in the absence of special circumstances, had a reasonable expectation of obtaining an order for costs in its favour unless "for some reason connected with the case" a different order was specially warranted [199]. Any departure from this expectation would require that there should be material upon which the adverse discretion could be properly exercised [200]. It could not be exercised by reference to idiosyncratic notions or to facts and circumstances irrelevant to the case. Yet, until the discretion had been exercised and a costs order made in favour of a successful party, that party had no right to the order of costs, notwithstanding its success in the litigation[201]'
Given that the owners were the successful party in and that there are no special circumstances or some reason connected with the case as those phrases were used by Kirby J in Oshlack v Richmond River Council or disentitling conduct as referred to by McHugh J at [69] and [70] to deprive them of a costs order, I will order that the contractor must pay their costs of the proceedings which I will fix at $4,100.00 being their expert's costs.
D Goldstein
Senior Member
Civil and Administrative Tribunal of New South Wales
23 August 2016
[5]
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: 12 October 2016