Prestige Homez Pty Ltd v Ghag [2025] NSWCATAP 93 | Case summary

BCA Constructions Pty Ltd v Arsovski [2024] NSWCATAP 31

Prestige Homez Pty Ltd v Ghag [2025] NSWCATAP 93 | Case summary | Zoe

[38]

The builder filed Points of Defence dated 25 May 2022. The Points of Defence deny the owners are entitled to the orders sought; and assert that the owners were responsible for their loss or damage, in whole or part.
Both parties obtained expert evidence from building consultants. The owners expert evidence was contained in a report from Mr Doug Coombes dated 11 February 2022. The builder's expert evidence was contained in a report of Mr Glen Sim dated 23 September 2022.
Mr Coombes asserted that the value of the works performed (including adjustments for prime cost items) was less than the amounts paid by the owners in the amount of $100,368.80; and that there were two items of existing defective work (defective timber framing and defective veneer tiles in brickwork) that would cost $94,661.79 to rectify.
Mr Sim asserted that there were no defective works and that the owners had not 'overpaid' the builder any amounts under the contract. He agreed the owners had paid the builder $305,468.80, but noted that this was still $139,915.20 less than the contract price for completed works (exclusive of contractual variations and adjustments).
Both parties filed and served affidavit evidence regarding the factual issues in dispute.
Pursuant to a letter dated 18 October 2022, the owners made a Calderbank offer that the builder pay the owners $23,000, and perform certain works, with each party to bear their own costs. The detail of that offer will be discussed later in this decision. The offer was open to 4.00 pm on 25 October 2022.
On 21 November 2022, the owners made a further Calderbank offer that the builder pay the owners $20,000 and perform certain works with each party to bear their own costs. This was a response to an offer by the builder dated 11 November 2022. That offer was open until 4.00pm on 22 November 2022.
On 23 November 2022, the experts prepared a joint expert report.
On 24 November 2022, the parties entered into consent orders that the builder perform certain works to rectify defects and achieve practical completion. The work orders were as follows:

[40]

Those orders did not finalise the Tribunal proceedings as the owners claim for damages remained extant.
On 25 January 2023, the orders of 24 November 2022 were amended under s 63 of the NCAT Act. The amendment was to change "4. Costs reserved" to "Reserves the question of what amount (if any) of liquidated damages the Applicants are entitled to."
Between 21 April 2023 and 1 September 2023, there were various interlocutory directions hearings, and directions made on the papers. It is unnecessary to provide extensive detail of those directions and orders, other than to note that works were ongoing and by the time the matter was further listed before the Tribunal on 20 October 2023, it appears the works were completed.
In mid-October 2023, there was an exchange of various written offers between the parties.
On 20 October 2023, the Tribunal (presided by Titterton SM OAM) made a consent order that the builder pay the owners $20,000 on or before 14 November 2023, and, otherwise, the proceedings were dismissed.
Although the Tribunal's orders of 20 October 2023 do not specifically state that the issue of costs was reserved, it is clear that the parties sought to argue the issue of costs, as a timetable was made for the filing and serving of cost submissions and documents.
On 10 May 2024, the Senior Member made procedural directions stating that the costs decision "is largely complete", but sought the "assistance" of the parties on "one issue". That issue was whether or not the builder agreeing to the work orders of 24 November 2022 "could be viewed as a capitulation or surrender".
Both parties filed and served extensive written submissions and documents on the issue of costs.
The owners sought that the builder pay their costs of the proceedings on an indemnity basis for the whole of the proceedings.
The builder sought that the Tribunal made no order as to costs in respect of the owners' "return to work claim" (i.e. the owners seeking an order that the builder return to site and perform works to rectify existing defects and complete incomplete work to bring the contract to practical completion); no order as to costs in respect of the liquidated damages claim (i.e. the claim brought for delay damages); the owners pay the builder's costs of the "restitution claim" (i.e. a claim brought by the owners on the basis that the owners had "overpaid" the builder in respect of making early progress payments); and the owners pay the builders costs of the claim for damages to rectify allegedly defective works.
However, in its supplementary costs submission on the issue of "surrender" the builder changed its position to seek an order that the owners pay the builders costs of the entire proceedings.

[50]

On 22 May 2024, the Tribunal issued procedural directions stating that the costs decision had been made before the closing date of the timetable made by the Senior Member on 10 May 2024 for the filing and serving of supplementary costs submissions.
In other words, the decision had been made without the parties having been given a reasonable opportunity to have their entire submissions considered.
The Senior Member stated that he proposed to "withdraw" his decision of 16 May 2024, and issue a further decision after consideration of all of the cost submissions.
The parties then made further written submissions on whether or not the Tribunal could, or should, set aside the decision of 16 May 2024.
The Tribunal relevantly made orders that the decision of 16 May 2024 was set aside; and that the builder pay the owners' costs as agreed or assessed.
The decision of the Tribunal that 2 July 2024 comprises of 27 pages of reasons.
The first part of the decision deals with the issue of whether the Tribunal could, and should, set aside the first costs decision. The builder submitted that the decision should be set aside, and the Tribunal had the power to do so under s 53(4) of the NCAT Act. The owners submitted that there was no power to set aside the decision under s 53(4) of the NCAT Act. The Tribunal found that it did have the power to set aside the decision, and it was appropriate to exercise its discretion to do so in circumstances where part of the submissions of the parties had not been considered in the first costs decision.
The Tribunal referred to the submissions of the parties made in the first costs decision, and repeated them. The Tribunal then dealt with the additional submissions of the parties that had not been considered previously.
The owners submitted that the builder had, by entering into the consent orders to (a) perform work; and (b) pay the owners $20,000, "capitulated" or "surrendered" pursuant to the principles set out in One.Tel Ltd v Deputy Commissioner of Taxation [2000] FCA 270 and Knox v Bullen [2018] NSWCATAP 106. The owners also further submitted that the builder had, in effect, "abandoned" the works (other than briefly returning to site after the Tribunal application had been served on the builder) and had defended the proceedings "until the first day for the hearing."
The builder submitted that there was no "capitulation" or "surrender" in respect of entering into the consent orders. The builder submitted that it had "suspended" the works under the contract, because there had been a "dispute" between the builder and the owners in respect of construction of the roof. The builder submitted that, after correspondence regarding the roof dispute, the builder had returned to site and was performing works, in the period immediately prior to the owners filing the Tribunal proceedings.
The builder submitted that after the owners had "prematurely" filed and served the Tribunal proceedings, the builder had "again ceased work to avoid being perceived as attempting to 'cover up' works that the homeowners alleged were defective."
The builder submitted that it was always ready, willing, and able to perform its contractual obligations and "it is not a capitulation or surrender for a person to agree to do something that he or she has never denied her or his obligation to do."
The builder submitted that the owners conduct was so unreasonable the owners should pay the builder's costs of the proceedings.
The builder concluded its further cost submissions by requesting the Tribunal, in its costs decision (if the first costs decision was set aside) "provide reasons" to explain (a) why the builder's submissions that a proportionate costs order should be made were wrong; and (b) why it was unreasonable for the builder to reject an offer to pay liquidated damages of $23,000, in circumstances where the builder achieved settlement requiring payment of $20,000 in liquidated damages on 20 October 2023 where the owners liquidated damages claim would have increased by reason of the effluxion of time, meaning that the owners had settled this aspect of the claim for an amount far less than is potential claim.
The Tribunal noted at [49] that when the owners had filed proceedings on 18 March 2022, the orders sought included orders that the builder performed work; the builder pay the owners $9,800 "by way of debt"; and that the builder pay damages (or otherwise credit or refund) the amount of $100,368.08.
The Tribunal stated at [51] that although the parties had "disagreed" as to whether the orders of the Tribunal that the builder return to site and perform work were by consent, the Senior Member had checked the sound recording, and was satisfied the parties have consented to the orders. The Senior Member then moved on to consideration of the party's submissions (commencing at [58]).
The Senior Member stated as follows (at [58]-[59]):

[63]

In Prendergast, the Appeal Panel identified the following questions of law, at [13], which are here summarised:

(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 considerations.

(6) Whether the Tribunal took into account an irrelevant consideration.

(7) Whether there was no evidence to support a finding of fact.

(8) Whether the decision is so unreasonable that no reasonable decision-maker would make it.

The formulations above are overly reductive. As the authorities above identify, it is necessary to state the question of law with precision.

To the above list might be added the following (some of which are nuanced aspects of the categories in Prendergast):

(1) Whether the Tribunal drew inferences that were not available from the facts as found (an extension of item 7). As noted by the Full Court in Minister for Immigration & Multicultural Affairs v Al‑Miahi [2001] FCA 744 at [34], the "question whether there is any evidence of a particular fact is a question of law. Likewise, the question whether a particular inference can be drawn from facts found or agreed is a question of law. That is because, before the inference is drawn, there is a preliminary question as to whether the evidence reasonably admits a different conclusion."

(2) Whether the construction of a statute or contract arrived at by the Tribunal at first instance was wrong in some identified way: Bianco Walling Pty Ltd v Construction, Forestry, Maritime, Mining and Energy Union (2020) 275 FCR 385; [2020] FCAFC 50 at [66].

(3) Whether the Tribunal's decision was vitiated by bias, or a reasonable apprehension of bias, relates to and intersects with the fair hearing rule, and may encompass or be related to the procedural fairness question: Mark Aronson, Matthew Groves and Greg Weeks_, Judicial Review of Administrative Action and Government Liability_ (Thomson Reuters, 6th ed, 2017) 643.

(4) Whether the Tribunal failed to respond to substantial, clearly articulated arguments based on established facts which may constitute a failure to accord natural justice, that is, procedural unfairness. Alternatively, it may also constitute a constructive failure to exercise jurisdiction: Dranichnikov v Minister for Immigration and Multicultural Affairs [2003] HCA 26; 77 ALJR 1088; Alexandria Landfill Pty Ltd v Transport for NSW (2020) 103 NSWLR 479; [2020] NSWCA 165 at [6], [20]-[22] (Basten JA).

(5) Whether the facts as found necessarily satisfied the statute or necessarily did not: Azzopardi v Tasman UEB Industries (1985) 4 NSWLR 139 at 156; Hope v Bathurst City Council [1980] HCA 16; (1980) 144 CLR 1 (Hope v Bathurst City Council) at pp 7 and 10; Australian Gas Light Co v Valuer‑General (1940) 40 SR (NSW) 126 at 138; Lombard Farms Pty Ltd v Chief Commissioner of State Revenue [2013] NSWADTAP 42 at [9]-[13], [23(5)]. Though care must be taken where the statute uses words according to their ordinary meaning, as questions raised about the ordinary meaning of words may not raise pure questions of law: Orr v Cobar at [56] citing Hope v Bathurst City Council at p 7; Thomas v Naaz [2023] NSWCA 40 at [54].

(6) As to the distinction between a question of law and a question of fact, the Federal Court in Collector of Customs v Pozzolanic Enterprises Pty Ltd [1993] FCA 356; (1993) 43 FCR 280 (_Pozzolani_c) at 287; [1993] FCA 456 identified five general propositions. These were extracted by the High Court in Collector of Customs v Agfa‑Gevaert [1996] HCA 36; (1996) 186 CLR 389 (Agfa‑Gevaert); [1996] HCA 36 at p 395:

[72]

In Donohoe v Alburario [2025] NSWSC 9, Basten AJ stated at [36]-[39] that denial of procedural fairness is a question of law for the purpose of s 80(2)(b) of the NCAT Act, and is not a question of mixed fact and law such that leave to appeal is required.
The principles governing an application for leave to appeal under the NCAT Act are well-established and are repeated in many decisions of the Appeal Panel, often quoting Collins v Urban [2014] NSWCATAP 17. They are the same principles applied by the courts. It is only if the decision is attended with sufficient doubt to warrant its reconsideration on appeal will leave be granted. Ordinarily it is appropriate to grant leave where there is an issue of principle, a question of public importance, or an injustice which is reasonably clear, in the sense of going beyond what is merely arguable: Secretary, Department of Family and Community Services v Smith [2017] NSWCA 206; (2017) 95 NSWLR 597 at [28]. As explained in Collins v Urban at [84], it is not sufficient merely to show that the Tribunal below was arguably wrong or that there was a bona fide challenge to an issue of fact.
Further, the circumstances in which the Appeal Panel may grant leave to appeal from decisions made in the Consumer and Commercial Division of this Tribunal under s 80(2)(b) of the NCAT Act are limited to those set out in cl 12 (1) of Sch 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: (a) the decision of the Tribunal under appeal was not fair and equitable; or (b) the decision of the Tribunal under appeal was against the weight of evidence; or (c) significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with).
In Collins v Urban, the Appeal Panel stated at [76] that a substantial miscarriage of justice for the purposes of cl 12(1) of Sch 4 may have been suffered where:

[74]

Both parties filed and served written submissions (including submissions in reply). We also had the benefit of a 3 volume Court Book filed by the appellant (comprising 2425 pages) and a 390 page respondents' Appeal Bundle.
Before dealing with the grounds of appeal, it is appropriate to set out the well-established legal principles when parties settle a case by way of consent orders without a hearing on the merits, and then seek to argue the issue of costs.
Those principles were discussed in the Appeal Panel decision of BCA Constructions Pty Ltd v Arsovski [2024] NSWCATAP 31 (Arsovski).
Neither party referred to Arsovski in their written submissions. However, at the Appeal Panel hearing, we raised with the parties the decision in Arsovski, and the parties were given the opportunity to make oral submissions as to what effect, if any, the decision had on their legal arguments. Both parties addressed Arsovski orally at the appeal hearing.
In Arsovski, as works under a residential building contract were nearing completion (but before the builder had commenced pouring concrete for the driveway and carport) the parties fell into dispute about purported defective work and payments. The owners stated they would not be making further payments until they were satisfied with the quality of the works. The builder issued a notice of completion under the contract on the basis that the owners had taken possession of the site. There was a dispute between the parties as to who had lawfully terminated the contract and whether or not the contract remained on foot.
The owners took Tribunal proceedings. There was a Calderbank offer made by the builder. The dispute was complicated by the builder having obtained an order under the Building and Construction Industry Security of Payment Act 1999 (NSW), and this being a matter relevant to the construction of the Calderbank offer.
Both parties were legally represented. They settled their Tribunal case on the morning of the hearing, and the Tribunal made consent orders that relevantly included (a) the builder performing certain works; (b) the owners paying the builder $70,000 after completion of the works; and a notation that (c) the Local Court judgement would be set aside by consent after works were completed by the builder and payment of monies by the owners.
The parties reserved the issue of costs, and then made costs submissions. The Tribunal ordered the builder to pay the owners' costs of the proceedings on the basis that it was "almost certain" to have succeeded if the matter proceeded to hearing; and the owners had not unreasonably rejected the builder's Calderbank offer. The Appeal Panel held the Tribunal had made an error of the type identified in House v The King (1936) 55 CLR 499; [1936] HCA 40 in the exercise of its discretion when determining the costs application.
The Appeal Panel stated as follows (at [84]-[93]):

[76]

"In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order.

In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided_._ In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation...

Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. ... But such cases are likely to be rare.

If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases. (footnotes and citations omitted)."

[77]

A party "capitulating" to the other party, in the sense of one party, after litigation has been on foot for some time, effectively "surrendering" to the other party and consenting substantially to the relief sought without any obvious compromise, or (if the applicant) withdrawing the proceedings, is a situation where it is open to conclude either (a) it is clear that one party would have been successful had the proceedings been heard and determined on the merits; and/or (b) a party has acted with sufficient unreasonableness in the proceedings that a costs order should be made (Muhibbah Engineering (M) BHD & Anor v Trust Company Ltd & Anor [2009] NSWCA 205 (Muhibbah Engineering) at [54]-[55]; Shellharbour City Council v Minister for Local Government [2017] NSWCA 256 at [6]- [14]; One.Tel Ltd v Commissioner of Taxation (2000) 101 FCR 548; [2000] FCA 270 at [6] - [8]; (One Tel); Kiama Council v Grant [2006] NSWLEC 96 at [80]; Hunter Development Corporation v Save Our Rail NSW Incorporated (No 2) [2016] NSWCA 375 at [78]-82]).

A "surrender" is to be distinguished from a situation where "some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs" (One Tel at [6]; Knox v Bollen; Bollen v Knox [2018] NSWCATAP 106 at [47]).

In Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 (Nichols) the NSW Court of Appeal dealt with the principles in Lai Qin in the context of a matter where the parties had entered into consent orders finalising the dispute, but 'reserved' the issue of costs and sought separate determination of that issue.

Unhelpfully, neither party referred to Nichols in their submissions before the Tribunal, nor their submissions in the appeal. The Appeal Panel referred the parties to that decision during the course of oral submissions at the hearing of the appeal. Both parties have been legally represented at all relevant times.

Nichols is not an obscure authority. It has been referred to in many subsequent decisions, including decisions in the Supreme Court of NSW and the Appeal Panel of the Tribunal (e.g. The Owners-Strata Plan No 5319 v Price [2020] NSWCATAP 245 at [51]; Campara v Australian Islamic Society of Bosnia Herzegovinia Inc [2020] NSWSC 1739 at [75]- [77]; Wang v Cai (No 2) [2021] NSWSC 1268 at [63] Hoare v Taylormade Residential Pty Ltd [2022] NSWSC 1359 at [23]- [27]). Both parties had a reasonable opportunity to prepare and make submissions that dealt with the principles emerging from the decision in Nichols.

In Nichols, Basten JA stated at [2]-[3] and [8]-[10]:

[113]

Paragraphs [58] and [59] of the decision of the Tribunal dated 2 July 2024 (which replicate paras [28]-[29] of the decision of 16 May 2024) contain a clearly wrong legal principle.
The Tribunal found that the owners were "successful" and the "starting point" was that they were entitled an order for costs of the proceedings.
It is clear from the authorities referred to earlier (in particular, Lai Qin; Nichols; and Price) that where there is no determination on the merits by a court or Tribunal, there is no "event" from which it can be said that "costs follow the event." The starting point is that each party should bear its own costs, which is diametrically opposed to the "starting point" identified in paras [58]-[59] of the Tribunal's reasons.
The authorities that the builder referred to in its submissions are not authority for the proposition that a party in whose favour consent orders are made is the "successful party" in the same way that a party who has had proceedings determined in their favour by way of factual and legal findings made by a court or Tribunal after a contested hearing is a "successful party."
Rather, they are consistent with the principle that emanates from Lai Qin (and was developed in Nichols and Price), that the usual order is that each party bears is own costs, unless a court or Tribunal is satisfied that either (a) one party was almost certain to have succeeded if the matter had been fully tried so that the party should obtain the costs of the action; or (b) one party had acted so unreasonably in the conduct of the litigation that a costs order should be made against it.
The mere fact that there are consent orders filed that one party pay the other party money, or do work, does not automatically mean that the party was the "successful" party, and does not create any presumption that the other party should pay its costs of the proceedings.
The Tribunal found at [58]-[59] that the owners were the "successful party" (without any analysis or explanation as to why they were the "successful party") such that a costs order should be made in their favour unless there was disentitling conduct or other established basis for departing from the "usual principle". The Tribunal then, at [64] states that it must consider whether "the conclusion" that the owners are "entitled" to costs is "displaced" by the principles in Lai Qin.
However, Lai Qin does not "displace" the applicable costs principles. It sets them out.
The Tribunal then makes a finding at [75] that its "provisional view" was that, by reason of Lai Qin principles, there be no order as to costs. That finding is repeated at [84] after discussion of the submissions regarding "capitulation" and "surrender".
The Tribunal then finds at [85]-[87] that the builder's rejection of the Calderbank offer in October 2022 was "unreasonable". We will return to that issue later in the decision. However, the Tribunal did not find that the builder should pay the owners' costs from the date the Calderbank offer, or from the date the Calderbank offer expired. Rather, it ordered the builder pay the owners' costs of the entire proceedings, as agreed or assessed.
If the Tribunal was only finding that the builder had acted so unreasonably in the proceedings that a costs order should be made because it had not accepted the October 2022 Calderbank offer, and had ultimately consented to the orders to perform work and pay damages, then it would only have awarded costs from the date of the Calderbank offer (or its expiration) which was approximately 7 months after the owners had commenced Tribunal proceedings in March 2022.
Thus, the only way to make sense of the Tribunal's costs order is that it must have found that the owners were the successful party to the proceedings, and that additionally, from October 2022, the builder had acted unreasonably by not accepting the Calderbank offer.
Consequently, the clearly erroneous legal principle set out at [58]-[59] of the reasons that the owners were the successful party and that the "starting point" was that there was an entitlement to the owners obtaining a costs order in their favour was material to the decision that the builder pay the owners' costs of the entire Tribunal proceedings, as agreed or assessed. It affected the outcome.
We are satisfied in respect of Ground 3 of the appeal that:

[119]

The builder seeks leave to appeal in respect of ground 2. We are satisfied that ground 2 does not raise an error on a question of law, and that leave to appeal is required.
The owners submit that the Tribunal referred to the correct legal principles regarding 'proportionate' costs orders; the outcome was based on the factual findings of the Tribunal; and no issue of public importance; or legal principle; or clear injustice, has been demonstrated such that leave to appeal should be granted.
We do not grant leave in respect of ground 2.
It is well-established that a successful party can be deprived of its costs on a legal or factual issue upon which it was unsuccessful if that issue was dominant or separable (Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38]). Where there has been a mixed outcome in proceedings, and it is appropriate to entertain the process of apportioning costs as between different issues in the proceedings, in general such an exercise will be carried out on a relatively broad brush basis, and largely as a matter of impression and evaluation (Doppstadt at [19]-21]).
However, the submissions of the builder on ground 2 fail to deal with the principles in Lai Qin, Nichols and Price. There was no determination by the Tribunal on the merits. The starting point is each party should bear its own costs of the proceedings.
For the builder to obtain a costs order in its favour (as distinct from no order as to costs/each party bear its own costs), it must establish that either (a) it was, on the basis of matters that are not the subject of factual or legal dispute, almost certain to have obtained a costs order in its favour had the proceedings been determined on their merits to finality; or (b) the owners acted so unreasonably in the conduct of the litigation that a costs order is appropriate. In doing so, the Tribunal also has to take into account that the builder agreed to pay the owners damages (albeit far less than were claimed) and agreed to a consent work order under s 48O of the HB Act. The Tribunal cannot conduct an hypothetical hearing involving seriously contested factual and legal findings in the context of determining a costs dispute.
We will return to this issue later in the decision when dealing with what order should be made in respect of the costs of the Tribunal proceedings.

[123]

"The failure by a party to accept an offer of compromise which is a Calderbank offer where that party does not achieve a judgment more favourable than the offer is one of the circumstances in which the court may exercise its discretion under r 42.1 of the UCPR to make some order other than costs following the event on the ordinary basis. However, merely because the party to whom the offer was made does not ultimately obtain a more favourable judgment does not automatically lead to a favourable costs order, or raise a presumption that such an order should be made: E Group Security at [57].

The onus is on the party making a Calderbank offer to satisfy the court that it should exercise the costs discretion in its favour, in particular that (a) the Calderbank offer embodies a genuine compromise and (b) it was unreasonable for the other party not to accept it, which is an evaluative judgment to be made by reference to the terms of the offer and all the relevant surrounding circumstances at the time that it was made, and not with the benefit of hindsight: Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8], [11], [16]; Wheatley v Lakshmanan (No 2) [2022] NSWSC 851 at [97]; E Group Security at [57]-[58].

Relevant factors in determining whether the rejection of an offer was unreasonable 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 of the offeree rejecting it: Hazeldene's Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (2005) 13 VR 435; [2005] VSCA 298 at [25]; Miwa at [12]; Wheatley at [98]; E Group Security at [59]. A finding of unreasonableness should not be made other than on clear grounds: E Group Security at [58].

In relation to (d), what is required is an objective assessment of the offeree's prospects of success as at the date of the offer: Hazeldene's Chicken Farm at [30].

The practice of treating Calderbank offers in this way is informed by the public policy objective of providing an incentive to the parties to end their litigation as soon as possible and discouraging wasteful and unreasonable behaviour by litigants: Commonwealth Bank of Australia v Gretton [2008] NSWCA 117 at [41]. However, the mere fact that the offer is a reasonable one does not make it unreasonable for the offeree to have rejected it: Gretton at [74] and [120]."

[131]

Neither party has established that it would almost certainly succeeded such that a costs order would have been made in its favour had the proceedings been tried and determined to finality, rather than resolving by way of consent orders.
The success of both parties was dependent upon disputed factual and legal issues. The lay evidence of the parties served in the dispute clearly indicates the parties made different factual assertions about whether the builder had lawfully suspended work pursuant to the terms of the contract (cl. 25); whether the builder had actually returned to work after the purported suspension; and whether the builder had returned to site after the purported suspension. There were also disputes between the parties experts as to whether or not builder's existing work was defective.
There was also a legal dispute as to whether the builder was entitled to all of the monies that had been paid by the owners for the works performed. As part of determining some of those issues, the Tribunal was also likely to have to make findings as to whether or not the owners were reasonably preventing the builder from entering the site and performing works, or whether the builder had elected to leave the site notwithstanding that it could return to site and continue work irrespective of whether the owners 'consented' to the builder doing so. Under the terms of the contract it was the builder who had possession of the site while the contract remained on foot (cl. 13 of the contract).
The builder submits that the owners were not entitled to damages because the owners had commenced proceedings "prematurely" while the contract was still on foot (neither the owners, nor the builder, having elected to terminate the contract despite each party asserting the other party was in breach). However, there were different heads of damages claimed by the owner, as well as a work order under s 48O of the HB Act.
In Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2005] NSWCA 248 (Brewarrina) Ipp JA stated at [67]-[69] (Hodgson and McColl JJA agreeing):

[135]

The owners claim for damages in respect of the cost of rectifying existing defective work was made in the alternative to a work order under s 48O of the HB Act. The owners had arguable claims in respect of delay damages (even if the damages may arguably only have been assessed until the date of Tribunal orders and the owners may have left themselves open to a defence that they had waived, or were estopped, from making any future to any loss after the date of any Tribunal determination); arguable claims for recovery of damages for payments made that the builder was not entitled to under the terms of the contract (or otherwise if they could establish payments made under a mistake of fact or law); and arguable claims for a work order under s 48O of the HB Act on the basis that the builder was breaching its obligations under the contract (relevantly including cl. 2).
Some of those claims may have been stronger than others. Each party's likely success is not clearly apparent on the basis of concise materials that are not the subject of factual and legal dispute. We cannot determine which party was "almost certain" to have succeeded in the factual and legal issues in dispute without engaging in the "hypothetical" process disapproved of in Lai Qin and Nichols.
We note the builder asserts that it was ready, willing and able to return to site, and had returned to site for a brief period, prior to again ceasing work. However, those factual matters were in dispute, and it is not clear why, if the contract remained on foot and the builder had possession of the site, the builder had not returned to site and recommenced work irrespective of the owners commencing Tribunal proceedings. No notice of suspension of works issued by the builder under cl. 25 of the contract after the builder 'returned to site' but then ceased work is referred to in the builder's costs submissions.
The builder's submission that a "proportionate" or "issue by issue" costs order should be made is also rejected. We cannot determine on the basis of concise materials that are not the subject of legal or factual dispute that it is almost certain the Tribunal would have made any proportionate or issue by issue costs orders in favour of the builder.
We are not satisfied that either party "capitulated" or "surrendered" by entering into the consent orders. Both parties compromised to some degree from the positions they had respectively set out in their pleadings and evidence. Whilst it is arguable the owners compromised more than the builder, the degree of compromise is not sufficient to find that the owners capitulated or surrendered. There was no capitulation or surrender by the builder in circumstances where the owners had, in agreeing to the settlement, departed significantly from the substantial damages claims set out in their Points of Claim.

[138]

(1) The monetary offer was for an amount more than the owners ultimately accepted to settle the damages component of their claim.

(2) The offer was only open for a short period of time. Both parties have made submissions on the basis that the offer was made on 22 October 2022. The offer expired at 4.00 pm on If that is correct, the builder had 3 days to obtain advice about, and consider, the offer. Even if the offer was received on 18 October 2022, the 7 day period for acceptance of the offer included a weekend. Considering the nature of the issues in dispute and the extensive terms of the obligations on the builder that the offer referred to, we do not regard that period as a reasonable period of time for the builder to properly consider and respond to the offer.

(3) The offer contained (at para [3]) a "notation" that the parties had "entered into a settlement agreement and will perform the settlement agreement, Building Contract dated 18 January 2021 and Tender for Fixed price Contract dated 26 November 2020". However, at paras [4]-[7] the offer refers to various specific obligations of the builder. It is unclear whether these obligations were to be consent orders of the Tribunal under s 48O of the HB Act; or notations of an agreement. That ambiguity is important, because if they were consent work orders, the owners would have a right to renew the proceedings under cl. 8 of Sch 4 of the NCAT Act, but otherwise would only be able to bring future proceedings for breach of agreement.

(4) Pars [5]-[7] contain obligations and time stipulations that do not clearly accord with the terms of the contract. Para [5] obliged the builder to provide, within 28 days of the date of acceptance of the offer "a report and/or certificate issued by the relevant Certifying Authority in connection with the structural framework stage of the Building Works..." Par [6] obliged the builder to perform, within 28 days of acceptance of the offer building works that involved attaching veneer ties and metal bracings to framework, as well as other work. Para [7] obliged the builder "within 21 days of completion of item 6 above" to provide various reports and certificates to the owners "required for an occupancy certificate, including "any other relevant inspection report for the Building Works completed".

(5) The works identified in pars [5]-[7] of the offer are in excess of the works that were contained in the consent orders dated 24 November 2022. The works identified in that consent order were limited to the builder carrying out the installation of a "further 100 ties" and the builder completing the works under the contract to achieve practical completion.

(6) The works identified in paras [5]-[7] are in excess of the works identified as defective in the report of the builder's expert Mr Sim. At the stage of the offer, there was no Joint Expert Report by Mr Coombes and Mr Sim. It was reasonable for the builder to adopt the position that the works identified paras [5]-[7] of the offer may not be works ordered by the Tribunal after a contested hearing, or works that the builder was obliged to perform under the terms of the contract within the time periods stipulated in the offer.

Prestige Homez Pty Ltd v Ghag

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