In the principal decision in this matter published on 1 February 2018 the Appeal Panel refused the appellant owner's application for leave to appeal and dismissed the appeal.
We referred to the question of costs in paragraphs [83] to [86] as follows:
83. The parties did not address the Appeal Panel in relation to the costs of the appeal. We note that the Senior Member made orders for the filing of submissions by the parties in respect of the costs of the proceedings below. We are not aware of what, if any, orders were made in respect of those costs.
As the appeal is to be dismissed there is no reason to consider any variation of any orders made in respect of the costs of the proceedings at first instance. However there remains the question of appropriate orders concerning the costs of the appeal.
84. The proceedings below were brought in the Consumer and Commercial Division of the Tribunal and the amount in issue both before the Senior Member below and before the Appeal Panel exceeded $30,000. Accordingly, by reason of rules 38 and 38A of the Civil and Administrative Tribunal Rules 2014 (NSW), it would not be necessary for the Appeal Panel to find special circumstances before making an award of costs in respect of the appeal.
85. However, as the Appeal Panel has not received submissions from the parties concerning the appropriate costs orders we will not at this stage make orders in respect of the costs of the appeal. Rather we will permit either party to file written submissions within 14 days of the date of judgment seeking an order in respect of the costs of the appeal. If a party files such submissions the other party may file written submissions in response within a further 14 days.
86. Any written submissions should address the question whether the question of costs should be determined on the papers and without further hearing.
On 19 February 2018 the Registry received the builder's written submissions on costs. Although the submissions were received more than 14 days after the date of publication of the principal decision the Appeal Panel extended time for the filing of the submissions.
The appellants filed submissions in response on 5 March 2018.
Neither party objected to the proceedings being determined on the papers without a further hearing and we make an order pursuant to s 50(1)(c) of the Civil and Administrative Tribunal Act 2013 (NSW) dispensing with a hearing on the question of costs.
The parties did not dispute that rule 38 of the Civil and Administrative Tribunal Rules is applicable to the appeal (by virtue of rule 38A) or that the amount in issue exceeded $30,000. Rule 38 provides:
38 Costs in Consumer and Commercial Division of the Tribunal
(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 in the proceedings is more than $30,000.
[2]
Builder's submissions
The respondent builder sought an order that the appellant pay its costs of the appeal on an indemnity basis.
The builder submitted:
In the present case the owner has maintained proceedings that he should have known had no real prospects of success and his actions in that regard were delinquent and unreasonable. The grounds of appeal were unclear, confused and overlapping, making it difficult for the builder to prepare his case and respond to the grounds.
A number of the appeal grounds did not raise questions of law and a number of grounds outlined in the appeal matters were essentially abandoned in oral address during the hearing of the appeal.
The builder submitted that the owner was placed on notice as to the builder's intention to seek indemnity costs on two occasions during the proceedings. The builder relied upon two letters dated 9 August 2016 and 10 February 2017, that is before the decision at first instance which was upheld on appeal.
The letter of 9 August 2016 is described by the builder as an offer of settlement based on the principles in Calderbank v Calderbank [1975] 3 All ER 333; [1976] Fam 93; [1975] 3 WLR 586. The letter of 10 February 2017 is described by the builder as "requesting the owner to discontinue the proceedings as his claim was vexatious and frivolous".
We note that the offer contained in the letter of 9 August 2016 was not in fact bettered by the builder in the decision at first instance as the letter sought payment of the full amount claimed by the builder, that is $112,592.00, and allowed against that amount the cost of rectifying five defects at the amount agreed by the experts, being a total of $6,345.00, which was about $6,000 less than the amount the Senior Member ordered the builder to pay the owner in respect of defects.
[3]
Owner's submissions
The owner submitted that, unlike the Supreme Court, the "norm" in proceedings in the Tribunal is that each party bear its own costs and that the onus is on the builder "to show why that norm should have been departed from in the circumstances".
In respect of the question whether costs if awarded should be on the ordinary or indemnity basis the owner submitted that the offer of 9 August 2016:
1. Was not in clear, precise and certain terms;
2. Did not involve a genuine offer of compromise;
3. Provided no explanation as to why the offer should be accepted; and
4. Was not marked "without prejudice save to costs" and does not make provision for costs separately from the principal offer.
The owner also submitted that the offer was made at a time when the parties' experts were in the process of preparing joint reports and therefore "it was not unreasonable for the owner to take the view that it had a strong case".
The owner's submissions concluded:
26. It is the owner's position that the correspondence relied upon by the builder cannot be reasonably construed to be Calderbank offers in line with the common law principles and even if it was (which is denied), it does not entitle the builder to indemnity costs.
27. The present circumstances do not warrant an award for costs and further there is not and the builder has not established any sufficient or unusual feature, or relevant delinquency on the part of the owner to warrant indemnity costs.
[4]
Consideration
In Thompson v Chapman [2016] NSWCATAP 6 an Appeal Panel of this Tribunal held in relation to the allocation of costs in proceedings to which Rule 38 applied:
67. In circumstances where there is a general discretion to award costs, the correct statement of principle is that the Tribunal in exercising its discretion is to have regard to the nature of the proceedings before it and all relevant factors arising in connection with those proceedings for the purpose of determining what order for costs, if any, should be made.
68. Each of Regulation 20 of the CTTT Regulation and Rule 38 provide a general discretion in respect to the award of costs.
69. The starting point in exercising such discretion is that the "usual order for costs" is that a successful party should be entitled to an order for costs in their favour: see Latoudis v Casey [1990] 170 CLR 534 per Mason CJ at 554 and Oshlack v Richmond River Council per McHugh J at 97.
70. The reason for such an order is that it is appropriate for the party who incurred costs caused by the other party in litigation to be reimbursed. Further, an award of costs is by way of an indemnity to the successful party and not as punishment of the unsuccessful party: see Latoudis v Casey per Mason CJ at 543 and McHugh J at 567 and in Oshlack v Richmond River Council per Brennan CJ at 75.
71. Where there is a general discretion for costs there is no absolute rule that, absent disentitling conduct, a successful party is to be compensated by the unsuccessful party nor is there any rule that a successful party might not be ordered to bear the costs of an unsuccessful party: see Oshlack v Richmond River Council per Gaudron and Gummow JJ at 88 and Kirby J at 121 - 123.
72. The factors to be considered in awarding costs in a particular case are not to be confined as to do so would constrain the general discretion. However it is clear from the authorities that factors that might influence whether the usual order for costs should apply and, if so, to what extent include:
1. Whether, by reason of the relative success of the parties on different issues and the time taken to determine those that an order for costs based on issues should be made: see for example Bostick Australia Pty Ltd v Liddiard (No 2) [2009] NSWSCA 304; and
2. Whether, by reason of the nature of the proceedings the usual rule should otherwise be displaced in whole or in part: see Oshlack v Richmond River Council per Gaudron and Gummow JJ at 41 - 44.
In Rockwall Constructions v Nayak (No 2) [2018] NSWCATAP 32 at [13], an Appeal Panel stated:
Where an appeal has been heard and determined on the merits and cl 38A applies, the appropriate starting point for the exercise of the discretion is not that the parties are to pay their own costs. Rather, it is the well-established position at common law; that is, that the purpose of making a costs order is to provide compensation to the party in whose favour the order is made for the expense the party has been put to in prosecuting or defending legal proceedings. In general terms, this means that a party who is successful is entitled to an order for costs in its favour, subject to exceptions generally involving misconduct on the part of that party: Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534; Oshlak v Richmond River Council [1998] HCA 11; [193 CLR 72].
In our view, and as the decisions in Thompson v Chapman and Rockwall Constructions v Nayak make clear, if rule 38(2)(b) is applicable, a successful party is ordinarily entitled to an order for costs in its favour. We reject the owner's submission that the norm in such cases is that each party should bear its own costs, save in special circumstances.
In our view there is no factor in this case suggesting that it would be inappropriate to order that the owner pay the builder's costs.
However we do not consider that there is any basis for an order that the owner pay the builder's costs on an indemnity basis. The correspondence relied upon by the builder was sent in relation to the original proceedings. There was no correspondence tendered regarding the making of offers or otherwise in relation to the appeal proceedings. As the Court of Appeal has held in Grace v Thomas Street Café (No.2) [2008] NSWCA 72 at [33]:
"Pre-trial settlement offers do not necessarily continue to operate for the purpose of an appeal. Generally, if an offer is not renewed (either in the same or different terms) prior to the appeal, the Court will not make a special costs order in respect of the appeal".
As was observed in Bathurst Regional Council v Thompson (No.2) [2012] NSWCA 420 at [16]:
The usual position is that appeal costs should primarily be determined by the issues in and the outcome of the appeal proceedings themselves.
These decisions were applied by an Appeal Panel in Hancock & Claringbold v Calalla Bayside Realty [2016] NSWCATAP 60 at [56]-[60] in relation to an application for costs where rules 38 and 38A were not applicable.
Moreover, we do not consider that the correspondence relied upon by the builder constitutes an offer of settlement which might have warranted the application of the principles in Calderbank v Calderbank.
Given that the offer was to accept the full amount of the builder's claim less the value of the defects which had been agreed by the parties' joint experts, there was no element of compromise in the offer.
In any event the builder did not obtain a better result than the offer.
The builder is correct in stating that, as noted in the principal decision, the grounds of appeal were not clear and overlapped to some degree. However the grounds of appeal were clarified in oral submissions and it was not apparent that the builder's legal representatives had had significant difficulty in preparing for the hearing or preparing their written submissions.
The fact that the owner did not succeed and that some of the appeal grounds did not raise questions of law are not matters that we would regard as providing a sufficient basis to award the builder indemnity costs.
Although the appeal was dismissed and it is correct to say that some of the grounds of appeal were without merit, we do not consider that the matters raised by the owner were so hopeless that it would be appropriate to award indemnity costs.
[5]
Orders
Accordingly we order that:
1. A hearing on costs is dispensed with pursuant to s 50(1)(c) of the Civil and Administrative Tribunal Act 2013;
2. The appellant is to pay the respondent's costs of the appeal as agreed or assessed.
[6]
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: 28 March 2018