Rona v Opes Lifestyle Homes Pty Ltd

NCAT Appeal Panel|2022-12-02

REASONS FOR DECISION

On 17 November 2022, the Appeal Panel made the following orders and directions in this appeal. "(1) The application to extend time for the filing of the Notice of Appeal is refused. (2) The appeal is otherwise dismissed. (3) The respondent shall file and serve submissions on the question of costs seven days after publication of these reasons. (4) The applicant shall file and serve submissions on the question of costs fourteen days after publication of these reasons. (5) The submissions should address whether a hearing on the question of costs can be dispensed with and whether the special circumstances provisions of s 60 of the [Civil and Administrative Tribunal Act 2013 (NSW)] apply."
Reasons for those orders and directions were provided in Rona v Opes Lifestyle Homes Pty Ltd [2022] NSWCATAP 363 ("the substantive decision").
It is convenient to set out the background facts which are captured in our decision at [1]-[6]: "This is an internal appeal under s 80(2) of the Civil and Administrative Tribunal Act 2013 ("the NCAT Act") against a decision made in the Consumer and Commercial Division of the Tribunal on 10 May 2022. The matter concerns "residential building work" within the meaning of clause 2(1)(c) of Schedule 1 to the Home Building Act 1989 (NSW) (the HBA). The parties entered into a contract for the carrying out of residential building work for the design and construction of five swimming pools at five different residences in North Kellyville. The appellant provided five plans. It became apparent to the respondent that the plans provided by the appellant were not fit for purpose because the plans did not disclose the correct volume for the five pools and despite several amendments the relevant Council rejected the pools' approval on the basis that the plans did not provide relevant information. For these reasons, on about 29 March 2021 the contract was terminated by the respondent. The appellant filed a statement of claim in Blacktown Local Court seeking payment of $49,000 being for a debt outstanding under the contract ("debt claim"). The matter was transferred to the Tribunal. The respondent commenced proceedings against the appellant seeking repayment of the $25,000 deposit paid for five plans and specifications. As the plans were rejected by Council for being insufficient the respondent sought a repayment of the $25,000 deposit as the plans were of no value or, as it was argued at the hearing, the total failure of consideration under the contract. The appellant, contrary to directions of the Tribunal, failed to file any evidence in the proceedings. On 2 May 2022, the appellant sent an email to the Tribunal which was in the following terms 'Dear NCAT we at Brilliant Pools rely on exactly the same information as provided by WHWLE (sic).' The matter was heard on 10 May 2022. The appellant failed to appear. The Tribunal proceeded to hear the matter and published written reasons for decision on the same day, ordering the appellant to pay $25,000 to the respondent by 17 May 2022. The appellant's debt claim was dismissed for want of prosecution."

Costs - the applicable law

Costs in the Consumer and Commercial Division of the Tribunal are to be determined in accordance with s 60 of the Civil and Administrative Tribunal Act 2013 (NSW) ("the NCAT Act") and rules 38 and 38A of the Civil and Administrative Tribunal Rules 2014 (NSW) ("the NCAT Rules").
Section 60 of the NCAT Act provides: 60 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 NCAT Rules provides an exception to section to s 60 with respect to certain matters in the Consumer and Commercial Division: 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.
Rule 38A provides: 38A Costs in internal appeals (1) This rule applies to an internal appeal lodged on or after 1 January 2016 if the provisions that applied to the determination of costs in the proceedings of the Tribunal at first instance (the 'first instance costs provisions') differed from those set out in section 60 of the Act because of the operation of-- (a) enabling legislation, or (b) the Division Schedule for the Division of the Tribunal concerned, or (c) the procedural rules. (2) Despite section 60 of the Act, the Appeal Panel for an internal appeal to which this rule applies must apply the first instance costs provisions when deciding whether to award costs in relation to the internal appeal.
In this costs application, there is a dispute about whether rule 38 has any application. Where it does not apply, which is what we have found, the Tribunal's power to award costs is that found in s 60.
The Appeal Panel's task, therefore, is to determine whether there were special circumstances warranting an order for costs of the appeal, bearing in mind that the usual course is that each party pays its own costs.
In Edwards v Commissioner for Fair Trading, Department of Customer Service (Costs) [2019] NSWCATAP 249 at [9], the Appeal Panel said: "Special circumstances are circumstances that are out of the ordinary, but need not be those which are exceptional or extraordinary. These principles are well established and have been consistently applied in this Tribunal: Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120 at [11]; Commissioner for Fair Trading v Edward Lees Imports Pty Ltd (No 2) [2019] NSWCATAP 222 at [8]; CPD Holdings Pty Ltd t/as The Bathroom Exchange v Baguley [2015] NSWCATAP 21 at [32]."
The Tribunal's discretion to award costs must be exercised judicially, and not arbitrarily, capriciously or so as to frustrate the legislative intent: Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [22].
A costs order is compensatory and not punitive: Dr Douglass v Lawton Pty Ltd (No 2) [2007] NSWCA 90 at [22].

Material before the Appeal Panel:

In considering the costs issue, we have had regard to the following materials provided by the parties: 1. Submissions of the Respondent dated 24 November 2022 and 2 December 2022; 2. The statement of Medhat Eleisawy dated 29 April 2022 and the affidavit of David Vaughan sworn 12 September 2022; 3. Submissions of the Appellant which are undated.
The Appellant opposed the reply submissions filed by the Respondent on 2 December 2022. This was because the Tribunal made no order in relation to reply submissions. We have considered the reply submissions and find there is no prejudice to the Appellant.

Does rule 38 apply?

It is not in dispute that the appeal concerned the order made by Senior Member Paull for the Appellant to pay to the Respondent $25,000. The Appellant lodged an appeal to set that order aside. On first principles, when considering the operation of rule 38(2)(b) we find that the amount "claimed" in the proceedings constituted by the appeal was not "more than $30,000".
We turn now to question whether the amount "in dispute" in the proceedings was more than $30,000.
The words "or in dispute" after "the amount claimed" in rule 38 indicates that amounts may be in dispute in proceedings even if they are not the subject of a specific claim for an order for payment.
The Respondent relies upon the following passage in Allen v TriCare (Hastings) Ltd [2017] NSWCATAP 25 ("Allen") at [57]: "Adapting these principles to the circumstances of the present appeals and having regard to the specific wording of r 38, it appears to us that in applying r 38(2)(b): (1) The determinative factor is the amount in dispute in each appeal, not the amount in dispute in the proceedings at first instance; (2) The phrase "in dispute" is to be construed as meaning truly in dispute or at issue or, inversely, not unrealistically in dispute; (3) Whether 'the amount … in dispute' in each appeal is more than $30,000 depends on whether there is a realistic prospect that in each appeal the wealth of the appealing party would be changed by more than $30,000 or, put another way, whether the right claimed by the appealing party, but denied by the decision at first instance, prejudices that party to an amount in excess of $30,000; (4) The fact that the value of the property the subject of any appeal exceeds $30,000 does not, of itself, mean that 'the amount … in dispute' in that appeal is greater than $30,000."
The Respondent submits: "… that the order as to costs which was appealed against by the Appellant is in fact an amount in dispute as, if upheld, it would inevitably impact the 'wealth' of the Appellant. As such, the Respondent says that by combining even a nominal amount for the Respondent's costs of the proceedings at first instance, which proceedings: a) spanned over the course of approximately 6 months and included multiple appearances for directions hearings; b) required the preparation of pleadings, detailed submissions and both lay and expert evidence; and c) involved a hearing before Senior Member Paull, with the $25,000.00 the subject of order 2, there can be little dispute that the amount in dispute in these appeal proceedings well exceed $30,000 such that rule 38(2) is triggered. To substantiate its submission that the true value of the Respondent's entitlement to costs in relation to the appeal proceedings, which entitlement was appealed by the Appellant, exceeded the $5,000.00 required to activate the operation of rule 38(2) of the Rules, the Respondent provides a copy of a tax invoice dated 19 May 2022 from the planning expert engaged by the Respondent, Ms Clare Burdett of Ethos Urban, in the amount of $7,623.00 for the preparation of her expert report (Ethos Urban Report). A copy of that invoice appears at 'Annexure B' to these submissions. … The Respondent submits that even though the Appeal Panel is not a taxing officer of the Court or charged with the responsibility of an assessment of the actual costs of the Respondent nevertheless, it would be obvious that the Respondent's reasonable party/party costs would exceed $5,000 such that the threshold amount of $30,000 would be exceeded. Accordingly, the Respondent says that as the appeal was unsuccessful in relation to both orders 2 and 3, the Respondent is entitled to an order for its costs pursuant to rule 38 of the Rules for the appeal and the unsuccessful application for a stay."
The Appellant argues: "As found in Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120, rule 38 does not apply to proceedings before the Appeal Panel when exercising its powers in connection with costs of an appeal. As set out by the Appeal Panel in Megerditchian at [7]: 'The Appeal Panel has power under s 80(2) of the NCAT Act in determining an appeal to exercise all functions that are conferred or imposed by the NCAT Act or other legislation on the Tribunal at first instance when varying or making a decision in substitution for the decision under appeal. But an order in relation to costs of the appeal is not a function of the Tribunal at first instance. Rather, it is a decision of the Appeal Panel in the appeal proceedings. The exercise of the power to make an order in respect of the costs of an appeal is not a "function of the Tribunal … allocated to the Consumer and Commercial Division of the Tribunal" and Rule 38(1) does not apply.' The decision of Megerditchian was cited with approval by Wilson J in Symes v Mick Fabar Constructions Pty Ltd [2015] NSWSC 1922 at [37]-[38]. As such, the only live question is whether 'special circumstances' exist warranting an award of costs."
The Respondent replied by stating that the two decisions referred to by the Appellant are otiose because of the operation of rule 38A which came into effect after 1 January 2016.
The Appeal Panel is to consider whether the amount claimed, or the amount in dispute, exceeds $30,000 in the Appeal Panel proceedings and whether there is a realistic prospect that the wealth of the appellant would be changed by more than $30,000 dependent upon the outcome of the appeal.
Where the provisions of ss 60(1), (2) and (3) of the NCAT Act are not to apply, we must be satisfied that the amount in dispute is greater than $30,000 by reason of the outcome of the appeal.
We find that the amount in dispute was not more than $30,000. The Appellant appealed against orders 2 and 3 made by the Tribunal. In our view, the order as to costs (order 3) cannot be included as an amount in dispute. Success in the appeal by the Appellant and the remittal of the matter only realistically involves the return of the deposit of $25,000 ordered by the Senior Member at first instance. That amount is less than $30,000. The Respondent did not appeal the amount to be returned and there was no cross appeal in respect of this order. Costs orders are ancillary orders. We reject the Respondent's contention that, by reason of the costs claimed, the amount in dispute is likely to exceed $30,000. First there is no evidence that costs will exceed $5,000 before us, and critically costs do not form part of the amount in dispute.
What is meant by the expression "amount claimed or in dispute" was explained in The Owners Corporation Strata Plan No. 63341 v Malachite Holdings Pty Ltd [2018] NSWCATAP 256 ("Malachite"). There, at [3]-[5], the Appeal Panel summarised the operation of the rule as follows: "Rule 38(2)(b) applies to the following proceedings: (1) Where the relief claimed in the proceedings is for an order to pay a specific amount of money, or an order to be relieved from an obligation to pay a specific amount of money, and that amount is more than $30,000; (2) Where an order is sought in the proceedings for the performance of an obligation (such as to do work), and the Tribunal has power make an order to pay a specific amount of money, even if not asked for by the claimant, provided that: (a) there is credible evidence relating to the amount the Tribunal could award; and (b) that evidence, if accepted, would establish an entitlement to an order for an amount more than $30,000. Rule 38(2)(b) may also apply to proceedings where the orders sought in the proceedings depend upon the claimant proving there is a debt owed in order to establish an entitlement to the relief sought, and that amount is in dispute and is more than $30,000. Rule 38(2)(b) does not apply to proceedings: (1) Where a claim for relief in the proceedings (not being a claim for an order to be paid or be relieved from paying a specific sum) may, as a consequence of that relief being granted, result in the loss of any property or other civil right to a value of more than $30,000; or (2) Where there is a matter at issue amounting to or of a value of more than $30,000 but: (a) no direct relief is sought and no order could be made in the proceedings requiring payment or relief from payment of an amount more than $30,000; or (b) the relief sought does not depend on there being a finding that a specific amount of money is owed."
What is the amount claimed can be determined from the application. If, at any time, the amount claimed is of an amount specified in each of subrules 2(a) and (b), then those rules are satisfied as to what is the "amount claimed".
What is the amount in dispute is a more complex issue.
Having considered the comments in Allen at [48] and following, the Appeal Panel in Malachite concluded that rule 38 was not concerned with a "change in wealth" (as is the case when leave to appeal is sought under s 102(2)(r) of the Supreme Court Act 1970 (NSW)), but rather with the "amount in dispute": see also Hanave Pty Ltd v Wine Nomad Pty Ltd; Wine Nomad Pty Ltd v Hanave Pty Ltd (No 2) [2022] NSWCATAP 361 ("Hanave") at [40]. In this regard, unlike r 38, s 101(2)(r) of the Supreme Court Act refers to "value". Subsections 101(2)(r)(i) and (ii) use the expressions "involves a matter at issue amounting to or of the value of $100,000 or more" and "involves (directly or indirectly) any claim, demand or question to or respecting any property or civil right amounting to or of the value of $100,000 or more".
As explained in Malachite at [91] and following, an amount is only in dispute if it is necessary to determine the amount for the purpose of granting or withholding relief. Costs do not fall within that category.

Conclusion on r 38(2)(b)

Consequently, r 38(2)(b) does not apply to the appeal and we cannot award costs in the absence of special circumstances, as referred to in s 60(2) of the NCAT Act.

Are there special circumstances - s 60(3) NCAT Act

The Respondent contends for the following matters in support of a finding that there are special circumstances warranting the making of a costs order: "(a) being exposed to a second round of unnecessary and unsuccessful litigation despite its success at first instance. (b) the appeal sought to do nothing more than reagitate a claim it failed to defend at first instance. (c) the appellant's application to extend time to appeal and the appeal application itself had no tenable basis in fact or law. (d) the appellant sought and was granted leave to be legally represented for the purpose of the appeal, increasing costs of the respondent. (e) the appeal was entirely frivolous and at the very least, misconceived and entirely lacking in substance"
The Appellant submits that the real grounds relied upon by the Respondent are found in NCAT Act, subss 60(3)(c) and (e). That is the contention that the appeal had no tenable basis in fact or in law and was entirely frivolous or vexatious or misconceived.
The Appellant submits that in the substantive decision the Appeal Panel described the merits of the appeal as being "slim" (at [55]), which does not place the appeal in the category of frivolous or vexatious. We agree.

Our consideration

For the purposes of s 60(2) of the NCAT Act, "special circumstances" are circumstances that are out of the ordinary. They do not have to be extraordinary or exceptional: Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120 ("Megerditchian") at [11], citing Cripps v G & M Mawson [2006] NSWCA 81 at [60].
In Alexander James Pty Ltd v Pozetu Pty Ltd (No. 2) [2016] NSWCATAP 75 at [14], the Appeal Panel stated: "An assessment whether circumstances are 'special' involves the exercise of a value judgement carried out by way of comparison between what is not 'special', and what is special. There are no scientific means by which the former can be ascertained. The evaluative process is necessarily one of impression informed by the particular provisions of section 60, which by sec 60(3)(f) incorporates also a consideration of section 36(3) of the Act."
Even if special circumstances are established, the Tribunal has a discretion as to whether to award costs. The discretion to award costs must be exercised judicially having regard to the underlying principle that parties to proceedings in the Tribunal are ordinarily to bear their own costs: Megerditchian at [11].
We are not satisfied that any of the criteria in s 60(3) are established that warrants a costs order being made in the appeal. We have found that the merits of the appeal were "slim". Notwithstanding this finding, we are not satisfied that the appeal could be described as being frivolous or vexatious, nor, misconceived as required by subss 60(3)(c) or (e).
There is nothing in the parties' conduct of the appeal, nor the proceedings below, which suggests that it was conducted in a manner that would constitute special circumstances. We are not satisfied that the Appellant was responsible for unreasonably prolonging the time taken to complete the proceedings.
Where the Appellant and the Respondent were both legally represented, that in itself does not creates a special circumstance. This is because there was nothing particularly complex about the appeal, which, caused the parties to retain legal representation: see ZHH v ZHI (No 2) [2018] NSWCATAP 193 at [5].
There are no special circumstances meriting an award of costs under s 60. This means that each party is to pay their own costs of the appeal.

ORDERS 1. An oral hearing on the issue of costs is dispensed with under s 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW). 2. The application for costs is dismissed. 3. Each party is to bear its own costs of the appeal in accordance with s 60(1) of the Civil and Administrative Tribunal Act 2013 (NSW).

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: 24 March 2023

Administrative Decisions Tribunal Act 1997(NSW)

Administrative Tribunal Act 2013(NSW)

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