Salakis v Silvabuilt Pty Ltd; Silvabuilt Pty Ltd v Salakis

The Builder's Notice of Appeal

1. The builder's Notice of Appeal against the Costs Decision was filed on 16 February 2021.
2. The builder's appeal against the Costs Decision challenges only the order requiring the builder to pay the owners' costs of the owners' application. That order was referred to in the builder's Notice of Appeal as "the Owners' Claim Costs Order".
3. The builder's Notice of Appeal sets out one ground of appeal as follows: "In making the Owners' Claim Costs Order the Tribunal erred in law in applying the principle that costs follow the event."
4. The Notice of Appeal provided "particulars" of that ground as follows: "1.1 the Tribunal correctly identified the principle at [14] the Costs Decision; 1.2 the Tribunal misapplied the principle at [63] in finding that the Owners were the successful party in the Owners' Claim; 1.3 The Builder reserves the right to provide further or different particulars following the determination of the Owners' Substantive Appeal …"
5. The builder also sought leave to appeal on the grounds that the decision was not fair and equitable and was against the weight of evidence. The builder did not provide any details of those grounds but sought to reserve the right to provide particulars following determination of the substantive appeal.
6. The builder's appeal against the Costs Decision is an internal appeal as that term is defined in s 32 of the NCAT Act. In respect of the scope and nature of internal appeals, we repeat paragraphs [34] - [39] of our decision of 15 February 2022.

The Builder's Submissions Concerning the Costs Appeal

1. The builder's submissions filed on 1 March 2022 made it clear that: "The sole complaint of the Builder in relation to the Primary Costs Decision is that [the Tribunal] found that the Owners had a level of success which justified an order that the Builder pay the Owners' costs of the Owners' application.
2. The builder submitted that the homeowners had run a "complicated, and misconceived case at first instance".
3. The builder submitted that it had been wholly successful in respect of three elements of the homeowners' case, as reflected in three of the grounds of appeal identified by the Appeal Panel in its decision on the substantive appeal at [56], that is: (2) Finding that the homeowners were not entitled to reimbursement of "overpayments" measured by reference to the value of the work carried out by the builder. (3) Failing to undertake a reconciliation of payments made by the homeowners with invoices issued by the builder. (5) Failing to find that the homeowners were entitled to damages from the builder calculated by reference to the costs incurred by the homeowners in completing the work;
4. The builder also submitted that it had been "overwhelmingly" successful in relation to the fourth issue arising on the homeowners' claim, being the extent and cost of rectification of defective work. In that regard, the builder submitted that the homeowners had established only 12 of 26 items listed in the Scott Schedule filed on their behalf.
5. The builder submitted that it "does not have the benefit of a costs order which would compensate it for the result it achieved at first instance" in respect of the homeowners' claim.
6. The builder relied upon a passage from the decision of Ward J in Quest Rosehill Pty Ltd v White [2020] NSWSC 1190 at [67]: 67 I have previously had occasion to refer to what was said in the English Court of Appeal in Roache v News Group Newspapers [1992] TLR 551 (as cited by the Queensland Court of Appeal in Timms v Clift [1998] 2 Qd R 100) where the question as to who was to be seen as the successful party "in the event" was posed as being a question as to "[w]ho, as a matter of substance and reality, had won? Had the plaintiff won anything of value or anything he could not have won without fighting the action through to a finish? Had the defendant substantially denied the plaintiff the prize which the plaintiff fought the action to win?"
7. The builder also relied upon the fact that that passage had been cited in the decision of the Court of Appeal in Hawkesbury District Health Service Ltd v Chaker (No 2) [2011] NSWCA 30 at [11].
8. The builder submitted that the question which the Tribunal was required to answer in order to determine whether the homeowners or the builder was the successful party in relation to the homeowners' claim was: "has the Builder substantially denied the Owners the prize which the Owners fought the action to win?" The builder submitted that the amount ultimately awarded to the homeowners on the homeowners' case ($25,443.31) was required to be compared to "the high water mark of the Owners' case", which the builder submitted was $218,935.57, being $113,024.62 for the "overpayment claim" and $87,910.95 for the defects claim.
9. The builder submitted that the Tribunal had erred in law at [63] and [64] of the Costs Decision by answering in the negative the question which the builder submitted it was required to answer. Paragraphs [63] and [64] of the Costs Decision were: [63] Although the owners succeed on 12 items out of the 25 claimed in regard to defective and incomplete work, and the award of damages was significantly less than the total amount claimed by the owners in regard to defective (and incomplete) work, the owners succeeded on a sufficient number of items that it was the successful party in its proceedings against the builder. [64] The Tribunal is not satisfied that there should be an order that the owners pay the builder's costs of the "overpayment" claim and 6 items of work found to be incomplete in the owners proceedings against the builder.
10. The builder further submitted that it would not be fair and equitable "to visit the Builder with the Owner's costs of litigating in" the "large pond of facts and issues embodied somewhere in the 32 grounds of appeal, not relevant to the Builder's claim in contract."

The Homeowners' submissions on the Costs Appeal

1. The homeowners submitted that it was appropriate for the Tribunal to make costs orders in respect of the distinct claims brought by the parties. The builder did not suggest otherwise.
2. The homeowners nevertheless submitted: 8. However, the warnings are numerous against the tallying of wins and losses, or the taking of a 'scoreboard approach to orders for costs: Roluke Pty Ltd v Lanaro Consultants Pty Ltd [2007] NSWSC 671 at [29] per Nicholas J. 9. The Builder urges the Appeal Panel to take a 'scoreboard approach' towards the so-called Impugned Order, and overturn [the Tribunal's] order, on the asserted proposition that the Owners were not sufficiently successful on their claim to warrant a costs order in their favour. 10. That approach ignores the discretionary, evaluative, impressionistic, and intuitive approach that is properly taken in determining how costs orders should be made in circumstances where mixed results have obtained: Australian Trade Commission v Disktravel [2000] FCA 62 at [5]; HP Mercantile Pty Ltd v Dierickx (No 2) [2012] NSWSC 1430 at [32] per White J.
3. The homeowners further noted that the Tribunal's decision on costs was a discretionary decision and referred to the decision of the High Court concerning appellate review of discretionary decisions in House v The King (1936) 55 CLR 499 at 504-505.

Consideration

1. As the homeowners submitted, the decision to award the homeowners the costs of the homeowners' claim was a discretionary decision and subject to review on appeal only in accordance with the principles laid down in House v The King at 504-505. There, the High Court held: The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution, for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.
2. In considering the Tribunal's reasons for decision it is important to note that the builder did not argue before the Tribunal that the homeowners should only be awarded a proportion of their costs having regard to their success on discrete issues. The Tribunal explicitly noted, at [65], that the builder had not made any submission to that effect. The builder submitted only that, if the Tribunal did not conclude that the builder was the successful party on the homeowners' claim, the Tribunal should award the builder the costs of the homeowners' overpayments claim and the costs related to six items of work in the Scott Schedule that were found to be incomplete rather than defective.
3. Accordingly, the issues before the Tribunal in relation to the costs of the homeowners' claim were: whether the builder or the homeowners were the successful party and, if the builder was not the successful party, whether the Tribunal should order the homeowners to pay the builder's costs of the overpayments claim and the six items of work found to be incomplete rather than defective.
4. We find no error in the Tribunal's conclusion that the homeowners were the successful party on their claim. Although the builder's submissions focussed on paragraphs [63] and [64] of the Costs Decision, the Tribunal primarily addressed the question who was the successful party in the homeowners' proceedings at [45] - [49].
5. At [47], the Tribunal set out paragraphs [12] - [15] of the Court of Appeal decision in Hawkesbury District Health Service Ltd v Chaker (No 2) and, at [48] - [49], held: 48 In circumstances where the owners succeeded on a number of items of defective work the Tribunal is satisfied that it was the successful party in its proceedings against the builder. The claim that the builder had performed defective work was a significant part of its proceedings. The builder disputed that work was defective, other than in respect of the items in the Joint Scott Schedule that the parties respective building consultant experts agreed upon. The owners claim for defective work was clearly "worth fighting for" and the builder had not completely (or very substantially) defeated this aspect of the owners proceedings. 49 In respect of s 48MA of the [Home Building Act], there was never any guarantee that the Tribunal would ultimately have made a work order (Leung v Alexakis [2018] NSWCATP 11 at [139]-[140) irrespective of the owners engaging a new builder. Further, the submissions of the builder do not refer to any correspondence or evidence that the builder was prepared to return to site and rectify defects prior to the builder electing to accept the homeowner's repudiation of the contract. The builder's offer of 13 February 2018 was expressed in terms that the builder not return to the site and the owners would be responsible for rectifying any existing defects.
6. The builder has identified no error of law in those conclusions. The builder's case relied upon the propositions that the relevant question was whether the homeowners had been "substantially denied … the prize which the homeowners fought the action to win" and that the answer to that question was, as a matter of law, that the homeowners had been so denied.
7. We do not consider that the decisions in Quest Rosehill Pty Ltd v White and Hawkesbury District Health Service Ltd v Chaker (No 2) lay down any rule in the terms posited by the builder. The question is not whether the homeowners had been "substantially denied" what they had sought, but rather whether, "as a matter of substance and reality", they had "won anything of value or anything [they] could not have won without fighting the action through to the finish". The judgment in the homeowners' favour of an amount in excess of $25,000 was clearly something of value, and there is no suggestion from the builder that the homeowners were not compelled to bring proceedings to recover that amount in respect of the defects in the work carried out by the builder.
8. We also find no error in the Tribunal's conclusion that it was not appropriate to order the homeowners to pay the builder's costs of the overpayments claim and the six items of incomplete work.
9. At paragraph [50] of the Costs Decision, the Tribunal cited the relevant principles in respect of the award of costs in respect of separate issues, as set out in Vella v Mir (No 3) [2020] NSWCATAP 17 at [31] - [33]: 31 Generally, costs are awarded in favour of the successful party based on the outcome of the proceedings as a whole, without differentiating between particular issues on which the party may not have been successful. That said, a different costs order may be made if the losing party succeeds on significant issues: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [31]-[36]; Sydney Ferries v Morton (No 2) [2010] NSWCA 238 at [10]-[12]. The dollar amount of a particular claim does not determine its dominance in the proceedings. Rather, regard must be had to all of the work involved in prosecuting and defending the parties' various claims, including but not limited to the time taken up at the hearing. 32 In Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) (2011) 288 ALR 385, Campbell JA (with Macfarlan JA and Young JA agreeing) held at [107] that an issue or group of issues is "clearly dominant" when it is clearly dominant in the proceedings as a whole. In that case, the approach by counsel to analysing the percentage of costs between the parties - counting the proportion of paragraphs and pages devoted to each factual topic - was held at [84] to be "a highly artificial way of proceeding" which gave "a false air of mathematical precision". 33 In relation to separable issues, a successful party's entitlement to the whole of the costs of the proceedings should not be discounted to allow for another party's success in a separate issue that played a very minor part in the proceedings as a whole: Macourt v Clark (No 2) [2012] NSWCA 411 at [7]. Further, in Hawkesbury District Health Service Ltd v Chaker (No 2) [2011] NSWCA 30 at [14], the Court of Appeal held that the severability of one issue on which the successful party failed is not, without more, sufficient to warrant departure from the general approach. The exercise of discretion will often depend upon matters of impression and evaluation: Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 at [11].
10. The Tribunal held, at [55]: "The Tribunal is not satisfied that the two issues (the 'overpayment' claim and the failure to succeed on items of defective and incomplete work) are clearly separable and dominant issues such that the Tribunal should depart from the principle that the builder pay the costs of the owners' proceedings."
11. The Tribunal noted that the builder's claim had included a claim for payment on the basis of a quantum meruit and that the evidence filed in relation to that claim included expert evidence of the value of the works performed by the builder, and lay evidence concerning what payments had been made, what work had been agreed to and what work had been performed. The Tribunal found that that evidence was also relevant to the overpayment claim and that evidence of what work had been performed and the cost of such work was relevant to the homeowners' defects claim because, to assess damages for the cost of rectifying defective work "the Tribunal had to consider what amount, if any, was owed by the owners to the builder under the contract as at the date of cessation of the work".
12. The Tribunal also noted that the builder's submissions had not clearly established "how the owners' legal argument, that it had 'overpaid' the builder for the value of the work performed, lengthened the proceedings or caused additional costs to be incurred by the builder".
13. In relation to the six items of incomplete work, the Tribunal noted that "it is not a clear legal or factual issue as to whether items of work are defective or incomplete" and that the parties' respective building consultant experts expressed "significant differences of opinion on this issue".
14. We find no error of law in those findings. More particularly, we are not persuaded that the Tribunal's decision involved any of the categories of error set out in House v The King. Nor are we persuaded that the builder may have suffered a substantial miscarriage of justice. We do not consider that the Tribunal's conclusions were against the weight of evidence or not fair and equitable.

Conclusion

1. It follows from our conclusions set out above that leave to appeal must be refused and the appeal dismissed.
2. The homeowners submitted that the Costs Appeal should be dismissed with costs.
3. Pursuant to s 60 of the NCAT Act we can make an order for costs only if there are special circumstances. Although rules 38 and 38A of the Civil and Administrative Tribunal Rules 2014 (NSW) provide that special circumstances are not necessary where the amount "claimed or in dispute" on an appeal exceeds $30,000, it is not practicable, even on an appeal against costs orders, to characterise costs as an amount claimed or in dispute in the appeal: RBV Builders Pty Ltd v Chedra (No 2) [2021] NSWCATAP 393 at [39] - [43]; Dimitropoulos v Capital Construction Pty Ltd [2019] NSWCATAP 164 at [28].
4. The homeowners did not point to any basis upon which they submitted there were special circumstances warranting an order for costs on the Costs Appeal. We are not persuaded that there are such special circumstances in this case. The mere fact that the appeal has been dismissed does not constitute special circumstances or establish that the appeal had no tenable basis: Dennis Family Corporation Pty Limited v Casey City Council (2008) VCAT 691 at [15]; Yelda v Sydney Water Corporation; Yelda v Vitality Works Pty Limited (No 2) [2022] NSWCATAP 47 at [92]. We do not consider that the appeal was entirely lacking in substance.
5. There will be no orders in relation to the costs of the Costs Appeal.

Our orders are:

1. In proceedings 2020/00371175 (the substantive appeal): 1. Pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW) a hearing in respect of the costs of the appeal is dispensed with. 2. The appellants are to pay the respondent's costs of the appeal as agreed or assessed.
2. In proceedings 2021/00056103 (the costs appeal): 1. Pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW) a hearing in respect of the costs appeal is dispensed with. 2. Leave to appeal refused. 3. Appeal dismissed.

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: 31 March 2022