Alexander James Pty Ltd v Pozetu Pty Ltd (No. 2) [2016] NSWCATAP 75
BPU v New South Wales Trustee and Guardian (Costs) [2016] NSWCATAP 87
Chaw v Jenkinson [2017] NSWCATAP 150
Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81
Source
Original judgment source is linked above.
Catchwords
Alexander James Pty Ltd v Pozetu Pty Ltd (No. 2) [2016] NSWCATAP 75BPU v New South Wales Trustee and Guardian (Costs) [2016] NSWCATAP 87Chaw v Jenkinson [2017] NSWCATAP 150Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81Fitzpatrick Investments Pty Ltd v Chief Commissioner of State Revenue [2015] NSWCATAD 103Gaynor v Burns [2015] NSWCATAP 150Hamid v Commissioner of Police, New South Wales Police Force (No. 2) [2018] NSWCATAD 93Murphy v Chief Commissioner of State Revenue [2012] NSWADT 221Obieta v Australian College of Professionals Pty Ltd [2014] NSWCATAP 38Stonnington City Council v Blue Emporium Pty Ltd [2004] VCAT 144
This is a costs application brought by the respondent Lismore City Council arising out of the proceedings and decision in Scott-Brydges v Lismore City Council [2018] NSWCATAD 215, which was decided on 14 September 2018.
Briefly, the applicant Mr Garry Scott-Brydges on 3 August 2017 had applied to this tribunal for review of a decision by the respondent dated 5 July 2017 to refuse him payment of compensation under s 66 of the Food Act 2013 for loss which he claimed to have sustained as a result of a prohibition order under s 60 of the Act issued on 2 June 2017 by the Council in respect of his operation of certain café premises known as the "Contented Tummy" at shop 2, 45 Cullen Street, Nimbin, New South Wales. The café served food and beverages at those premises.
On 28 April 2017, Mr David Mundt, a Council health compliance officer, inspected the premises and recorded certain shortcomings, the absence of a food safety supervisor or FSS certificate on the premises, the positioning of plastic containers impeding access to the hand basin, a leaking hand basin and lack of a thermometer on the premises. As a result of those observations, Mr Mundt issued an improvement notice on 4 May 2017 requiring the applicant to repair the hand wash basin, provide a thermometer and ensure that utensils were effectively washed and sanitized. A Council public health officer, Mr Cameron Smith, who inspected the premises on 4 May 2017 made similar observations.
On 4 May 2017, Mr Mundt sent a show cause letter to the applicant requiring him to appoint a food safety supervisor and make a certificate available for inspection, by 18 May 2017. On that date Mr Smith and Mr Mundt carried out an inspection in the course of which they observed that staff members were in their view not appropriately cleaning and sanitizing food service utensils. On 19 May 2017, Mr Smith emailed the applicant informing him that the cleaning and sanitizing system observed at the premises was not effective and that the use of a single bowl sink was unacceptable. The applicant was informed that he needed to provide an alternative system, such as a double-bowl sink, a single bowl sink and a dishwasher, or a double bowl sink and a dishwasher.
At a meeting with the Council's general manager, Mr Gary Murphy, and compliance manager, Mr Peter Jeuken, attended by the applicant and Mrs Carolyne Scott-Brydges on 30 May 2017, the applicant refused to install a double bowl sink. He did undertake to appoint a food safety supervisor with appropriate accreditation by 2 June 2017, however. (For convenience Mrs Scott-Brydges will be referred to, with all due respect, as Carolyne; Mr and Mrs Scott-Brydges will sometimes be jointly referred to as "the owners" or "the applicants".)
Mr Jeuken and Mr Smith inspected the premises on 2 June 2017 and observed the same system of a single bowl sink and buckets used to clean and sanitize food service items. The applicant confirmed that he would not install a double bowl sink. Mr Smith issued a prohibition order while on the premises. Performing a further inspection on 11 June 2017, Mr Smith observed that a double bowl sink had in fact been installed. A clearance certificate was issued that permitted the applicant to resume business from that date. At the time the applicant also operated a restaurant in shop 3, the premises adjoining the café. Since then, he has sold both businesses and is now retired. Both the owners are now pensioners.
At the start of the hearing, the applicant stated that if successful he would be seeking an order for costs, while the respondent said it would follow the normal rule in s 60 of the Civil and Administrative Tribunal Act 2013 (CAT Act) that each party should bear its own costs. At the conclusion of the hearing, however, the parties' positions had reversed, the applicant not seeking costs and the respondent foreshadowing an application for costs. Both parties filed written submissions on the cost issue, on which they relied at the costs hearing on 6 November 2018.
[3]
Applicable legislation
The tribunal's power to make costs orders derives from s 60 of the CAT Act:
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.
As the owners' original claim for damages arose out of a prohibition order under s 60 of the Food Act, it may be helpful to set out that provision as background:
60 Prohibition order
(1) If the Food Authority or an enforcement agency believes, on reasonable grounds:
(a) that any of the circumstances specified in section 57 (a), (b), (c) or (d) exist, and
(b) that:
(i) the proprietor of a food business has not complied with an improvement notice within the time required by section 58 for compliance, or
(ii) the issue of the order is necessary to prevent or mitigate a serious danger to public health,
the Food Authority or the enforcement agency may serve a prohibition order on the proprietor of the food business in accordance with this Part.
(2) A prohibition order is to take the form of an order that:
(a) no food intended for sale is to be handled on specified premises or a specified part of specified premises, or
(b) no food intended for sale is to be conveyed in a specified vehicle, or
(c) specified equipment is not to be used in connection with food intended for sale, or
(d) no food intended for sale is to be handled by a food business in a specified way or for a specified purpose,
until the proprietor of the food business has been given a certificate of clearance stating that the premises, part of the premises, vehicle or equipment may be used for the handling or conveyance of food intended for sale, or for use in connection with such food, or that the food may be handled in the specified way or for the specified purpose, as the case may be.
(3) A prohibition order is to state that it is issued under this section.
(4) The Food Authority or person that made the order must give a certificate of clearance if, after an inspection of the premises, part of the premises, vehicle or equipment, or the way of handling food, specified in the prohibition order, the Food Authority or person finds, by the Food Authority's or person's own inspection or the report of an authorised officer, that:
(a) the premises, part of the premises, vehicle or equipment, or the handling of food by the food business in the specified way or for the specified purpose, is not a serious danger to public health, and
(b) the person on whom the prohibition order was served has complied with the prohibition order and any improvement notices served on the person.
The applicants' original claim for damages was brought under s 66 of the Food Act:
66 Compensation
(1) A person bound by a prohibition order who suffers loss as a result of the making of the order may apply to the Food Authority or person who made the order for compensation if the person bound by the order considers that there were no grounds for the making of the order.
(2) If there were no grounds for the making of the order, the Food Authority or enforcement agency is to pay such compensation to the applicant as is just and reasonable.
(3) The Food Authority or enforcement agency is to send written notification of its determination as to the payment of compensation under this section to each applicant for the payment of such compensation.
(4) If the Food Authority or enforcement agency has not determined an application for compensation under this section within 28 days of receiving the application, the Food Authority or enforcement agency is taken to have refused to pay any compensation.
(5) An applicant for the payment of compensation under this section who is dissatisfied with a determination by the Food Authority or enforcement agency as to the refusal to pay compensation or as to the amount of compensation may apply to the Civil and Administrative Tribunal for an administrative review under the Administrative Decisions Review Act 1997:
(a) within 28 days after the day on which notification of the determination was received, or
(b) in a case to which subsection (4) applies, within 28 days after the expiration of the 28-day period referred to in that subsection.
The issues in this application are therefore:
1. Whether there are special circumstances warranting an award of costs within the meaning of s 60 of the CAT Act; and
2. If so, whether the statutory discretion should be exercised in favour of the respondent/applicant, Lismore City Council.
[4]
Respondent's submissions
In its written submissions on the costs issue the respondent took the position that it was apparent from the outset that the application had no prospects of success as it was not in a position to be able to prove that the respondent had "no grounds" for issuing the prohibition notice. It had failed to make a case under any of the four sub-issues identified by the tribunal and had endeavoured to rely on purely technical points to justify its failure to comply with the improvement notice. The applicant had demonstrated that he had failed to consider how the legislation operated.
The underlying and fundamental issue that the tribunal was asked to deal with was the applicant's failure to accept or understand that he had responsibilities to ensure that certain standards were met and that the systems he relied on were inadequate to meet the rigorous sanitization requirements in a food retail environment in 2017. It was no defence for him to say that he and Carolyne were unavoidably absent during periods throughout the first half of 2017, nor to assert that the Council should have taken swabs to establish whether there was in fact a cleanliness problem.
Acknowledging that the primary position in s 60 of the CAT Act is that each party to the proceedings is to pay its own costs, the respondent submitted that account should be taken of four of the matters listed in s 60(3) as possible indicators of special circumstances warranting an award of costs. They were ss 60(3)(b), (c), (e) and (g).
As regards s (6)(3)(b), the respondent submitted that the applicant was responsible for prolonging unreasonably the time taken to complete the proceedings by leading orally the evidence of his witnesses even though that evidence was contained in written statements. The applicant's failure to answer questions put to him by the respondent's counsel in a direct manner led to lengthy cross-examination in order to establish even basic issues. His untrue statement about a single bowl sink system being in place in the previous premises and carried through to the current premises was eventually withdrawn, but caused the respondent significant expense in carrying out investigations, drafting and serving statement and making arrangements for the witness to attend court. Carolyne took a combative approach to the hearing, which made her cross-examination lengthy and extended the duration of the hearing.
The applicant had also made a claim that had no tenable basis in fact or law within the meaning of s 60(3)(d). Yet the facts, which in reality were not disputed, established that there was a basis for the issuing of the notice. The approach adopted by the applicant to the evidence meant that it necessarily went on for a lengthy period of time. There was no reasonable basis for disputing the improvement notice and the prohibition order. This was enough to open the gate to "special circumstances".
Next, the respondent submitted that the proceedings were misconceived within the meaning of s 60(3)(e). The Food Act in the relevant areas imposes absolute duties on duty holders such as the applicant and the matters relied on by the applicant as defences had no relevance. The applicant's case asserted that there was insufficient evidence to prove that a problem existed because it did not perform tests to ascertain whether there was bacterial growth, when the legal requirement was for the enforcement agency to have a belief on reasonable grounds. The applicant had failed to understand the duties imposed upon him by the Act, which led to his case being misconceived.
Other relevant matters for the tribunal to consider are referred to in s 60(3)(g). The respondent submitted that the most significant feature in the case was the identification by the respondent at the very beginning of the case that it was destined to fail and making an offer for the applicant to be able to walk away. That offer was repeated more than once because the cost of appearing and reappearing was can completely disproportionate to the costs being sought by the applicant. The failure to accept that offer of compromise could in itself constitute "special circumstances" as required by s 60(2): Chaw v Jenkinson [2017] NSWCATAP 150, [9].
In Yammatree Pty Ltd v North West Local Land Service [2015] NSWCATAD 221, a successful respondent had pointed out that the proceedings were entirely futile and there was no rational reason to bring them because there was no order that the tribunal could properly have made that would have had any effect on the applicant's operations. Further, the tribunal had found that there was no proper basis for it to award any compensation, even if the applicant had succeeded in other respects. The respondent's solicitors invited the applicant to withdraw the application and that the matter be settled on the basis that each party bear its own costs. The applicant declined that offer. The tribunal found that the evidence constituted a finding of special circumstances: "In my view the Appellant continued to prosecute the proceedings in circumstances where it should have become apparent that the proceedings were futile. In doing so, it contributed to the Respondent incurring unnecessary costs: [29].
At the hearing the respondent reiterated those points and submitted inter alia that the applicant was relying on a moral issue in relation to the compliance officer Mr Mundt and his non-appearance to give evidence at the hearing. But a medical certificate explaining Mr Mundt's absence had been tendered without objection. There had been no suggestion that the applicants' refusal to install a two-bowl sink as suggested by the Council's compliance staff had been due to a lack of funds. The point was that they had, they said, operated successfully for 12 years using a single-bowl system. The respondent had made out four legs of s 60(3). The fact that the applicants were now pensioners was irrelevant. All the facts showed that the tribunal should exercise its discretion in favour of the Council.
[5]
Consideration
As was noted above, the tribunal's power to award costs derives from s 60 of the CAT Act. Section 60(1) establishes that the primary position is that each party is to pay its own costs of the proceedings. By s 60(2), however, the tribunal possesses a discretionary power to depart from that general rule: "(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". When exercising that power the tribunal may have regard to the matters expressly identified by s 60(3)(a) to (f) and, by s 60(3)(f), to "any other matter that the Tribunal considers relevant".
The general rule in s 60(1) that parties should bear their own costs is designed to promote access to justice generally and to minimize the overall level of costs in tribunal proceedings as far as is practicable: Stonnington City Council v Blue Emporium Pty Ltd [2004] VCAT 1441, [13]. It has also been observed (by the Victorian tribunal) that -
Generally speaking, I say that it is important that would-be applicants are not deterred from airing genuine grievances and making genuine claims, by the fear that the Tribunal will award costs against them if they lose, particularly if they lose because they have made a legal mistake (IIQ v Delaney Associates Pty Ltd [2011] VCAT 2056, [30] - [31].
See also Murphy v Chief Commissioner of State Revenue [2012] NSWADT 221, [27] - [28]- a decision of mine, but as far as I know it has not been criticized.
The Appeal Panel in Gaynor v Burns [2015] NSWCATAP 150, [18] outlined the process to be followed when applying s 60:
The drafting of s 60(1) evinces the intent of the legislature that generally each party to proceedings in the Tribunal shall be responsible for their own costs. Departure from s 60(1) may occur but only if the Tribunal finds, there are "special circumstances" warranting it to do so. In determining whether there are special circumstances the Tribunal may, in a structured exercise of discretion, have regard to the criteria in s 60 (3) (a) - (g).
Exercising the s 60(2) discretion is thus a two-stage structured process consisting of:
a consideration of whether or not the tribunal is "satisfied" that there are "special circumstances" in relation to the question of costs; and
if so, whether those special circumstances warrant departing from the general rule and making an award of costs.
As was indicated above, it is important to realize that the test applicable in this tribunal is different from the one that governed its predecessor, the Administrative Decisions Tribunal Act 1997, s 88 (and that test itself was altered in 2008). Before 2008, s 88 incorporated a "special circumstances" test, but the 2008 amendments altered the test to "if it is fair to do so" having regard to the listed matters (Robinson, Fitzgerald, Lucy, NCAT - Practice and Procedure (Thomson Reuters 2015) (NCAT Practice), pp 90-91).
I outlined the history of the two provisions in Hamid v Commissioner of Police, New South Wales Police Force (No. 2) [2018] NSWCATAD 93, [25] - [29], [31] and there is no need to reproduce that discussion here. Suffice it to say that the Appeal Panel has noted that the "special circumstances" exception to the general rule in s 60(1) is narrower than the "fair to do so" exception in the former s 88(1A): Obieta v Australian College of Professionals Pty Ltd [2014] NSWCATAP 38: [78]; (see also NCAT Practice, p 92).
In the context of s 60(2), the Appeal Panel has stated that the words "'special circumstances' mean something out of the ordinary, which invites an examination of the particular circumstances of the proceedings under consideration and a comparison with what might be characterised as 'ordinary circumstances'": Alexander James Pty Ltd v Pozetu Pty Ltd (No. 2) [2016] NSWCATAP 75, [13]. Once it is satisfied that there are special circumstances, the tribunal must further be satisfied that they are circumstances "warranting an award of costs": Fitzpatrick Investments Pty Ltd v Chief Commissioner of State Revenue [2015] NSWCATAD 103. The exercise of the discretion requires the tribunal "to weigh whether those circumstances [identified by the invoking party] are sufficient to amount to 'special' circumstances that justify departing from the general rule that each party bear their own costs": BPU v New South Wales Trustee and Guardian (Costs) [2016] NSWCATAP 87, [9].
The first matter relied on by the respondent as indicating the existence of special circumstances was the proposition that the applicant had been responsible for prolonging unreasonably the time taken to complete the proceedings. It was submitted that taking the applicant and his witnesses orally through their evidence when it was already available in their written statements had unnecessarily prolonged the hearing. It was also said that the applicant's failure to answer questions directly and Carolyne's combative attitude had extended the amount of time taken in cross-examination.
Taking a witness orally through his or her written statement at the hearing is, however, a common practice that is presumably followed in order to give some colour to the witness's statements and to provide an opportunity to supply further detail. And discursive or prolix answers in cross-examination, especially on the part of witnesses who are themselves the parties to the proceedings, are by no means uncommon. It should also be noted that both parties complied with directions and delivered submissions and statements in a timely manner. That the hearing occupied the whole or part of 7 days over 8 months when it was expected to take two days was due in part to the number of witnesses called by both sides.
[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: 20 November 2018
The respondent pointed out that the applicants' claim that they had used a single-bowl sink system at their previous business, with the Council's full approval, had been shown to be false and indeed was withdrawn by the applicants' representative in the course of the hearing. The applicants replied that their recollection had been impaired inter alia by the fact that the applicant had contracted meningitis in the interim and Carolyne had suffered a stroke. That explanation was not offered during the hearing, however. The point was a material, but not a crucial, one. The respondent acknowledged that the point had not taken up much time at the hearing, but argued that the respondent had expended time and effort in finding an appropriate witness and preparing a statement. While that is no doubt true, and the matter does not reflect well on the applicants, I do not think that point in itself is enough to warrant the making of a costs order.
Next, the respondent argued that the applicant had made a claim that had no tenable basis in fact or law within the meaning of s 60(3)(c) and showed a failure to understand the operation of the Food Act. All requirements of the legislation had clearly been satisfied. The respondent's case on this ground succeeded, but that does not necessarily mean that the applicant had no case that could be rationally advanced. The argument that while s 57 only required an improvement notice to specify the section relied on and makes specification of any actual remedial action permissive and not mandatory, and that if remedial action is articulated then it must be comprehensive, was a standard type of legal argument that made use of accepted statutory interpretation principles.
Similarly, bearing in mind that the application under s 66 of the Food Act was a matter of first impression and that there were no authorities to guide the parties in the preparation of their cases, to argue that the section required the respondent to demonstrate an objective factual basis for its orders did not fall outside the range of normal legal argument such as to negate any possibility of a tenable case.
The respondent argued successfully that while the applicants had successfully operated their food businesses for 12 years with no health incidents or complaints, health policy had moved on in the meantime and it was now necessary to comply with a wider range of precautions. But by the same token, it was not absurd or irrational for the applicant to contend that in modern times, an authority's failure or refusal to conduct scientific tests such as swabbing to ascertain bacteria count indicated that it lacked reasonable grounds for its action.
Next, the respondent argued that the application was misconceived because the Food Act in the relevant areas imposes absolute duties on operators such as the applicant and does not require the enforcement agency to prove that it had reasonable grounds. The comments above in relation to s 60(3)(c) also apply to this point. In addition, the application was for compensation against an enforcement authority, a cause of action expressly provided by s 66.
As regards the reference in s 60(3)(g) to "any other matter that the Tribunal considers relevant", the respondent stressed that "the most significant feature in this case in the respondent's submission was the identification by the respondent at the very beginning of the case that it was destined to fail; setting out why it was destined to fail; and making an offer for the applicant to be able to walk away". The offer was that if the applicant withdrew the application, the respondent would refrain from seeking costs under s 60 and it was repeated more than once over a number of points of time throughout the hearing.
It was submitted that failure to accept that offer of compromise in circumstances where the applicant's legal representative expressly recognized that the applicant had a significant hurdle to overcome constituted special circumstances. The respondent relied on Chaw v Jenkinson and Yammatree Pty Ltd v North West Local Land Service in support of that proposition. In the latter case Montgomery SM stated that, "I consider that formal offers of compromise and offers to settle are within the scope of 'other matters…' in s 60(3)(g) and are matters to be weighed in the balance" (at [32]).
In Chaw, the Appeal Panel observed that "The unreasonable refusal of an offer of compromise may constitute 'special circumstances' as required by s 60(2) of the Act" and noted that "An imprudent refusal of an offer of compromise is one circumstance that has been found to warrant an order for costs to be paid on in indemnity basis" (at [9]). In that case, however, the unsuccessful party had rejected an offer to settle for the full amount of the claim, an imprudent and perhaps irrational course of action indeed.
In the present case, however, the respondent offered nothing in exchange for the applicant's suggested withdrawal of its claim, other than an undertaking not to seek costs, hardly an overwhelming consideration in a generally no-costs jurisdiction in which the legislation provides a statutory presumption against costs orders. Further, the applicants harboured a strong sense of grievance about what they considered was the unfair treatment they had received from the Council. Indeed, the Council had changed a long-standing food safety policy to the applicant's disadvantage. The applicant's choice to press on could not be seen as inherently irresponsible or irrational.
In Yammatree, the ultimately successful respondent, like the respondent in this case, had invited the applicant to withdraw the application and that the matter be settled on the basis that each party bear its own costs. Yammatree rejected that offer and the respondent submitted that its refusal to walk away from the proceedings on the terms offered demonstrated an unreasonable and irrational position for the continuance of the proceedings. The tribunal was satisfied that the factors mentioned were of sufficient significance to justify a finding of special circumstances.
In that case, however, the proceedings were entirely futile as there was no order that the tribunal could properly have made that would have had any effect on Yammatree's operations. Even if they had succeeded in their challenge to the respondent's order, there was no proper basis on which the tribunal could award any compensation. In those circumstances, rejecting the respondent's offer could be characterized as unreasonable and irrational. Here, however, the applicant was relying on the specific cause of action in s 66 of the Food Act, which expressly provides for compensation. In those circumstances, rejecting a settlement proposal that gave the applicant no part of that which he claimed could not fairly be viewed as defying common sense.
A matter that may be considered relevant pursuant to s 60(3)(g) is the applicant's ability to meet and award of costs against them. There is not a great deal of evidence about their financial position, but it is known that they sold their business some years ago and are now both pensioners (presumably meaning on the Commonwealth age pension). Requiring them to pay costs that would undoubtedly be substantial would in all probability cause them some difficulty or even hardship. Also relevant is the tribunal's "guiding principle" in s 36(1) of the CAT Act whereby it is required to facilitate, inter alia, the low-cost resolution of the issues in the proceedings (Hamid No. 2, [43]).
I am therefore not satisfied that there are special circumstances warranting an award of costs within s 60. The application for costs is dismissed.