Secretary, Department of Customer Service v Marino

1. Under s 60 of the NCAT Act the usual rule is that each party bears its own costs. However, a costs order can be made if "special circumstances" are established.
2. In determining whether there are special circumstances warranting an award of costs, s 60(3) provides that the Tribunal may have regard to:

(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.

1. The onus to satisfy the Tribunal that there are special circumstances warranting an award of costs lies with the applicant for the costs order: Styles v Wollondilly Shire Council [2017] NSWCATAP 108 at [5].
2. Special circumstances are those that are out of the ordinary, and they do not have to be extraordinary or exceptional: Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81. In Kaye v The Owners - Strata Plan No 4350 [2022] NSWSC 1386 at [70], Basten AJA said that the term "special circumstances" in s 60 of the NCAT Act is "not a term of art":

"[70] ...Its scope and operation will depend heavily on the context in which it appears. A particular circumstance which appears to be special in one case may not be so in another. It is not a phrase which readily gives rise to appellate explication."

1. Where special circumstances are found to exist, the Tribunal has a discretion to exercise in deciding what, if any, order should be made. The Tribunal must further be satisfied that they are circumstances "warranting an award of costs": Youssef v NSW Legal Services Commissioner (Costs) [2020] NSWCATOD 115 at [108]. Under s 60(4) of the NCAT the Tribunal is able to award indemnity costs.

1. In determining whether a costs order should be made it is necessary to set out a little of the history of the matter before the Tribunal.
2. The original decision made by the appellant was that Mr Marino did not meet the relevant experience requirements for the issue of a licence under the Home Building Act 1989 (NSW) in the categories of plumber, drainer, gasfitter and LP gasfitter. The matter proceeded before the Tribunal on this basis until shortly before the hearing when the appellant raised an issue as to Mr Marino's fitness and propriety to hold a licence. Given the late notice of this issue, while the matter was addressed at the hearing, the parties were afforded further time to make written submissions after the hearing. The Tribunal's decision dealt with both issues - the experience requirements and Mr Marino's fitness and propriety.
3. The Tribunal found Mr Marino to have the relevant experience across all categories for which he had applied to licenced and also that he is a fit and proper person to hold the licence. As a result, the Tribunal set aside the appellant's decision and ordered that Mr Marino was to be granted the relevant licence under the Home Building Act. The Tribunal subsequently made an order that the appellant pay Mr Marino's costs of the proceedings before the Tribunal in relation to the issue of fitness and propriety and the costs application itself.
4. In the appeal from that decision by the appellant we found that the Tribunal had made errors on a question of law in its decision. We thus allowed the appeal and set aside the Tribunal's orders in both the substantive and costs decisions. As permitted by s 80(1)(d) of the NCAT Act we varied the original decision in substitution for the decision under appeal. We found that Mr Marino does not possess the required experience for the grant of the licence. We also found that he is not a fit and proper person to hold the licence.
5. It is against this background that the appellant claims its costs of the proceedings at first instance and of the appeal.

1. On 5 June 2024, eight days before the Tribunal hearing, the appellant sent a letter marked "Without Prejudice Save as to Costs" to Mr Marino's lawyers. The appellant describes this letter as being in the nature of a "Calderbank offer". The letter raised a number of "ongoing concerns" that the appellant intended to put before the Tribunal in relation to Mr Marino's fitness and propriety to hold a licence.
2. The letter went on to state that Mr Marino could consider making an application for a Tradespersons Certificate (for which he appeared to meet the requirements) and apply for a contractor licence after 30 August 2025 when he would have the requisite experience for the licence. The letter proposed that the parties sign consent orders that the proceedings be dismissed and that each party bear their own costs. The letter went on to state that, should the offer not be accepted and the appellant succeed in the proceedings, a costs order would be sought from the date of the offer.
3. Additionally, the letter stated that the appellant reserved the right to raise the issue of Mr Marino's fitness and propriety at the Tribunal hearing.
4. In its decision the Tribunal had found that Mr Marino was a fit and proper person to hold a licence. In the appeal, however, we decided that the Tribunal had made errors on a question of law in its determination of this issue. In the exercise of our powers under s 80(1)(d) to make a decision in substitution for that under appeal, we found that all of the allegations raised by the appellant concerning Mr Marino's fitness and propriety were made out.
5. The appellant therefore argues that it's offer was more favourable than the outcome ultimately achieved by Mr Marino and, if accepted, would have avoided the need for a hearing and subsequent appeal.
6. Both parties accept that an unreasonable refusal of a genuine offer of settlement may amount to special circumstances within the meaning of s 60(2) of the NCAT Act and may be a basis for awarding indemnity costs: Mendonca v Tonna [2017] NSWCATAP 176 at [59]- [60]; SHH Ltd v City of Parramatta Council (No 2) [2019] NSWCATAP 231 at [44]; Brunsprop Pty Ltd v Joanne Hay & Wes Davies [2015] NSWCATAP 152 at [21].
7. The principles relating to Calderbank offers were recently set out by the Appeal Panel in Colourrender (Australia) Pty Ltd v Sarkis [2023] NSWCATAP 250 at [34] with reference to the summary set out by Ward P in Abdi v Abdi (No 2) [2022] NSWSC 582 at [20]- [30]. These principles may be stated briefly to be (citations omitted):

(1) The purpose of costs awards is primarily compensatory not punitive and the discretion to be exercised in a manner which is primarily directed to the position of the successful party.

(2) However, there are circumstances in which special costs orders are warranted. One of these circumstances is where the Calderbank principles are applicable. The public policy underlying the making of special costs orders in such circumstances is the interest in encouraging settlement of litigation and discouraging wasteful and unreasonable behaviour of litigants.

(3) In determining whether an offer took effect as a Calderbank offer, the offer or the circumstances in which it was conveyed must indicate the intention that it was to be relied on as to costs if it were to be rejected or not accepted and a judgment more favourable than the offer be achieved, it being crucial to determine the manifested objective intention of the offeror.

(4) It is also necessary, to enliven the discretion to make special costs orders by reference to the rejection of a Calderbank offer, that the offer in question amounts to a genuine offer of compromise (that was it unreasonable for the party against whom the order is sought not to accept).

(5) The making of a valid Calderbank offer that is better than the result ultimately obtained at the conclusion of a contested hearing does not automatically result in an indemnity costs order, nor does it raise a prima facie presumption that such an order should be made.

(6) The party seeking the special costs order bears the onus of demonstrating that the rejection of the offer was "unreasonable" in all the circumstances of the case.

(7) Whether rejection of a Calderbank offer (or other offer of settlement) was unreasonable is an evaluative judgment to be made by reference to the terms of the offer and all the relevant surrounding circumstances and a finding of unreasonableness should not be made other than on clear grounds.

(8) The factors to be taken into regard when considering whether the rejection or non-acceptance of the offer was unreasonable include: the stage of the proceeding at which the offer was received; the time allowed to the offeree to consider the offer; the extent of the compromise offered; the offeree's prospects of success assessed as at the date of the offer; the clarity with which the terms of the offer were expressed; and whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it.

(9) Factors that have been found to be relevant in determining whether the rejection of a Calderbank offer was not unreasonable, and tending against such finding, have included: all relevant evidence not having been served at the time of the offer; the full parameters of the dispute remaining uncertain at the time of the offer; the offeror's case changing after the making of the offer; the inclusion of conditions in the offer; and the issues in dispute in the proceedings being complex.

1. The appellant submits that her offer contained in the 5 June 2024 letter was a Calderbank offer unreasonably rejected by Mr Marino. The essence of the offer was that the appellant would not press any argument that Mr Marino is not a fit and proper person to hold the hold the licence if he consented to the dismissal of the proceedings and that each party bear their own costs. Mr Marino submits that the offer was not a genuine offer of comprise.
2. Whether the offer is a compromise is difficult to assess in an administrative review context. This is particularly the case as, in order to succeed, an applicant in administrative review proceedings must generally satisfy certain legislative criteria. The argument is usually whether the applicant does or does not satisfy those criteria. While further evidence may demonstrate that an applicant does indeed meet the statutory requirements, it is rare that a decision maker will simply change their mind or offer a compromise based on the same set of circumstances.
3. What was on offer to Mr Marino was that the appellant would not pursue any allegations relating to Mr Marino's fitness and propriety if he walked away from the proceedings. It is not clear to us why this should be characterised as a "compromise" because, as Mr Marino points out, the appellant did not forgo anything in the letter. As was pointed out by Ward P in Abdi v Abdi at [25], an offer "that invites no more than a capitulation or surrender on the part of a party may well not be found to involve a genuine element of compromise". In any event, even if the offer embodied a compromise on the part of the appellant, we are not satisfied that Mr Marino's rejection of that offer was unreasonable in the circumstances.
4. Mr Marino had a statutory right under the Home Building Act to seek administrative review of the appellant's refusal decision under the Administrative Decisions Review Act 1997 (NSW) ("ADR Act"). At the time of application that decision was confined to whether Mr Marino met the experience requirements for the licence. The letter containing the offer was sent to Mr Marino on 5 June 2024, eight days before the Tribunal hearing. At this time evidence and submissions had closed. The letter raised for the first time concerns relating to seven allegations that Mr Marino may not be a fit and proper person to hold the licence. The offer was said to be open for two days until 7 June 2024. The appellant filed evidence by way of an affidavit in relation to the allegations on 11 June 2024 and provided further written submissions on the first day of the hearing on 13 June 2024 which addressed Mr Marino's fitness and propriety.
5. We agree with the Tribunal when it said that the fitness and propriety issue was raised late in the proceedings by the appellant. Furthermore, the allegations were set out briefly in the 5 June 2024 letter and no evidence had been filed by the appellant relating to this issue. The appellant argues that it was Mr Marino's own evidence that revealed the matters contained in the allegations in the letter and in those circumstances it could not be said that the matters were raised for the first time in the letter or the subsequent affidavit filed in the proceedings. While Mr Marino's own evidence drew the appellant's attention to various matters, it cannot be said that prior to the offer Mr Marino's fitness and propriety was a live issue that he should have been aware of. The only issue at that stage was whether Mr Marino met the experience requirements for the licence. In these circumstances, he was given a very short time to respond to the offer, being two days.
6. The assessment of an applicant's fitness and propriety is not a straightforward matter. As was stated by Toohey and Gaudron JJ in Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 388:

The question whether a person is fit and proper is one of value judgment. In that process the seriousness or otherwise of particular conduct is a matter for evaluation by the decision maker. So too is the weight, if any, to be given to matters favouring the person whose fitness and propriety are under consideration.

1. As their Honours recognised, whether a person is fit and proper requires a range of considerations to be taken into account in light of the activities in which the person is or will be engaged. In our view, at the stage the offer was made Mr Marino may well have believed he had an arguable case. As we noted in our decision, there was no malice or deliberate intention to Mr Marino's non-compliance with the requirements of the Home Building Act.
2. Taking into account the above matters, in particular that this was a walk away offer made late in the proceedings with little time given to accept it and which was based on matters not previously raised which involved some complexity, we are not satisfied that, on balance, it was unreasonable for Mr Marino to reject the offer at the time it was made.
3. As we have found that Mr Marino did not unreasonably refuse a settlement offer, we find that the refusal of the offer does not of itself amount to special circumstances.

Section 60(3) factors

1. The appellant also submits that special circumstances warranting an award of costs exist having regard to several of the relevant factors set out in s 60(3) of the NCAT Act: see [4] above.

Section 60(3)(b) - Unreasonably prolonged the proceedings.

1. The appellant argues that the refusal by Mr Marino to accept the offer unreasonably prolonged the proceedings as, had the offer been accepted, there would have been no hearing on 13 and 14 June 2024, no original costs application, and no appeal. She states that the appellant's refusal caused her to incur the time and expense of preparing for and conducting a two-day hearing, preparing costs submissions and then the preparation and hearing of the appeal.
2. As set above, we do not consider that it was unreasonable for Mr Marino to refuse the offer. Mr Marino had a statutory right to seek review of the appellant's decision to refuse the licence. That decision was based on the experience grounds. It was the appellant who raised the fitness and propriety issue before the Tribunal shortly before the hearing. The hearing in fact did not take longer than originally planned even though that issue was also dealt with.
3. It was also the appellant who appealed to the Appeal Panel. This is not a case where a party who lost at first instance pursued an unmeritorious appeal before the Appeal Panel. That the Appeal Panel found the Tribunal had made errors is not a matter that can easily be sheeted home to the applicant before the Tribunal. As a result, we do not consider that Mr Marino unreasonably prolonged the proceedings.

1. The appellant submits that our reasoning in the substantive decision (for example, at [102]-[109], [125]-[127] [156]) demonstrates that Mr Marino's case lacked a tenable basis in fact or law. Those paragraphs in our decision relate to errors which we found the Tribunal had made in its interpretation and application of the law and in how it had gone about its task. It is true that the Tribunal, in reaching the conclusions that it did, placed considerable reliance on the submissions of Mr Marino. What was in issue in the appeal, however, was not those submissions, but whether the Tribunal as the decision maker made errors on a question of law. We found that it did. Again, it is difficult to attribute the errors made by the Tribunal to Mr Marino.
2. Ultimately, in our decision in the exercise of our powers under s 80(1)(d) of the NCAT we have found against Mr Marino. On one view this may demonstrate that his claim had no tenable basis in fact or law which may amount to special circumstances. However, we do not consider the mere fact that Mr Marino was unsuccessful following the appellant's successful appeal necessarily demonstrates that his claim before the Tribunal was so hopeless that it was simply unarguable: see Chopra v Department of Education and Training (2019) 60 VR 505; [2019] VSCA 298 at [134]; The Owners Corporation of Strata Plan 4521 v Zouk [2007] NSWCA 23 at [45]. While those cases address dismissal of proceedings on the grounds that a matter is misconceived or lacking in substance, the views of the Court of Appeal in both matters are apposite. We are particularly mindful that Mr Marino was arguing his case on two bases - the experience requirements for the licence and fitness and propriety, the latter, as we have already commented, being a matter involving the exercise of a broad discretion.

1. The appellant submits that Mr Marino's submissions that the relevant Instrument did not set out the necessary experience for an applicant and should not apply because of the death of the Mr Marino's father caused the proceedings to be unnecessarily complex.
2. The appellant refers to our reasons at [72] - [82] where we stated: "as a matter of logic, the qualifications set out in Column 2 of "Table 4 - Superseded Qualifications", are superseded qualifications which must be held by an applicant for the licence". The Tribunal held that there were no prescribed experience requirements in the Instrument which Mr Marino had to meet. We found the Tribunal had misconstrued the Instrument and had erred in failing to apply it.
3. The construction of the Instrument relied upon by the Tribunal and referred to in our reasons at [72] to [82] was not a construction put forward by Mr Marino. His submissions and submissions in reply before the Tribunal proceeded on the basis that the Instrument is properly characterised as a policy document which must not be applied inflexibly. The Tribunal itself noted the Appeal Panel's decision in Commissioner for Fair Trading, NSW Department of Customer Service v Kalkan [2022] NSWCATAP 112 which set aside the previous line of authority to that effect and held the Instrument is binding.
4. This being a matter not propounded by Mr Marino, it is difficult to understand how it could have made the proceedings unnecessarily complex. Indeed, on the appeal Mr Marino conceded that Tribunal was in error on this ground: see [69] of our reasons.

Section 60(3)(e) - Misconceived or lacking in substance.

1. The appellant submits that our decision on the appeal confirms the proceedings should never have succeeded at first instance. She states that Mr Marino's application, premised on deficient evidence and misinterpretation of statutory requirements, was misconceived and lacking in substance.
2. We have set our views above as to whether Mr Marino's case could be said to be misconceived and lacking in substance and have found that it was not. In addition to the cases cited above we refer to the Appeal Panel's decision in Davis v NSW Minister for Health [2023] NSWCATAP 211 where at [52] the Appeal Panel said:

... in NCAT's administrative review jurisdiction, considerations of whether the initiating application is "not reasonably arguable" or "based on an untenable proposition of fact or law" generally do not arise. Provided the applicant is an "interested person", the subject decision is an "administratively reviewable decision" and any procedural requirements are met (e.g., making the application within the time prescribed by the relevant legislation: ADR Act, s 55(2)), the ADR Act entitles the applicant to apply to NCAT and seek administrative review of that decision. The applicant is not required to point to material which, if accepted, might support a finding that their challenge to an administratively reviewable decision is based on a "tenable proposition of fact or law" or is "reasonably arguable". The merit of the subject decision is irrelevant to whether an affected person is entitled to commence and to continue proceedings in NCAT's administrative review jurisdiction.

Section 60(3)(f) - Failure to comply with s 36(3) duty.

1. The appellant submits that in rejecting a reasonable offer and persisting with weak and complex arguments, Mr Marino failed to give effect to the guiding principle in s 36(3) of the NCAT Act of "facilitating the just, quick, and cheap resolution of the real issues".
2. Largely for the reasons outlined above in relation to the appellant's contentions that Mr Marino's case was misconceived and lacking in substance, that it had no tenable basis, that his claims were weak and that he unreasonably refused an offer of settlement, we do not consider that any conduct on the part of Mr Marino in relation to s 36(3) was egregious or that it would amount to special circumstances warranting a costs order.

1. We are unable to find that special circumstances exist to warrant making an order that Mr Marino pay the appellant's costs of the Tribunal proceedings from 13 June 2024 onwards or the Appeal Panel proceedings, let alone that costs be awarded on an indemnity basis.

(1) The parties having been given the opportunity to make submissions as to whether the Appeal Panel should dispense with a hearing, and being satisfied that the matter can be adequately determined in the absence of the parties, the Tribunal dispenses with a hearing pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW).

(2) Each party to pay their owns costs of the Tribunal proceedings and the appeal.

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.