Smith v Giro Construction Pty Ltd

Grounds of Appeal and submissions of the parties

1. In his Notice of Appeal, Mr Smith sought leave to appeal on the basis that the costs decision was not fair and equitable because he was successful on the dominant issues in the proceedings, namely, whether Giro Constructions installed the floorboards in a defective manner, whether Giro Constructions' actions or inactions were causative of the floorboards being defective; and whether Giro Constructions was entitled to rely on a defence under s 18F of the HB Act. Mr Smith also contended that the monetary size of his claim did not lengthen the proceedings or impact on the hearing preparation by Giro Constructions and the decision, being in the nature of a work order, did not allow the Tribunal to make a direct comparison between the amount Mr Smith claimed and the amount he was awarded.
2. In accordance with the Tribunal's directions, Mr Smith filed submissions on 19 June 2015. These submissions expanded on the grounds of appeal, setting out the legal authorities on which Mr Smith relied in advancing his arguments. Mr Smith contended that the Tribunal had erred in exercising its discretion, noting that the principles for reviewing costs decisions of the Tribunal are those laid down in House v R (1936) 55 CLR 499. Costs are compensatory. The decision should therefore be set aside because the Tribunal was guided by the irrelevant consideration of whether Mr Smith's claim was "inflated" and failed to take into account the following relevant considerations: 1. Mr Smith had succeeded on all of the dominant issues in the case; 2. The length of the trial was not extended in any way as a result of the size of Mr Smith's claim; and 3. Giro Constructions' preparation was not affected by the size of Mr Smith's claim given it adduced no evidence on the question of quantum.
3. Mr Smith contended this disclosed an error of law from which he was entitled to appeal as of right. In the alternative, leave to appeal should be given because the decision was not fair and equitable for the reasons set out in his Notice of Appeal. Mr Smith sought orders that the Appeal Panel set aside the decision and substitute a decision that Giro Constructions pay all of Mr Smith's costs.
4. In reply Giro Constructions contended that the "inflated claim was the major reason that an early commercial settlement could not be reached" between the parties and this: …contributed to a situation, which is unfortunately ongoing, where legal and other costs for all of the parties are now several times the cost of repair of the allegedly defective work.
5. This was a matter that was relevant and, as such, the exercise of the discretion did not miscarry.
6. Weyitin Trading was not affected by the costs appeal and therefore made no submissions.

Nature and scope of the Appeal - legal principles

1. An award of costs in Tribunal proceedings is an ancillary proceeding for which leave is required unless the appeal from the ancillary decision is on a question of law: s 4 and s80(2)(b) Civil and Administrative Tribunal Act 2013 (NSW) (CAT Act). Schedule 4, clause 12 of the CAT Act provides that the Appeal Panel may grant leave to appeal against a decision of the Consumer and Commercial Division only if the Appeal Panel is satisfied the appellant may have suffered a substantial miscarriage of justice because the decision of the Tribunal under appeal was not fair and equitable, the decision of the Tribunal under appeal was against the weight of evidence, or significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with).
2. The principles to be applied by an Appeal Panel in determining whether or not leave to appeal should be granted are set out in Collins v Urban [2014] NSWCATAP 17 and were summarised at [84] as follows: The general principles derived from these cases can be summarised as follows: (1) In order to be granted leave to appeal, the applicant must demonstrate something more than that the primary decision maker was arguably wrong in the conclusion arrived at or that there was a bona fide challenge to an issue of fact: BHP Billiton Ltd v Dunning [2013] NSWCA 421 at [19] and the authorities cited there, Nakad v Commissioner of Police, NSW Police Force [2014] NSWCATAP 10 at [45]; (2) Ordinarily it is appropriate to grant leave to appeal only in matters that involve: (a) issues of principle; (b) questions of public importance or matters of administration or policy which might have general application; or (c) an injustice which is reasonably clear, in the sense of going beyond merely what is arguable, or an error that is plain and readily apparent which is central to the Tribunal's decision and not merely peripheral, so that it would be unjust to allow the finding to stand; (d) a factual error that was unreasonably arrived at and clearly mistaken; or (e) the Tribunal having gone about the fact finding process in such an unorthodox manner or in such a way that it was likely to produce an unfair result so that it would be in the interests of justice for it to be reviewed.
3. Mr Smith contended that the failure of the Tribunal to take into account the matters referred to in par [9] above and the finding that his claim was "inflated" was not fair and equitable and was so unreasonable and unjust that leave should be given and the decision should be set aside.
4. The Appeal Panel in Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 considered the requirements for establishing an error of law giving rise to an appeal as of right. Relevantly, the Appeal Panel in Prendergast gave examples of matters that would constitute questions of law at [13] to [21] as including whether a wrong principle of law had been applied and whether the decision-maker failed to take into account a relevant consideration or wrongly took into account an irrelevant consideration (citing Minister for Aboriginal Affairs v Peko-Wallsend Limited [1986] HCA 40; (1986) 162 CLR 24).
5. In summary, there will be an error of law if the decision-maker failed to take into account a consideration it was bound to take into account. Determining what is to be taken into account when making a decision is a matter of construction of the statute conferring power. Whether a decision-maker has taken into account an irrelevant consideration will also be guided by the construction of the statute. As noted by Mason J in Peko-Wallsend at 40: In the context of judicial review on the ground of taking into account irrelevant considerations, this Court has held that, where a statute confers a discretion which in its terms is unconfined, the factors that may be taken into account in the exercise of the discretion are similarly unconfined, except in so far as there may be found in the subject matter, scope and purpose of the statute some implied limitation on the factors to which the decision-maker may legitimately have regard.
6. The substantive proceedings were lodged under the Consumer, Trader and Tenancy Tribunal Act 2001 (NSW), being the legislation that was in force at the relevant time. In accordance with s 53 of that Act, the usual order is for the parties to bear their own costs (s 53(1)); however, cl 20 of the Regulation to that Act specifically provides that where the amount claimed or in dispute is more than $30,000 "the Tribunal may award costs in relation to the proceedings in such circumstances as it thinks fit."
7. It was in accordance with this power under cl 20 that the Tribunal made the costs decision. Accordingly, where the amount claimed or in dispute is more than $30,000, the discretion to award costs under cl 20 is unfettered and the Tribunal is not bound to take into account any mandatory considerations.
8. Despite this, in exercising its discretion the Tribunal was required to act judicially and to have regard to the general legal principles governing costs. In our view, it would be an error of law for the Tribunal to fail to do so.
9. In Ohn v Walton (1995) 36 NSWLR 77 (cited and recently followed in Qasim v Health Care Complaints Commission [2015] NSWCA 282) the Court of Appeal held that the principles to be applied by the Medical Tribunal in the exercise of its discretion to award costs under reg 27 of the Medical Practitioners Regulations, which conferred a wide discretion to order costs analogous to cl 20, are similar to those applied by a court in similar circumstances, namely costs should follow the event unless the circumstances of the case require the exercise of a discretion not to do so.

Consideration

1. As a general rule, costs are compensatory and should follow the event unless the Court orders otherwise (Oshlack v Richmond River Council (1998) 193 CLR 72).
2. As noted already, Mr Smith succeeded in the substantive proceedings by having a work order made in his favour. Thus, he was successful on the issue of liability. Mr Smith was also successful on quantum, albeit at a reduced sum. While Mr Smith had pursued a claim in the vicinity of $100,000, the value of the work order made in his favour was in the vicinity of $27,000.
3. In examining the costs decision it is clear that this was a significant factor for the Tribunal. Indeed, this factor appears to be the only explanation or stated reason as to why the Tribunal determined to award Mr Smith, who had succeeded in liability and quantum, only 10% of his costs. It is regrettable that this issue is not further expanded upon or explained in the decision.
4. On one reading of the reasons it could be inferred that the Tribunal took the view that Mr Smith was "unsuccessful" on the issue of quantum because the value of the $27,000 work order he was awarded fell far short of the $100,000 he claimed.
5. Even if we were to infer that this was the reason for the costs decision, where there are multiple issues in a case, the Court does not generally attempt to differentiate between the issues on which a party was successful and those on which it failed (Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304).
6. Where, however, a Court is minded to differentiate between the issues on which a party succeeded and those on which it failed, a successful party should only be deprived of costs if the unsuccessful issues were clearly dominant or severable; having regard to the overall significance of the unsuccessful issues to the outcome; the time they occupied during the hearing, and so far as can be determined, in preparation (Short v Crawley (No 40) [2008] NSWSC 1302; Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 at (63)-(66)).
7. There is nothing in the Tribunal's reasons, nor have we been taken to anything in the evidence before the Tribunal or, indeed, in this Appeal, to suggest that the Tribunal considered these issues or that it was open to the Tribunal to come to a conclusion that these issues were applicable so as to modify the usual position of Mr Smith being entitled to his costs in full. For instance, there was reference in the Tribunal's reasons to failed settlement negotiations. The reasons refer to a settlement offer that was declined by Giro Constructions "for its own reasons." While the reasons are not entirely clear, there appears to be criticism of failed settlement process. Relevantly, and despite this criticism, the reasons do not explain why Mr Smith's costs should be so significantly reduced or why Mr Smith should be deprived of the benefit of the usual order.
8. Furthermore, by simply stating that Mr Smith's claim was "inflated" without any further elaboration, it is open to the Appeal Panel to infer that the Tribunal failed to take into account that Mr Smith succeeded completely as to liability on the only issue in dispute in the substantive decision; and that ultimately he succeeded in having a work order with a quantum value of some $27,000 awarded on that sole issue in dispute.
9. Further, there is nothing in the Tribunal's reasons, nor have we been taken to anything in the evidence before the Tribunal, to show that the "inflated" claim was a dominant or severable issue; or occupied a significant time of the hearing or the preparation of the hearing.
10. The unequivocal fact is that there was a hard fought dispute between the parties as to whether the floorboards were defective, an issue that on the material before the Appeal Panel, does not appear to have been the subject of concession by Giro Constructions and on which Mr Smith succeeded.
11. As observed in Obieta v Australian College of Professionals Pty Ltd [2014] NSWCATAP 38 at [75] "an appellate tribunal should not lightly interfere with the primary tribunal's decision." The Appeal Panel referred to the relevant principles laid down by Dixon, Evatt and McTiernan JJ in House v R as follows: 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.
12. However, in light of the above it is difficult to accept that the general rule that costs should follow the event does not apply.
13. We find that the Tribunal failed to appropriately apply the relevant legal principles in assessing costs as between Mr Smith and Giro Constructions and thereby erred in exercising its discretion to award Mr Smith only 10% of his costs.
14. Having found an error of law, leave to appeal is not required. We nonetheless note that if leave to appeal was required, we would have given leave on the basis that the decision was not fair and equitable because it discloses an injustice that is reasonably clear.
15. Under s 81(1)(c) of the CAT Act, the Appeal Panel may "make such orders as it considers appropriate in light of its decision on the appeal," including orders to set aside the decision under appeal and substitute another decision in its place. Having regard to the matters set out in these reasons, the Appeal Panel sets aside the costs decision and substitutes a decision that Giro Constructions pay Mr Smith's costs as agreed or assessed.

Orders

1. The appeal is allowed.
2. The decision of the Tribunal made on 15 April 2015 is set aside.
3. The Giro Constructions to pay Mr Haydn Smith's costs as agreed or assessed.

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

Amendments 01 October 2015 - Coversheet - amended case title Paragraph [6] - changed heading "Decision under appeal" to "Decision at first instance" Paragraph [22] - added "(cited and recently followed in Qasim v Health Care Complaints Commission [2015] NSWCA 282)" 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: 01 October 2015