Sorrento Bathrooms and Kitchens Pty Ltd v Wei Huang Wang

The respondent's submissions

1. The respondent filed submissions dated 17 June 2019 seeking an order for indemnity costs.
2. The respondent submits that the appeal was doomed to fail because it was brought out of time. The appellant was required to file its Notice of Appeal within 28 days of the reasons being published unless the Tribunal grants an extension: ss 40, 41 of the CAT Act and Rule 23 of the Tribunal Rules. The appellant filed its appeal 23 days out of time. The appellant did not provide any explanation as to why it did not file its Notice of Appeal in time. Nor did it seek an extension of time in which to do so.
3. The matter was listed before the Appeal Panel on 12 June 2019 at 2:15 pm. The legal representative for the appellant sought leave to withdraw the appeal. The application to withdraw was made on the basis that the appellant was of the view that the Tribunal did not have jurisdiction. The respondent submits that the appellant's position before the Appeal Panel was contrary to representations made at the call over and contrary to communications made to the legal representatives of the respondent the day before the hearing at 5:03 pm when the appellant sent an email in which he wrote: "our client reserves the right to proceed with the appeal before NCAT".
4. It is the respondent's submission that it is appropriate to award indemnity costs in circumstances where a party has: 1. maintained proceedings that had no real prospects of success; and 2. acted in wilful disregard to known facts or clearly established law; and 3. engaged in a relevant delinquency (Oshlack v Richmond River Council [1998] HCA 11 at [44]: "It may be true in a general sense that costs orders are not made to punish an unsuccessful party. However, in the particular circumstances of a case involving some relevant delinquency on the part of the unsuccessful party, an order is made not for party and party costs but for costs on an "solicitor and client' basis" or on an indemnity basis. The result is more fully or adequately to compensate the successful party to the disadvantage of what otherwise would have been the position of the unsuccessful party in the absence of such delinquency on its part."
5. The respondent contends the appeal had no reasonable basis and no prospects of success. This is supported by the appellant's admission on 12 June 2019 that the Appeal Panel had no jurisdiction. In circumstances where the appellant knew that the appeal had no merit, it ought not to have been made or ought to have been discontinued.
6. The respondent relies on a series of Calderbank offers. The respondent submits on 17 May 2019 it offered that the appellant discontinue the proceedings and in exchange, the appellant could remove its goods from the premises. The offer was open for 7 days and was characterised as a Calderbank letter. The offer was not accepted.
7. On 11 June 2019 at 5.09 pm the respondent informed the appellant that the appeal was misconceived. It offered that the appellant withdraw on the basis that each party "walk away", but still sought indemnity costs should the appeal proceed and the respondent be successful. This offer was also characterised as a Calderbank letter. In circumstances where the appellant knew the appeal had no merit it should have accepted the offers of 17 May or 11 June 2019.
8. Finally it is submitted that the appellant did not withdraw the appeal in a timely fashion. No communication was made to the respondent before the afternoon of 12 June 2019 that it was the appellant's intention to withdraw the appeal. The respondent incurred costs. It was represented by a solicitor and counsel and had an interpreter present. Had the appellant advised the respondent of its position the respondent could have saved costs incurred on the day of the hearing. In all of the circumstances the respondent seeks costs on an indemnity basis from the date of the appeal application and in the alternative from 17 May 2019 or, further in the alternative, from 11 June 2019.

The appellant's submissions

1. The appellant filed reply submissions dated 1 July 2019.
2. The appellant maintains that the Tribunal erred in determining the issue of jurisdiction and failed to properly consider the application of the Act. It is submitted the Tribunal had failed to consider the type of business that the appellant conducted, which was the supply and sale of household fixtures and plumbing supplies. Those categories are specifically outlined in Schedule 1 of the Act. Definitions of "retail shop businesses" contained in Schedule 1 should be construed broadly based on the decision of Manly Council v Malouf (2004) 61 NSWLR 394.
3. It is the appellant's contention that it is necessary to embark on an analysis of the actual use of the premises to determine whether the predominant use falls within one or more of the businesses prescribed by Schedule 1 and the Tribunal erred when it considered the intention of the parties at the time of lease formation.
4. Further, it is submitted the Tribunal did not consider or did not place any emphasis on section 3 of the Act which states that a retail shop is defined as premises that are used or proposed to be used wholly or predominantly for the carrying on of one or more of the businesses prescribed for the purposes.
5. Notwithstanding that the appeal was not heard, the appellant relies upon the Grounds of Appeal filed on 30 April 2019 as justification of the merits of the appeal. The appellant submits that it did not withdraw the appeal on the basis that there were no real prospects of success but rather on the basis that the respondent's conduct was such that the relief now required by the appellant is outside the jurisdiction of the Tribunal.
6. The appellant submits that the Calderbank offers are of no effect and that there was no delinquency in the appellant's decision to decline the offers made on 17 May and 11 June 2019. Indeed on 5 June 2019 a verbal offer to settle the proceedings was made by the respondent's solicitor and on 10 June 2019 the appellant received instructions to accept that offer for the removal of the goods on certain grounds. A file note (marked E) dated 5 June 2019 was attached to the appellant's submissions. It states as follows: …as a follow-up Philip says that his client is now agreeable to security money being paid into our trust account and not his. Amount to remain the same.… Advised Philip that we will seek instructions on security being paid into our trust account for 3 weeks period. Will notify him once we have instructions.
7. In a follow-up email dated 11 June 2019, the solicitor for the appellant wrote to the solicitor for the respondent in the following terms: I note our telephone conversation today at 4:30 pm in which you confirmed the above was in fact proposed as terms of settlement by you and that you now say you did not have instructions to seek a period of 3 weeks despite proposing that our client be agreeable to a three-week period. We sought instructions from our client based on your verbal offer and our client has agreed to those terms.
8. It is submitted that the respondent failed or neglected to inform the Tribunal of all offers and email correspondences relevant to the question of costs and that the respondent had represented to continue negotiations when in fact he had instructed counsel to contest the appeal. The intentions of the respondent were not genuine and not in accordance with the guiding principle outlined in section 36(3)(a) of the CAT Act. The appellant submits that special circumstances arise as to the conduct of the respondent and that no order as to costs should be made in favour of the respondent.
9. The appellant submits that the respondent should pay the appellant's costs of the proceedings on an indemnity basis, not to punish the respondent but rather to put the appellant in the position it would have been in had the appellant not been "forced into withdrawing the proceedings".
10. In the alternative, the respondent seeks an order that there be no order as to costs of the hearing and that the parties should pay their own costs of and incidental to the appeal.

Jurisdiction - Special circumstances

1. Section 60(1) of the NCAT Act requires parties to pay their own costs unless the Tribunal is satisfied that special circumstances warrant an award of costs: s 60(2).
2. Rule 38 of the Civil and Administrative Tribunal Rules 2014 (the Rules) modifies the application of s 60 in proceedings before the Consumer and Commercial Division of the Tribunal. Rule 38(2)(a) provides that, in proceedings where the amount claimed or in dispute is more than $30,000, the Tribunal may award costs in the absence of special circumstances.
3. In this matter, the proceedings at first instance were brought under the Retail Leases Act 1994. The original application form was completed by the appellant personally. In section 4A "What Order do you want" the applicant wrote "Section 44 Part 3". In Section 4B "Reasons for asking the above orders" the applicant wrote: "Return of possession of premises to tenant [sic]. To refrain [sic] the landlord of further forceful lockout with [sic] application to NCAT first". No application was brought where the amount claimed or in dispute is more than $30,000, and cl 38 was not enlivened.
4. The matter was listed for directions on several occasions. On 25 October 2018 the Tribunal noted that the issues in the matter were "complex" and that one issue in dispute was "whether the Tribunal had jurisdiction" and "whether or not there is a claim for damages." However, there is no evidence before the Appeal Panel that the appellant filed an amended application for a claim exceeding $30,000. We are therefore of the view that this is a case where Rule 38 did not apply and that the respondent must establish special circumstances before an order for costs can be made. Pursuant to Rule 38A(2) the Appeal Panel must find special circumstances when deciding whether to award costs in relation to the appeal.
5. The authorities as to what constitutes "special circumstances" are well settled. In CPD Holdings Pty Ltd t/as The Bathroom Exchange v Baguley [2015] NSWCATAP 21 the Appeal Panel stated that special circumstances do not need to be exceptional or extraordinary. At paragraph [32] of that decision the Appeal Panel stated: 'The authorities are consistent in stating that "special circumstances" are circumstances that are out of the ordinary; they do not have to be extraordinary or exceptional circumstances. Accordingly the question for decision is whether the conduct of the appeal by CPD is out of the ordinary and warrants the Appeal Panel ordering CPD to pay Mr and Mrs Baguely's costs.'
6. The respondent submits that there are special circumstances as referred to in section 60(3) of the NCAT Act, as the appellant has brought a claim with no tenable basis in fact or law for the appeal. The respondent submits: 1. The appeal had no reasonable basis and no prospects of success and the legal representative confirmed at the hearing that the Appeal Panel had no jurisdiction to hear the substantive application; 2. In circumstances where the appellant knew or ought to have known that the Appeal Panel had no jurisdiction, the appeal should have been discontinued as soon as the appellant formed that view, instead the appellant kept the appeal on foot in an attempt to "use it for an improper purpose".
7. We note the appellant's written submissions that the appeal was withdrawn because the "respondent's conduct is such that the relief now required for the applicant is outside the jurisdiction of NCAT." The appellant did not set out the relief "now required". We are of the view that, as the appellant conceded there is no jurisdiction, the appeal had no merit and should have been withdrawn in a more timely fashion.
8. In addition, the appeal was filed 23 days out of time and the appellant required an extension of time to appeal. The appellant did not seek an extension of time and provided no explanation for the delay.
9. The appellant informed us that he called the Tribunal to withdraw the proceedings on the morning of 12 June 2019, however no file note to that effect could be located. The appellant did not notify the respondent at any stage before the hearing that the appeal would be withdrawn.
10. We accept that such conduct by the appellant comes within the criteria in sections 60(3)(b) and (e) and (f) of the NCAT Act, namely: 1. That the appellant has been responsible for prolonging unreasonably the time taken to complete the appeal; and 2. The appeal was misconceived or lacking in substance; and 3. The appellant has refused or failed to comply with the duty imposed by section 36 (3) of the NCAT Act, which relevantly provides as follows: "(3) The "guiding principle" for this Act and the procedural rules, in their application to proceedings in the Tribunal, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings."
11. In our view, 'special circumstances' have been demonstrated within the meaning of section 60(2) of the NCAT Act in the specific areas identified above justifying a costs order in favour of the respondent.

Calderbank offers

1. The respondent seeks an order for costs on an indemnity basis. It submits that two Calderbank offers made on 17 May and 11 June 2019 (the first and second offer respectively) offered to settle the proceedings on terms that the appellant: 1. immediately discontinue the proceedings; 2. remove all stock and rubbish from the premises; 3. pay $12,600 into a trust account "as a pre-requisite" for being allowed on the premises of which $6300 may "possibly be returned at the conclusion of the works subject to and strictly conditional upon the works being completed within the timeframe and subject to an inspection by the Respondent"; 4. all of the works must be completed by 30 May 2019; 5. the respondent reserved its rights generally including the right to sue the appellant for the "residual debt" owed.
2. The appellant disputes that the terms of the offer were favourable, or even capable of being complied with in the short time frame proposed as the works included the removal of a mezzanine level. Regardless, the parties continued to negotiate and on 10 June 2019 the appellant's solicitor sought to accept the offer, only to be informed the offer had expired. On 11 June 2019 at 4.09 pm the respondent offered to "settle the NCAT Appeal on the basis that each party walk away." The offer was only open until "close of business today", in other words less than one hour, as the appeal was listed for hearing at 2.15 pm on 12 June 2019.
3. In Miwa Pty Ltd v Siantan Properties Pte Ltd (No. 2) [2011] NSWCA 344 at [8] (Miwa), Basten JA identified two questions relevant to whether costs should be awarded on an indemnity basis. They are whether: 1. there was a genuine offer of compromise; and 2. it was unreasonable for the offeree not to accept it.
4. We accept the appellant's submission that the offers were open for an unreasonable amount of time, and that the appellant was not able to remove the mezzanine level in the short time offered by the respondent. The appellant submits that the respondent made a verbal offer on 5 June 2019, which the appellant purportedly accepted on 10 June 2019, only to be told that there had been no instructions to make the offer.
5. We have had regard to the letter of 24 May 2019 addressed to the solicitor for the respondent. An offer was made to remove the mezzanine structure within two weeks. The appellant maintains that an agreement had been reached on that basis between the parties which the respondent breached. These matters tend against viewing the May Calderbank offer as offering any significant compromise. We are not satisfied that it was unreasonable of the appellant not to accept the May offer and indemnity costs should not be awarded as a result of the first Calderbank offer.
6. Negotiations between the parties were ongoing but stalled abruptly on 11 June 2019 when the appellant finally informed the respondent at 5.03 pm, 'our client reserves its right to proceed with the Appeal before NCAT'.
7. In these circumstances, the respondent was obliged to incur the cost of the hearing, including the cost of counsel and an interpreter, only to be told at 2.15 pm that the appeal was withdrawn. We are of the view that the email informing the respondent that the appeal would proceed, followed by a withdrawal with no prior warning was relevant delinquency within the meaning of Oshlack, above. Allowing the appeal to proceed on 12 June 2019 added significantly to the legal costs of the respondent. In our view, indemnity costs should be awarded for the preparation of the hearing, and for the appearance at the appeal.

Order

1. We order the appellant pay the respondent's costs of and incidental to the appeal as agreed or as assessed on the ordinary basis until 10 June 2019, and on an indemnity basis thereafter. 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: 12 July 2019