Staniland v Integrity New Homes Pty Ltd

Preliminary issue - which costs rule applies?

1. Each party prepared submissions on the basis that s 60 of the Civil and Administrative Tribunal Act 2013 (the NCAT Act) is the relevant and operative provision. Section 60 relevantly provides: "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."
2. Thus, the respondent submitted that there were "special circumstances" within the meaning of ss 60(3)(a), (c) and (g) of the NCAT Act. They submitted that the appellants' conduct in bringing the appeal and rejecting the respondent's repeated offers entitles the respondent to an order for costs in its favour. The respondent submits that the appellants were repeatedly put on notice by the respondent that they had failed to address or even consider the "Discretion issue" which was the crux of their appeal.
3. On the other hand, in summary, the appellants agreed that with the Appeal Panel's preliminary view on costs, and submitted that the respondent had failed to establish "special circumstances".
4. Upon receipt of the parties written submissions, the Appeal Panel formed the preliminary view that r 38A of the Civil and Administrative Tribunal Rules 2014 (NCAT Rules) applied, and that the applicable costs rules were those contained in s 53 of the Consumer Trader and Tenancy Act 2001 (CTTT Act) and reg 20 of the Consumer Trader and Tenancy Regulation 2009 (CTTT Regulation). This has the consequence that, as the proceedings were in respect of an 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. The starting point for the award of costs would therefore be "the ordinary rule" that a successful party is entitled to the costs: see Oshlack v Richmond River City Council [1993] HCA 11; (1998) 193 CLR 72 per McHugh J at 97 and Thompson v Chapman [2016] NSWCATAP 6 at [69].
5. As neither party had addressed submissions to that question, and had prepared their submissions on the basis that s 60 of the NCAT was the costs rule applicable to the appeal, we had the matter listed for a short hearing on 6 December 2017.
6. At that hearing, in summary, Ms Wilde for the respondent accepted that r 38A applied, the costs were to be determined in accordance with the CTTT Act and CTTT Regulation and that costs were at large. She said she still relied on her written submissions as matters warranting a special order as to costs, namely that the respondent's costs by paid by the appellants on the indemnity basis.
7. Mr Mack, for the appellants, also accepted r 38A applied, but for reasons different to those advanced by the Appeal Panel. In particular, he submitted Sch 4(2)(b) was the relevant source of power for the Tribunal at first instance to award costs function and therefore r 38A(1)(b) operated to regulate costs in the appeal proceedings.
8. However, the appellants did not accept that the respondent was entitled to an award of costs. In summary, Mr Mack submitted that the Tribunal's discretion had miscarried, in that the Tribunal determined the issue of costs on the incorrect basis. He described this as the "anterior legal question" that the Tribunal had to determine, and submitted that his client was successful on this point.
9. In reply, Ms Wilde submitted that the Appeal Panel had to consider the "core issue" that was decided by the Appeal Panel in the Decision. The purpose of the appeal was to overturn the decision of the Tribunal; the practical outcome of the appeal was that the appellants were unsuccessful.

Consideration

1. In our view, reg 20(4) of the CTTT Regulation applies in determining costs of the appeal because of r 38A.
2. Rule 38A provides, in terms: 38A COSTS IN INTERNAL APPEALS (1) This rule applies to an internal appeal lodged on or after 1 January 2016 if the provisions that applied to the determination of costs in the proceedings of the Tribunal at first instance (the "first instance costs provisions") differed from those set out in section 60 of the Act because of the operation of: (a) enabling legislation, or (b) the Division Schedule for the Division of the Tribunal concerned, or (c) the procedural rules. (2) Despite section 60 of the Act, the Appeal Panel for an internal appeal to which this rule applies must apply the first instance costs provisions when deciding whether to award costs in relation to the internal appeal.
3. The expressions "enabling legislation", "'exercise' a function" and "function" are defined in s 4 of the Act as: "enabling legislation" means legislation (other than this Act or any statutory rules made under this Act) that: (a) provides for applications or appeals to be made to the Tribunal with respect to a specified matter or class of matters, or (b) otherwise enables the Tribunal to exercise functions with respect to a specified matter or class of matters. "exercise" a function includes perform a duty. "function" includes a power, authority or duty, and
4. As accepted by the parties in the Decision, the relevant costs rules for the proceedings at first instance were found in s 53 of the CTTT Act and reg 20 of the CTTT Regulation. Section 53 relevantly provided that subject to that section and the regulations, the parties in any proceedings were to pay their own costs (s 53(1)), but that the Tribunal may, in accordance with the regulations, award costs in relation to any proceedings (s 53(2)).
5. The costs rule at first instance (s 53 CTTT Act/ reg 20 CTTT Regulation), is different to the costs rule on appeal (s 60 NCAT Act). The question we need to determine is whether, as provided in r 38A, the costs rules differ because of the operation of enabling legislation or the Division Schedule, Sch 4. This is because the procedural rules (namely, the Civil and Administrative Tribunal Rules 2014 (the NCAT Rules)) do not regulate the costs of the proceedings at first instance, a matter dealt with in the principal reasons for decision in this appeal.
6. The enabling legislation that provides for the making of the original claim in this instance was the Home Building Act 1989 (the HB Act). Part 3A of that Act deals with the resolution of building disputes and building claims. Division 4 of part 3A deals with the jurisdiction of the Tribunal in relation to such disputes and claims. Division 5 deals with the powers of Tribunal in determining such disputes and claims, and s 48O relevantly provides as follows: (1) In determining a building claim, the Tribunal is empowered to make one or more of the following orders as it considers appropriate: (a) an order that one party to the proceedings pay money to another party or to a person specified in the order, whether by way of debt, damages or restitution, or refund any money paid by a specified person, (b) an order that a specified amount of money is not due or owing by a party to the proceedings to a specified person, or that a party to the proceedings is not entitled to a refund of any money paid to another party to the proceedings, (c) an order that a party to the proceedings: (i) do any specified work or perform any specified service or any obligation arising under this Act or the terms of any agreement, or (ii) do or perform, or refrain from doing or performing, any specified act, matter or thing. (2) The Tribunal can make an order even if it is not the order that the applicant asked for.
7. However, that section, does not give power to the Tribunal to award costs in respect of application made under that Act. Further, no other section of the HB Act gives such a power.
8. Rather, the relevant legislation which enables the Tribunal to make an award of costs is s 53 of the CTTT Act together with reg 20 of the CTTT Regulation. It is the CTTT Act and CTTT Regulation.
9. While the CTTT Act and CTTT Regulation do not enable the original home building application to be made, they do "otherwise enable the Tribunal at first instance to exercise functions (namely a power to award cost) with respect to a specified class of matters (namely home building applications)" and therefore falls within the definition of "enabling legislation".
10. Consequently, the CTTT Act and CTTT Regulation is, in the present context, legislation which provides "first instance costs provisions" which are different to s 60 of the NCAT Act.
11. Therefore, r 38A(2) requires the Appeal Panel to apply these rules in determining costs of the appeal.
12. Alternatively, as the appellants submitted, the cost rules differ because of the Division Schedule.
13. In this regard, the functions assigned to the Consumer and Commercial Division include those functions under the HB Act: Sch 4 sub cl (3)(1).
14. In addition, Sch 4 sub cl(3)(2)(b) provides: (2) Subclause (1) extends to: … (b) any functions conferred or imposed on the Tribunal by or under this Act or enabling legislation in connection with the conduct or resolution of proceedings for the exercise of functions allocated by that subclause (including the making of ancillary and interlocutory decisions of the Tribunal).
15. Consequently, because the power to award costs under the CTTT legislation: 1. Is a function conferred or imposed on the Tribunal in proceedings at first instance by or under Sch 1 of the NCAT Act and enabling legislation, and 2. Differed to those provisions in s 60 of the NCAT Act because of the Division Schedule, r 38A(2) requires the application of the costs rules that apply under the CTTT legislation.
16. Regardless of which analysis is preferred, it is clear that the cost rules under the CTTT apply to costs of the appeal.
17. It follows that because the amount in dispute was greater than $30,000, the Appeal Panel "may award costs in relation to the proceedings in such circumstances as it thinks fit": see reg 20(4) CTTT Regulation.

Respondent's submissions on what costs order should be made

1. The respondent provides a series of correspondence between its solicitors and the appellants in support of its application for costs, namely: 1. A letter dated 12 January 2017. This letter is a letter from the appellants' solicitors to the respondent's solicitors indicating that they had been instructed to file a Notice of Appeal. In the interests of resolving the matter without the need for a further appeal, they indicated that the appellants were prepared to accept the respondent paying the appellants' costs (below) of $115,000, alternatively costs as assessed on a party/party basis. 2. A letter dated 13 January 2017. This is the respondent's response to the letter above. The respondent submits that the appellants failed to properly particularise or identify any serious error in the Tribunal's decision, states that the appellants failed to enunciate any ground that might properly found an appeal, rejected the appellants' offer, and indicated that it would rely on the letter to found an application for indemnity costs of the appeal. The offer was open for 7 days. 3. A letter dated 1 February 2017. This is a further letter from the respondent to the appellants, written after the Notice of Appeal had been received. The respondent states that the grounds of appeal failed to deal with or raise any issue warranting the Appeal Panel to overturn the Tribunal's discretionary decision as to costs. The respondent offered to allow the appellants to dismiss the Notice of Appeal, and to pay the appellants the sum of $2,500 in respect of the appellants' costs of the appeal. That offer was open for seven days and made in accordance with the well-known principles of Calderbank v Calderbank [1975] 1 All ER 333. 4. A letter dated 15 January [sic - March] 2017. We note that while this letter is dated 15 January 2017, it refers to correspondence between the parties dated 1 February 2017 and 9 March 2017. We assume the correct date is 15 March 2017. In this letter, the respondent renews its offer contained in its letter of 1 February 2017, the renewed offer being open for acceptance to 20 March 2017, a period of 5 days. 5. A letter dated 21 March 2017, responding to the letter above. The appellants indicate that they are prepared to resolve the matter with a hearing if the respondent pay the appellants' costs of the hearing below (HB 12/51025) as assessed on a party/party basis, the appeal is dismissed and each party bear their own costs of the appeal.
2. The respondent seeks an order that the appellants pay their costs of the appeal on an indemnity basis from the commencement of the appeal proceedings and/or from any date the Appeal Panel sees fit. In the alternative, the respondent seeks an order that the appellants pay their costs on the ordinary basis, save for paying the respondents' costs in respect of ground 3 of the appeal (which was abandoned the day before the hearing of the appeal) on the indemnity basis, and each party paying their own costs in respect of the "transitional provisions" issue.

Appellants' submissions on what costs order should be made

1. In summary, the appellants agree with the Appeal Panel's preliminary ruling on costs.
2. The appellants submit that the Tribunal is not a court, and that the principles of Calderbank v Calderbank should not be "mechanically applied": Jubian v Clark (No 2) [2016] NSWCATAP 153 at [32]. There was no conduct of the appellants which could be classed as unreasonable in the present circumstances.
3. Further, the appellants say that the appeal was disposed of reasons different to those advanced by the parties. The appellants also submitted that, as the Appeal Panel found, there was an error of law which they were entitled to pursue and have corrected.

Consideration

1. As stated above, in the present appeal the Appeal Panel may award costs in such circumstances as it thinks fit. This is because the amount in issue is more than $30,000.00 and reg 20(4) of the CTTT Regulation applies to this appeal.
2. Where a court or a tribunal is conferred with the discretion to award costs, such discretion must be exercised judicially and not capriciously: Oshlack per Gaudron and Gummow JJ at [22] and McHugh J at [65]. The fundamental rationale for the awarding of costs is that such an award is compensatory, not punitive: Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534.
3. The application of these principles to proceedings in this Tribunal and factors which might affect the exercise of discretion was set out in Thompson at [69] and following. At [72] the Appeal Panel said: The factors to be considered in awarding costs in a particular case are not to be confined as to do so would constrain the general discretion. However it is clear from the authorities that factors that might influence whether the usual order for costs should apply and, if so, to what extent include: (1) Whether, by reason of the relative success of the parties on different issues and the time taken to determine those that an order for costs based on issues should be made: see for example Bostick Australia Pty Ltd v Liddiard (No 2) [2009] NSWSCA 304; and (2) Whether, by reason of the nature of the proceedings the usual rule should otherwise be displaced in whole or in part: see Oshlack v Richmond River Council per Gaudron and Gummow JJ at 41 - 44.
4. In addition, where an offer of compromise is made, the failure to accept the offer may be a factor relevant to whether a court or tribunal should make a different order for costs.
5. As has been noted by the Justice Beazley, President of the Court of Appeal of the Supreme Court of New South Wales in her paper Calderbank Offers, Australian Lawyers Alliance Hunter Valley Conference 14-15 March 2008: 16. The discussion which surrounds Calderbank offers is customarily couched in terms of indemnity costs. The party making the 'successful' Calderbank offer, whether plaintiff or defendant, usually makes an application for indemnity costs However, the correct principle is that a Calderbank offer may entitle a party to a different costs order, other than that costs follow the event. To that extent, the order made will be advantageous costs order. In the case of a successful plaintiff who has also made a Calderbank offer, the advantageous order will be an order for indemnity costs, usually from the date the offer was made.
6. In Thompson, the Appeal Panel referred to the authorities concerning the use to which "Calderbank" offers might be put in the context of a special order for costs. At [91], the Appeal Panel said: It is common ground that the form of the first offer and second offer were what is known as "Calderbank" offers. From cases such as SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37], Miwa Pty Ltd v Siantan Properties Pty Ltd (No2) [2011] NSWCA 344 and Nu Line Construction Group Pty Ltd v Fowler [2012] NSWSC 816 at [48]. The following principles can be derived in respect of whether a special order for costs should be made: (1) there must be a real and genuine element of compromise; (2) the refusal must be unreasonable; (3) the reasonableness in rejecting an offer must be considered at the time the offer is made, not with the benefit of hindsight; (4) relevant factors in relation to whether the rejection was unreasonable include: (a) the stage of the proceedings at which the offer was received; (b) the time allowed to consider the offer; (c) the extent of the compromise offered; (d) the offeree's prospects of success, assessed at the date of the offer; (e) the clarity with which the terms of the offer were expressed; (f) whether the offer foreshadowed an application for indemnity costs in the event of each rejection.
7. These factors might also be relevant on the question of whether a costs order should be made in circumstances where the Tribunal was otherwise disposed to make no order for costs because of what has occurred in a particular case.
8. As stated above, our initial view was that each party should pay their own costs.
9. As we outlined in our reasons dated 21 July 2017, one of the issues that arose on appeal was whether the Tribunal had correctly dealt with the costs application by applying the provisions of s 60 of the NCAT Act. This issue had not been identified by the parties. However, each of the parties file submissions on this aspect and, ultimately, both parties agreed that the CTTT cost provisions apply: Decision at [14].
10. Consequently, the only issues which the Appeal Panel were required to deal with were whether the amount in issue was more than $30,000 (a requirement for the operation of reg 20(4) and whether the decision to allow the appellants only 65% of its costs in the proceedings at first instance was in error.
11. However, each of the parties' submissions in the substantive appeal in part focused upon s 60 of the NCAT Act and the factors which might constitute special circumstances and their relevance to the exercise of discretion both under s 60 and r 38 of the NCAT Rules. That is, costs were incurred by both parties in dealing with a matter irrelevant to the disposition of the appeal. As we have outlined above, this again happened in the context of the application for costs in the appeal.
12. In short, some of the costs which each party incurred arose in consequence of their own misunderstanding of the provisions of relevant legislation, although in fairness, a contributing factor was likely the Tribunal's decision at first instance.
13. This factor counts against making any award for costs.
14. On the other hand, as set out above the respondent made several offers in an attempt to settle these proceedings. The significant offers are those made on 1 February 2017 and, we would infer, on 15 March 2017. Each of these offers was on similar terms, namely that the appellants consent to dismissal of their appeal and the respondents would pay the appellants' cost of the appeal in the sum of $2500.00.
15. By the time the second offer was made, namely 15 March 2017, the respondent had provided its Reply to Appeal. The Reply to Appeal is dated 13 February 2070. However, the respondent had not provided its written submissions in opposition to the appeal, those submissions originally being due on 28 March 2017 in accordance with directions made 14 February 2017. The respondent's written submissions were dated 5 April 2017, the Tribunal file indicating they were filed with the Tribunal on 10 April 2017. In any event, these submissions were provided after the second offer had expired.
16. The Reply to Appeal challenged the grant of any leave to appeal, asserted that the issue of costs was a discretionary matter. The respondent said the Tribunal was correct in its determination that the amount in issue was less than $30,000 and took into account relevant factors in making its decision. In any event, whether or not s 60(4) of the NCAT Act applied (that issue being a live issue at the time the Reply to Appeal was filed) no different outcome would have been arrived at to that under r 38.
17. In our view, it could not be said that the appellants were unreasonable in failing to accept these offers at the time they were made. This is because: 1. They were open for a short period of time; 2. In respect of the first offer, the respondent had not been filed a Reply to Appeal and was only open for 7 days; 3. In respect of the second offer, while a Reply to Appeal had been filed that asserting the Tribunal was correct in its conclusion that the amount in issue was less than $30,000 and that the discretion had not miscarried, the respondent had not then filed submissions in reply and the offer was only open for 5 days.
18. While the respondent, on both occasions, offered to pay the appellants' costs of the appeal in the amount of $2500, the offers made did not contain any compromise in respect of the substantive issue in the proceedings in terms of the issues the parties had identified at that stage. Rather, the respondent simply said the appeal should be dismissed because the grounds of appeal were unmeritorious.
19. Further, both parties were of the mistaken view that s 60 of the NCAT Act and r 38 of the NCAT Rules applied to this dispute. As such, a costs order could have been made whether or not the amount in issue was greater than $30,000. The situation would have been quite different if the parties had identified the CTTT legislation as the source of power to make an order for costs. This is because a different regime applied under the CTTT legislation when deciding what, if any, costs that might be recovered: see s 53 and reg 20(2) and (3) of the CTTT Regulation.
20. It follows that we are not satisfied that circumstances have been established that would warrant a special order for costs, nor are we satisfied that these offers provide a basis for making an award in favour of the respondent that the appellants pay all of the respondent's costs of the appeal as agreed or assessed on an ordinary basis.
21. However, it seems to us that the respondent, in its correspondence, has consistently asserted that the Tribunal properly assessed the evidence and the history of the proceedings when it made an order for the respondent to pay the appellants 65% of their costs. As we determined on appeal, and despite the appellants' written submissions dated 4 August 2017 at par [14] suggesting the contrary, the facts recorded at [56] of the Decision relevant to the exercise of the Tribunal's discretion in making the costs order at first instance were not challenged on appeal.
22. This question was resolved by us in favour of the respondent, in consequence of which the appeal was dismissed.
23. While the parties made submissions about issues that had no relevance and while the respondent lost on the issue of whether the amount in dispute was less than $30,000, the substance of the appeal was whether or not the discretion miscarried.
24. As stated above, costs are compensatory in nature. Also, where there is a general discretion, the successful party is ordinarily entitled to the costs, unless there is disentitling conduct. In deciding what, if any, order should be made the Appeal Panel is able to have regard to the success of the parties in relation to each issue and to the fact that both parties failed to properly address the relevant legislation regulating costs, the subject of the dispute.
25. Weighing these matters, and notwithstanding our preliminary view that each party should pay their own costs, ultimately the respondent was successful on the appeal and should be entitled to recover some of its costs.

Order

1. For the above reasons, the appropriate order in this case is that the appellants pay 50% of the respondent's cost of the appeal, as agreed or assessed on an ordinary basis.

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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: 22 January 2018