TA & JR O'Keefe Pty Ltd v Benita Holroyd and Clarence Valley Council

The Tribunal's decision on costs

1. On 1 April 2014 the Tribunal below ordered that the builder pay the owner's costs. The CCD had the power to do so pursuant to the transitional provisions set out in Schedule 1 of the Civil and Administrative Tribunal Act 2013 (the NCAT Act).
2. The Tribunal Member decided the issue under s 53 of the Consumer Trader and Tenancy Tribunal Act 2002 (the CTTT Act) and Regulation 20 of the Consumer Trader and Tenancy Tribunal Regulation. Reg 20 stated that in proceedings in the CTTT' s Home Building Division where the amount sought or in dispute exceeds $30,000, the Tribunal had the power to make an order for costs "as it sees fit". The decision to make an order for costs in favour of the owner was made essentially on the basis that she was the successful party in the proceedings, notwithstanding the "without admissions" caveat on the consent agreement. The Tribunal Member found that it was reasonable and necessary for the owner to commence and maintain her claim against the builder in order to achieve resolution of the application.
3. At [42] of the Reasons for Decision, the Tribunal Member cited Hill J's enunciation of what the Member referred to as "the guiding principle on which a determination of an award of costs should be supported" in Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 (Aust-Homes Investments): (3) In determining the question of costs it would be appropriate, however, for the Court to determine whether the applicant acted reasonably in commencing the proceedings and whether the respondent acted reasonably in defending them (SEQEB (supra)). (4) In a particular case it might be appropriate for the Court in its discretion to consider the conduct of a respondent prior to the commencement of the proceedings where such conduct may have precipitated the litigation: cf Sunday Times Newspaper Company Ltd v McIntosh [1933] NSWStRp 37; (1933) 33 SR NSW 371. We note that the above extract is found at [31] of Hill J's judgment.

Timing of appeal

1. For various reasons the builder filed its Notice of Appeal on 25 August 2014, which is outside the 28 day period specified in Rule 25(4)(c) of the Civil and Administrative Tribunal Rules 2014 (the Rules). On 17 October 2014, the Appeal Panel - differently constituted - extended time for the appeal under s 41 of the NCAT Act.

Material before the Appeal Panel

1. In determining the appeal, we have considered the oral submissions made at the hearing on 19 December 2014 and the following documents:

• The builder's Amended Notice of Appeal filed on 21 October 2014;
• The owner's Reply to Appeal filed on 7 November 2014;
• The council's Reply to Appeal filed on 3 November 2014;
• The builder's submission on the appeal filed on 18 November 2014;
• The owner's submission on the appeal and appeal bundle filed on 18 December 2014
• The council's submission filed on 2 December 2014;
• The council's submission filed on 20 January 2015;
• The owner's further submission filed on 23 January 2015 and
• The builder's further submission filed on 6 February 2015.

Internal appeals

1. The NCAT Act sets out the basis upon which appeals from decisions of the Tribunal may arise. This is an internal appeal under s 80(2)(b) of the Act. Such an appeal may be made as of right on any question of law, or with leave of the Appeal Panel on any other grounds.
2. Appeals on any other grounds from decisions made in the Consumer and Commercial Division are governed by Schedule 4, clause 12 of the NCAT Act. This clause provides that the Appeal Panel may grant leave to appeal if it 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 or that it was against the weight of the evidence, or because significant new evidence has arisen, being evidence that was not reasonably available at the time of the hearing. In this case, the builder did not appeal on the clause 12 grounds.
3. The parties made submissions as to whether the appeal was a new hearing or a re-hearing.
4. Pursuant to s 81(2) of the NCAT Act the Appeal Panel may exercise all of the functions that are conferred or imposed by the NCAT Act or other legislation on the Tribunal at first instance when varying, or making a decision in substitution for, the decision under appeal.
5. Accordingly, if an appeal is successful, the Appeal Panel may deal with the substance of the matter either as a re-hearing or a new hearing. However, the question does not arise unless an appeal is allowed.

Amended Notice of Appeal

1. As noted above, in the Amended Notice of Appeal the builder relies on grounds of appeal said to raise questions of law only. Leave to appeal pursuant to Schedule 4 clause 12 was not sought. At the hearing, the builder's counsel Mr Priestley sought to extend the appeal to the clause 12 grounds. As we have determined that the Tribunal made an error of law, it was unnecessary to determine this application.
2. The Amended Notice of Appeal sets out eleven grounds of appeal. These are: 1. The Member erred in finding that the applicant [that is, the owner] was the successful party. 2. The Member failed to consider properly or at all the issue of whether the applicant had the cause of action alleged in the points of claim filed. 3. The Member erred in relying on the affidavit of Peter Robert James sworn 21 June 2013. 4. The Member failed to consider properly or at all the fact that the applicant sought an order for the payment of money and never obtained such an order. 5. The Member erred in relying on the terms of settlement. 6. The Member erred in finding that the variations to the contract were invalid and in failing to consider the issue of estoppel in relation to the variations. 7. The Member failed to consider or properly consider the admissions made by the second respondent in its pleadings. 8. The Member failed to properly consider the participation of the second respondent in the costs allegedly incurred by the first respondent. 9. The Member failed to take into account that a significant proportion of the first respondent's alleged costs were incurred in dealings solely between the first respondent and the second respondent and beyond the control of the appellant. 10. The Member failed to consider the quantum of work to be done by the second respondent in comparison to the first respondent pursuant to the consent orders (without admissions) if consideration of those terms was appropriate at all.

The owner's Reply to Appeal

1. The amended grounds of appeal are relevantly replied to as follows: 1. In reply to Ground 1 the respondent states: (i) the respondent was the successful party and the Member made no error in finding so; (ii) the finding that the respondent was the "successful party" was a determination of fact and the appellant requires leave to appeal that finding: (iii) in the alternative in the event that the Member was in error the Member found it was reasonable and necessary for the respondent to have commenced proceedings with such finding giving grounds to the Member to make an order for the appellant to pay the respondent's costs of the proceedings. 2. In reply to Ground 2 the respondent states: (i) The Member was not obliged to determine whether the respondent "had the cause of action in the Points of Claim filed"; (ii) in the alternative, if the Member was so obliged then such determination would have found the respondent did have the course of action alleged in the Points of Claim; (iii) in the alternative, if the Member was in error then in the circumstances of the proceedings the respondent would still have been entitled to the order for costs in any event. 3. In reply to Ground 3 the respondent states: (i) The Member did not rely upon the affidavit of Mr James and expressly stated so; (ii) If the appellant's ground of appeal is based upon the allegation that the Member relied upon the affidavit notwithstanding his express statement that he did not do so, then the appeal is upon a question of fact and the appellant requires leave to conduct the appeal; (iii) If the member erred as alleged, then the respondent would have been entitled to the order for costs in any event. 4. In reply to Ground 4 the respondent states: (i) the Member gave sufficient consideration to the claim made by the respondent in the proceedings; (ii) the Member was not obliged to make a determination on that issue to properly determine the application for costs; (iii) it was not necessary for the respondent to claim a works order in the proceedings; (iv) in the alternative if the Member did so err, then in the circumstances of the proceedings the respondent would have been entitled to the order for costs in any event. (5) In reply to ground five the respondent states: (i) denies the Member erred as alleged; (ii) says further that it was appropriate for the Member to give consideration to the works agreed in the Schedule of Rectification Works dated 17 June 2013 for the Member to determine whether the respondent had been successful In the proceedings and also as to whether the respondent had acted reasonably in commencing and conducting the proceedings; (iii) the Member's reference to the Schedule in the Reasons for Decision was entirely consistent with the Schedule being marked "By Consent and Without Admission" and specifically the Member made no finding that the appellant admitted it was liable by agreeing to the Schedule; (iv) in the alternative if the Member did so err, then in the circumstances of the proceedings the respondent would have been entitled to the order for costs in any event. (6) In reply to ground six the respondent states: (i) the Member did not make a finding that "the variations to the contract were invalid" (ii) the appellant did not request the Member to "consider the issue of estoppel in relation to the variations" and cannot now raise this as a ground of appeal in these proceedings; (iii) in any event it would not have been proper for the Member to consider in detail the issue of estoppel as to do so would have been conducting a hypothetical trial of the proceedings. 7. In reply to the whole of the appeal the respondent states: (i) the appellant's right to appeal in this Tribunal are governed by section 80(2) of the Civil and Administrative Tribunal Act 2013 ("the Act"); (ii) the appellant can only appeal without leave on a question of law; (iii) the appeal is solely concerned with the Member's exercise of his discretion as to costs; (iv) as such the appeal is not an appeal on a question of law; (v) the appellant requires leave to conduct the appeal pursuant to section 80(2)(b) of the Act; (vi) the appeal does not satisfy the requirements of Clause 12 of Schedule 4 of the Act; (vii) leave should be refused. 8. In further reply to the whole of the appeal the respondent states: (i) the Member's decision was within the exercise of his discretion to order costs as granted by section 53 of the Consumer Trader and Tenancy Tribunal Act and clause 20(4) of the Regulations to that Act; (ii) the appellant must show that the Member erred in the exercise of that discretion in a way that warrants appellate intervention on the grounds set out in House v The King (1936) 55 CLR 499 at 504; (iii) The Member did not so err; (iv) The appeal should be dismissed. …..

Council's Reply to Appeal

1. In its Reply to Appeal, the council stated: The 2nd Respondent does not reply to the Appellant's grounds numbered 1-6 as these grounds do not affect the second respondent. As to grounds 7-10 the 2nd Respondent denies that the appellant is entitled to raise those grounds on appeal because: (a) they do not involve questions of law; and or in the alternative (b) they were not raised in submissions as to costs; (c) the 2nd Respondent would suffer prejudice if those grounds were now raised as it may have conducted the proceedings differently had those issues being raised. The second respondent will seek at the hearing an order that its costs of the appeal be paid by the appellants

Hearing

1. In addition to seeking to extend the appeal to the clause 12 grounds, during the hearing Mr Priestley - who also appeared for the builder in the Tribunal below - sought to raise a further ground of appeal, namely that there was no finding that the builder had ever acted unreasonably in defending the claim and that the Tribunal member failed to properly apply the test enunciated in Aust-Homes Investments.
2. Mr McCall, who appeared for the owner, submitted that although Aust-Homes Investments was seminal authority for the proposition that where parties settle the substance of a dispute and leave the question of costs to the court, one looks to the reasonableness of both parties, [41] to [43] and [68] of the Tribunal's reasons for decision make it apparent that the Tribunal did deal with the issue as to whether it was reasonable for the builder to maintain a defence of the proceedings. Mr McCall submitted that there was nothing in the grounds of appeal raising this as an error and that that part of the decision remained unchallenged.
3. Mr Roser, who appeared for the council, did not address the Appeal Panel orally because of time restrictions. However, he dealt with this issue in a written submission filed after the hearing.
4. In their oral submissions at the hearing Mrs Priestley and Mr McCall also addressed the grounds of appeal set out in the Amended Notice of Appeal. However, for the reasons that follow it has not been necessary to articulate their submissions or to make findings in respect of those grounds.

Issues

1. In determining the appeal, we have considered:

• Whether the new ground of appeal raised during the hearing should be considered;
• If so, whether the Tribunal made an error of law in respect of the new ground or any of the grounds articulated in the notice of appeal and
• If so, what orders should be made.

Should the new ground of appeal be considered?

1. As noted above, in oral submissions Mr Priestley sought to add a ground of appeal, namely that the Tribunal member erred in applying the correct test when determining costs. Mr Priestly submitted that in determining the costs issue, in accordance with the test in Aust-Homes Investments referred to in the decision, the Tribunal should have considered whether the builder had acted unreasonably in defending the proceedings as well as whether it was reasonable for the owner to commence the proceedings.
2. In oral submissions Mr McCall for the owner accepted that [66] of the Tribunal's reasons appears to be a finding that all parties acted reasonably. However, Mr McCall correctly submitted that there was nothing in the amended grounds of appeal challenging the failure of the Tribunal member to make a finding as to whether it was unreasonable for the builder to defend the proceedings. He contended that this ground of appeal had not been properly brought and that that part of the decision remains unchallenged.
3. In the submission filed on behalf of the owner following the appeal hearing, although Mr McCall contended that the new ground ought not be raised, he nevertheless dealt in detail with the substance of the claimed error: [7] to [9] of the submission filed on 23 January 2015.
4. Until 2009, justice was "the paramount consideration in determining any application by a party to amend its case": State of Queensland v J L Holdings (1997) 189 CLR 146. Parties, even in courts of strict pleading, were given relatively wide latitude to amend their case in order to do justice between the parties. Amendments were usually accommodated by courts, subject to any prejudice suffered by reason of the amendment being remedied by an order for costs against the amending party.
5. AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR175 (AON) is now the leading authority concerning the way in which amendments to cases should be dealt with, at least in courts of strict pleading. However, AON does not suggest that an unduly narrow approach should be taken to the real issues in controversy, even if those issues are not or not sufficiently expressed in the pleadings: AON [83].
6. The guiding principle of the Tribunal is to facilitate the just, quick and cheap resolution of the real issues in the proceedings: NCAT Act s 36(1). The Tribunal must implement this guiding principle when exercising any power under the Act or when interpreting procedural rules: s 36(2). The Tribunal is to act with as little formality as the circumstances permit and according to equity, good conscience and the substantial merits of the case, without regard to technicalities or legal forms: s 38(4). The Tribunal is also required to ensure that all relevant material is disclosed to it so as it to enable to determine all of the relevant facts and issues in the proceedings: s 38(6)(a).
7. It was with those principles in mind, that the Appeal Panel considered whether to allow the builder to raise the additional ground. The overriding purpose in such a case is to facilitate a just resolution of the real issues with minimum delay and expense: AON [90].
8. There is no doubt that Mr Priestley raised this ground very late in the proceedings. It did not feature either in the Amended Notice of Appeal or in Mr Priestley's initial written submissions, which had the purpose of putting the Tribunal and the other parties on notice of the case the appellant wished to propound. Rather, the matter was raised for the first time in oral argument before the Appeal Panel.
9. However, Mr McCall did not seek an adjournment in order to be able to deal with the new ground. Instead, he argued that the ground was not properly brought and should not be considered.
10. As the hearing progressed it became obvious that the hearing would not conclude on time. While Mr Priestley and Mr McCall had completed their oral submissions, Mr Roser elected to put further submissions in writing and directions were made in this regard. In his submission, Mr Roser dealt with the new ground. In response to Mr Roser's submission, Mr McCall had an opportunity, which he took up, to also address the further ground of appeal.
11. In those circumstances, the Appeal Panel finds that all of the parties had an opportunity to properly address the further ground. The additional written submissions were required in any event so as to allow all parties sufficient opportunity to deal with the matters raised on appeal and as such no further expense or inconvenience was caused by reason of the lateness of the ground being raised.
12. Where parties are represented in proceedings, amendments of this nature are not granted lightly. However, in this case, the new ground raised a significant question which requires determination. It did not occasion delay or give rise to any case management issues and there was no prejudice raised by the owner that could not be properly accommodated by an order for costs in her favour, should such an order be otherwise appropriate to make.
13. In the circumstances, we propose to deal with the error asserted by Mr Priestley on behalf of the builder, namely that the Tribunal Member failed to properly apply the test set out in Aust-Homes Investments.

Did the Tribunal err in applying Aust-Homes Investments?

1. At [42] of the reasons for decision the Tribunal Member correctly set out the principle enunciated in Aust Home Investments upon which an award of costs should be made in circumstances where there has been no hearing on the merits. The Tribunal Member correctly identified at [42] and [43] that a finding was required not only in relation to whether the owner acted reasonably in commencing the proceedings but also in relation to whether the builder acted unreasonably in defending the proceedings. The Tribunal Member referred at [43] to the owner's submission that the builder acted unreasonably in defending the matter.
2. However, in determining the matter with respect to the test in Aust Home Investments the Tribunal at [64] dealt only with whether the owner had been reasonable in commencing and maintaining the proceedings. At [66] the Tribunal Member referred to the negotiations between the parties and stated that it assumed "that the representatives have used their best endeavours to secure an early agreement to the dispute". The finding at [66] cannot amount to a finding that the builder acted unreasonably so as to support a finding of costs against it. Ultimately at [68] the Tribunal held that it was reasonable and necessary for the owner to maintain her claim. At [69] the Tribunal Member based his decision to make an order for costs in favour of the homeowner solely on a finding that she was the successful party in the proceedings.
3. Nowhere in the reasons for decision does the Tribunal Member deal with the second limb of the test in Aust Homes Investments; that is, whether the builder acted unreasonably in defending the proceedings.
4. Under clause 20 of the CTTT Regulation the Tribunal had a wide discretion in making a costs order. The principles to be applied in considering whether a discretion has miscarried are set out in House v. The King (1936) 55 CLR 499, at pp 504-505: 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. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.
5. The Appeal Panel is satisfied that in not making a finding in relation to the second limb of the Aust Homes Investments test which he had set out in his decision as the guiding principle to be applied, the Tribunal Member fell into legal error in the application of the correct legal test as identified by him.
6. As we have found a question of law arises in regard to this issue, we consider it unnecessary to determine the remaining grounds of appeal.

Appeal Panel's determination

1. Having found that the Tribunal erred in law, s 81(d) of the NCAT Act allows the Appeal Panel to make a decision in substitution for the decision made by the Tribunal. In making such a decision, s 81(2) states that the Appeal Panel "may exercise all the functions that are conferred or imposed by this Act or other legislation on the Tribunal at first instance".
2. The Appeal Panel therefore has wide powers, arguably including the power to conduct a new hearing on the basis of fresh evidence. However, we agree with the submission made by Mr Roser that given the time, effort, energy and human and financial resources that have already been expended in this matter, the application of the guiding principle set out in s 36(1) of the NCAT Act mandates that there should be a rehearing and not a new hearing of the costs application. Accordingly, we have determined not to remit the matter to the Tribunal and to conduct the matter as a rehearing of the application before the Tribunal rather than as a new hearing.
3. In respect of the issue of costs, we make the following findings:
4. The builder entered into a contract with the council to perform work at the owner's property in about August to November 2009. The work was to be performed at no cost to the owner as it was flood mitigation work. Relations between the builder and the owner deteriorated and on 21 July 2011 the owner commenced proceedings against the builder seeking an order for payment in the sum of $70,000.
5. During the course of preparation of the matter for hearing, the parties attempted to negotiate an outcome. The council was joined to the proceedings by the builder as it became apparent to the builder that the council might be affected by orders sought in the Tribunal and that its cooperation was required.
6. On 20 September 2012 a conclave of experts resulted in a significant narrowing of the issues in dispute. After that date, there were ongoing negotiations in respect of the extent of the work to be carried out, access by the builder and any necessary assistance to be provided by the council.
7. The application was listed for hearing on 17, 18 and 19 June 2013. After opening statements were made, the proceedings were adjourned to allow settlement discussions. The discussions continued overnight and concluded with an agreement between the parties for consent orders, not for the monies sought in the application or subsequently, but rather for rectification works to be carried out by the builder. No admissions as to liability were made.
8. In such circumstances, where there has been no determination on the merits of the case, ordinarily there would be no order as to costs. This is supported not only by Aust-Homes Investments, but also by the High Court in Re Minister for Immigration & Ethnic Affairs (Cth); Ex Parte Lai Qin (1997) 186 CLR 622 (Lai Qin), in which McHugh J stated: If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings.
9. However, if the owner had acted reasonably in maintaining the claim and the builder had acted unreasonably in defending the claim, an order for costs might, in the exercise of the discretion, be ordered in favour of the owner. To warrant an order for costs, it is necessary to determine whether firstly whether the owner acted reasonably in maintaining the claim and secondly whether the builder acted unreasonably in defending the claim.
10. The owner ultimately obtained the benefit of rectification works in terms dictated by the consent agreement. At the time she commenced proceedings the parties were at an impasse. Accordingly, we are satisfied the owner was reasonable in commencing the proceedings to break the impasse. We note that the applicant's original application was in the sum of $70,000, that the points of claim referred to $78,477.96 and that the sum sought was subsequently amended to $182,481.76. The fact that the quantum changed during the proceedings and that the owner ultimately accepted a work order does not of itself demonstrate that she was unreasonable in maintaining the proceedings. The owner consented to a conclave of experts and we are satisfied that she negotiated in good faith with the other parties to achieve a compromised outcome. In those circumstances, we find that the owner acted reasonably in maintaining the proceedings.
11. As to whether the builder acted unreasonably in defending the proceedings, we note that the builder negotiated an outcome in the proceedings more favourable to it than that originally sought by the owner; that is, the builder obtained a rectification order part of which was to be funded by council. We are satisfied that the builder also subjected itself to the conclave and the negotiation process in good faith. In those circumstances we find that the builder did not act unreasonably in defending the proceedings.
12. There is no doubt that all parties to the proceedings might have resolved the matter sooner than when the matter was listed for hearing. However, the fact that the hearing time was usefully taken up achieving a negotiated settlement where all parties compromised their position is not of itself any evidence of unreasonableness in not doing so sooner. Furthermore the evidence does not establish that any one party was responsible for the matter not resolving sooner. In those circumstances, we find that the appropriate costs order in accordance with the principles set out in Aust-Homes Investments and Lai Qin the proper exercise of the discretion is that there is no order as to costs.
13. The Appeal Panel notes that the builder made an application for an order that council pay the owner's costs. We have already determined that this appeal should be dealt with as a re-hearing and not as a new hearing.
14. In any event, the builder made a decision not to seek such an order costs against the council in the Tribunal below. Where a decision was made not to make the application before the Tribunal below, this would ordinarily tell against the granting of such an application before the Appeal Panel, even if a determination was made to deal with the matter as a new hearing. Absent evidence to the contrary and given that the builder had the benefit of legal representation throughout the proceedings, the Appeal Panel is not minded to infer that the decision not to apply for an order against the council was anything other than a deliberate decision. Accordingly, the application for a costs order against the council is refused.

Costs of the appeal

1. All parties have made applications for costs depending on the outcome of the appeal. The builder seeks an opportunity to be heard on costs following the determination of the appeal. Accordingly, we make the following directions: 1. Each party to file and serve within 21 days of the date of publication of these reasons any application for costs and submissions in respect of the application. 2. Any submissions in response to such an application are to be filed and serve any submissions within 14 days. 3. The determination of any such application is to be made without a hearing, on the papers, unless a party objects to that course, in which case a directions hearing will be held to consider the objection. 4. Written submissions on costs are not to exceed three pages.

Orders

1. The appeal is allowed.
2. Orders 1 and 3 made by the Consumer and Commercial Division on 1 April 2014 are set aside.
3. In lieu thereof, there is no order as to costs in HB11/35746.
4. Any applications for costs of the appeal are to be dealt with in accordance with the directions given at paragraph 60 of the reasons for decision. 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: 18 June 2015