TA & JR O'Keefe Pty Ltd v Holroyd

NCAT Appeal Panel|2015-09-21

Introduction

On 18 June 2015, the Appeal Panel allowed an appeal against an order for costs that had been made against the appellant (the builder) in the Tribunal below, in circumstances where the Tribunal proceedings had been settled and consent orders made.
The background to the original application is set out in the reasons for decision on the appeal (TA & JR O'Keefe Pty Ltd v. Holroyd [2015] NSWCATAP 112 (18 June 2015). However, in brief, the application concerned a dispute in relation to a residential building contract. The contract was between the builder and the second respondent (the council). The contract works were undertaken to benefit the first respondent (the owner). The owner fell into dispute with the builder and commenced proceedings in the Tribunal. The council was joined to the proceedings on the application of the builder and the council's involvement in the matter was central to the parties reaching a settlement, save as to the issue of costs.
The Tribunal below made an order for costs in favour of the owner against the builder on the basis that it had been reasonable for the owner to commence proceedings. This order was the subject of the appeal proceedings. On appeal, the Appeal Panel found that in making an order for costs against the builder, the Tribunal had erred in its application of the test in Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 (the Aust-Homes Investments test).
The builder did not raise the Tribunal's application of the Aust-Homes Investments test as a ground of appeal in either the original Notice of Appeal, the amended notice of appeal or in its first written submission. Rather, it was raised for the first time during the hearing. The Appeal Panel allowed the ground to be raised in the appeal as it raised a significant question that required determination. The Appeal Panel found that the new ground of appeal 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.

Applications for costs

At the hearing of the appeal, each of the parties foreshadowed that they would make an application for costs depending on the outcome of the appeal. The builder sought an opportunity to be heard on costs following the determination of the appeal. Accordingly, the Appeal Panel made 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.
An application for costs and submissions in support of the application were received from each of the parties in accordance with the above directions. In addition, the owner submitted a submission in reply to the builder's application.
None of the parties objected to the issue of costs being determined on the papers. The Appeal Panel is satisfied that the issues for determination can be adequately determined by considering any written submissions or other documents or material lodged: s 50(2) of the Civil and Administrative Tribunal Act 2013 (the NCAT Act). The Appeal Panel has accordingly made an order dispensing with a hearing under s 50(1)(c) of the NCAT Act.

Builder's application for costs

The builder was successful on the appeal. In a submission dated 8 July 2015, the builder's counsel Mr Priestley SC submitted, in summary, that:

On appeal, costs are at the discretion of the Appeal Panel by virtue of the combined effect of s 60 of the NCAT Act and "Regulation 38 of the Regulations" (sic). (The Appeal Panel has assumed that Mr Priestley intended to refer to Rule 38 of the Civil and Administrative Tribunal Rules 2014 (the Rules)).
Costs should follow the event, so an order for costs should be made against the owner in favour of the builder.
Any costs order in favour of the second respondent (the council) should be made against the owner.
The fact that the appeal ground which was successful was raised late in the course of the appeal had no impact on the conduct of the matter by the owner.
The nature of the successful appeal ground was already the subject of the appeal.
The reasoning of the Appeal Panel supports the other grounds of appeal.

Owner's application for costs

The owner's application for costs is made in a submission dated 2 July 2015 prepared by the owner's counsel, Mr McCall, who submitted, in summary, that:

The builder should be ordered to pay the owner's costs in whole or in part.
Alternatively, there should be no order for costs between the builder and the owner.
An order for costs can only be made if special circumstances warrant an order for costs.
The builder's overall conduct of the proceedings has caused the owner's response to the appeal to be wasted.
The proceedings were determined on a point which had not been raised at any point by the builder until oral submissions at the hearing.
This had the effect of the owner wasting time, effort and costs in responding to the appeal as it was constituted up to the oral hearing.
The builder's conduct warrants an order that the builder pay all or at least part, of the owner's costs of responding to the appeal as originally constituted.

The owner's reply submission on costs dated 29 July 2015 responds to the builder's submission.

Council's application for costs

The Council's application for costs was made in its earlier submission on the appeal. A further submission dated 29 July 2015, prepared by Mr Roser of Counsel, states, in summary:

The builder should be ordered to pay the Council's costs on an indemnity basis, because the builder rejected Council's offer to the builder to consent to an agreed sum costs order to avoid the further expense of applying for and making submissions in relation to costs.
The builder's decision to seek an order for costs of the original proceedings against the council (when no such order had been sought below) means that the council was unable to enter a submitting appearance and was required to participate to a far greater extent in the appeal proceedings.
The imprecision in and discrepancies between the orders sought in the amended Notice of Appeal, the builder's written submissions and the builder's oral submissions at the hearing added to the complexity and expense of the council's response.
None of the orders sought against the council was achievable or appropriate.

Relevant principles

The general rule in relation to costs is that each party is to pay their own costs: NCAT Act s 60.
Costs may only be awarded if the Tribunal "is satisfied that there are special circumstances warranting an award of costs": NCAT Act, s 60(2). Subsection 60(3) specifies the matters to which the Tribunal may have regard when considering whether or not special circumstances exist. This subsection provides: (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.
The builder has submitted that Rule 38 of the Rules applies to the appeal and that costs should follow the event.
Rule 38 states: (1) This rule applies to proceedings for the exercise of functions of the Tribunal that are allocated to the Consumer and Commercial Division of the Tribunal. (2) Despite section 60 of the Act, the Tribunal may award costs in proceedings to which this rule applies even in the absence of special circumstances warranting such an award if: (a) the amount claimed or in dispute in the proceedings is more than $10,000 but not more than $30,000 and the Tribunal has made an order under clause 10 (2) of Schedule 4 to the Act in relation to the proceedings, or (b) the amount claimed or in dispute in the proceedings is more than $30,000.
Contrary to the builder's submission, Rule 38 does not apply to proceedings before the Appeal Panel when the Appeal Panel determines an application for costs of an appeal. Rather, s 60 applies: Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120. An order for costs therefore cannot be made unless the Appeal Panel is satisfied that special circumstances warrant such an order.
The meaning of "special circumstances" was considered by the Court of Appeal in Cripps v G & M Mawson [2006] NSWCA 84. This was in the context of the costs provision in s 88(1) of the Administrative Decisions Tribunal Act 1997. Santow JA stated at [60]: I consider that the Tribunal was in error in failing to conclude that special circumstances apply here. For this purpose it suffices that the circumstances are out of the ordinary. They do not have to be extraordinary or exceptional.

Builder's application

Although the builder was successful on appeal, the submission on costs does not identify any special circumstances that warrant an order for costs and no circumstances are apparent on the available material. In these circumstances, the Appeal Panel is not satisfied that there are special circumstances that would warrant an order for costs being made in favour of the builder.

Owner's application

The owner's central submission is that an order for costs should be made in favour of the owner because of the builder's conduct in running the appeal. In particular, the owner points to the builder's failure to raise the ground on which the builder was ultimately successful until oral submissions, claiming that as a result of this, the owner was put to unnecessary work and expense.
The difficulty with this submission is that the builder did not abandon its other grounds of appeal. It maintained those grounds at the oral hearing. The Appeal Panel did not find that there was no substance to any or all of the other grounds of appeal. Rather, the Appeal Panel determined that it was unnecessary for the Appeal Panel to make findings in respect of the other grounds. It is clear that the owner wanted to defend all of the grounds of appeal put by the builder. It therefore would have been necessary for the owner to prepare its case in respect of the other grounds, even if the application of the Aust-Homes Investments test had been raised prior to the hearing. There is nothing in the owner's submission that suggests the owner would have conceded the appeal had that point been argued in the builder's amended Notice of Appeal. The owner would therefore have been put to roughly the same amount of time and expense, even if the application of the Aust-Homes Investments test had been raised earlier.
In these circumstances, the Appeal Panel is not satisfied that the owner has established that there are special circumstances warranting an order for costs in her favour.

Council's application

The Council's application for costs is based on two arguments. The first is that the Council was required to participate in the appeal to a greater extent than it might otherwise have done because the builder sought a costs order against it when it had not done so in the Tribunal below. The second is that the manner in which the builder conducted the proceedings added to the complexity and expense of the council's response.
However, the building contract the subject of the substantive proceedings in the Tribunal was between it and the owner. Further, the council played a central role in the settlement of the proceedings. In these circumstances, the Appeal Panel is of the view that the council was always likely to be actively involved in the appeal in order to protect its interests. As for the builder's conduct of the appeal, it was not ideal. However, for the reasons set out in [20] above, the Appeal Panel is are not satisfied that the Council's response would have been significantly less complex or that the Council would have been put to less expense had the builder raised all of the grounds of appeal at an earlier point in time or had otherwise conducted the appeal more efficiently.
Overall, the Appeal Panel is not satisfied that the Council has established that there are special circumstances warranting an order for costs in its favour.

Conclusion

As the Appeal Panel is not satisfied that any of the parties has established the basis for an order for costs, it has determined to dismiss all applications for costs and has ordered that the parties are to pay their own costs of 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. 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: 21 September 2015

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Cases Cited (4)