Taylormade Residential Pty Ltd v Hoare

NCAT Appeal Panel|2021-06-24

Introduction

Taylormade Residential Pty Ltd (the builder) has filed an internal appeal against a costs decision, made in the Consumer and Commercial Division (CCD) of the Tribunal on 29 September 2020, in which it was ordered to pay the costs of proceedings brought against it by Matthew and Jodie Hoare (the homeowners) as applicants (the respondents in this appeal).
The costs related to home building proceedings commenced by the homeowners with respect to the construction of residential promises by the builder under a contract dated 15 August 2015.
For the reasons set out below, I have decided to allow the appeal.

The Tribunal proceedings and the decision

At practical completion of the building works on 22 August 2016, the homeowners were dissatisfied with the work and obtained an expert's report setting out defective work.
On 2 August 2017, the Department of Fair Trading issued a Rectification Order for 30 items to be completed by the builder by 8 September 2017. The owners refused to allow the builder back on site, at which point the Department of Fair Trading said that it could no longer assist and advised the homeowners of their right to take their dispute to the Tribunal.

Scope and nature of internal appeals

Internal appeals may be made as of right on a question of law, and otherwise with leave of the Appeal Panel: s 80(2) Civil and Administrative Tribunal Act 2013 (NCAT Act).
A decision to award costs in proceedings is an ancillary decision within the meaning of the NCAT Act: see the definition of "ancillary" in s 4(1): The Owners Corporation Strata Plan No. 63341 v Malachite Holdings Pty Ltd [2018] NSWCATAP 256 and CPD Holdings Pty Limited v Baguley [2016] NSWCATAP 103at [7]. Therefore, s 80(2)(b) applies and there is a right of appeal on a question of law. Otherwise leave to appeal is required.
In Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 the Appeal Panel set out at [13] a non-exclusive list of questions of law: 1. Whether there has been a failure to provide proper reasons; 2. Whether the Tribunal identified the wrong issue or asked the wrong question; 3. Whether a wrong principle of law had been applied; 4. Whether there was a failure to afford procedural fairness; 5. Whether the Tribunal failed to take into account relevant (i.e., mandatory) considerations; 6. Whether the Tribunal took into account an irrelevant consideration; 7. Whether there was no evidence to support a finding of fact; and 8. Whether the decision is so unreasonable that no reasonable decision-maker would make it.
The circumstances in which the Appeal Panel may grant leave to appeal from decisions made in the Consumer and Commercial Division are limited to those set out in cl 12(1) of Schedule 4 of the NCAT Act. In such cases the Appeal Panel must be satisfied that the appellant may have suffered a substantial miscarriage of justice on the basis that: 1. the decision of the Tribunal under appeal was not fair and equitable; or 2. the decision of the Tribunal under appeal was against the weight of evidence; or 3. significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with).
In Collins v Urban [2014] NSWCATAP 17 the Appeal Panel stated at [76] that a substantial miscarriage of justice for the purposes of cl 12(1) of Schedule 4 may have been suffered where: … there was a "significant possibility" or a "chance which was fairly open" that a different and more favourable result would have been achieved for the appellant had the relevant circumstance in para (a) or (b) not occurred or if the fresh evidence under para (c) had been before the Tribunal at first instance.
Even if an appellant from a decision of the CCD has satisfied the requirements of cl 12(1) of Schedule 4, the Appeal Panel must still consider whether it should exercise its discretion to grant leave to appeal under s 80(2)(b).
In Collins v Urban, the Appeal Panel stated at [84] that 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 taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare.

Should the appeal be determined without a hearing?

Section 50 (2) to (4) of the CAT Act provide: (2) The Tribunal may make an order dispensing with a hearing if it is satisfied that the issues for determination can be adequately determined in the absence of the parties by considering any written submissions or any other documents or material lodged with or provided to the Tribunal. (3) The Tribunal may not make an order dispensing with a hearing unless the Tribunal has first: (a) afforded the parties an opportunity to make submissions about the proposed order, and (b) taken any such submissions into account. (4) The Tribunal may determine proceedings in which a hearing is not required based on the written submissions or any other documents or material that have been lodged with or provided to the Tribunal in accordance with the requirements of this Act, enabling legislation and the procedural rules.
In this case both parties have indicated their agreement to the appeal being determined on the papers. Having reviewed all the materials I am satisfied that this is matter that can be determined in the absence of the parties by considering the materials lodged by them. The Appeal Panel therefore dispenses with a hearing.

Submissions and evidence

In deciding the appeal, I have had regard to the following: 1. The Notice of Appeal dated 26 October 2020; 2. The builder's submissions on appeal filed 14 December 2020, with attachments; 3. The homeowner's submissions on appeal filed 20 January 2021; 4. The builder's submissions in response filed 2 February 2021; 5. The preliminary orders/directions made by the Appeal Panel on 9 November 2020. 1 February 2021, and 12 February 2021; 6. The Tribunal's Notice of Order and reasons for decision dated 29 December 2020; and 7. The original application lodged on 24 July 2018.
It is to be noted that there is no "Reply to the Appeal" from the homeowners. The Tribunal's Registry has confirmed that there is no Reply, but there are detailed submissions in reply. Despite this difficulty I have proceeded to determine the issues in the appeal in accordance with the guiding principle in s 36 of the CAT Act that the Tribunal "is to facilitate the just, quick and cheap resolution of the real issues in the proceedings."
The homeowners initially sought orders on appeal fixing the costs of the proceedings below and on appeal. The parties have subsequently agreed to withdraw those submissions. On 18 February 2021 they wrote to the Tribunal in the following terms: The Appellant and the Respondent agree that all submissions relating to an application for lump sum costs contained in the Appellants and the Respondents appeal submissions, relating to both the originating application (HB 18/32377) and the Appeal (AP 20/45143), are withdrawn.
Consequently, I have disregarded all submissions with respect to lump sum or fixed costs made by the parties in deciding this appeal.

Notice of Appeal

The Notice of Appeal was lodged on 2 March 2021, which is within the 28 day time period specified in cl 25(4) of the Civil and Administrative Tribunal Rules 2014 (the Rules). The appeal has therefore been lodged within time.

Error of law.

First, the builder submits that rule 38(2)(b) of the NCAT Rules was not enlivened in the circumstances of the case, or if it was, the Tribunal erred by making a costs order.
Secondly, the builder submits that the Tribunal erred in law by concluding, for the purpose of determining "the amount claimed or in dispute" under rule 38(2)(b) of the CAT Rules, that the process - of lodging a claim - "determines the amounts in dispute."
Thirdly, the builder says that Tribunal erred in law by making an order for costs in circumstances where the issues in dispute had been resolved by consent orders, relying on Nichols v NFS Agribusiness Pty Ltd [2018] 97 NSWLR 691, per Basten JA at [2].
Further, the builder says that the Tribunal erred by finding that conduct the homeowners engaged in before the proceedings commenced, could not be taken into account, as disentitling conduct, when deciding whether to make a costs order. This, the builder submits is contrary to the principles set out by the High Court in Re Minister for Immigration and Ethnic Affairs: Ex Parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6. The builder adds that Tribunal's reasons for reaching the conclusion were inadequate.

Leave to appeal.

The builder also seeks leave to appeal, to the extent necessary, with respect to the Tribunal's conclusion that the amount claimed or in dispute was more than $30,000, which finding enlivened r. 38(2)(b) of the NCAT Rules.

Fresh evidence

The homeowners have filed a document in the form of a statement from their solicitor, dated 15 January 2021, in which he outlines the work done in and the course of the proceedings, and gives opinion evidence as to the professional costs incurred. Attached to that statement are costs agreements, statements of costs and a chronology. The purpose of the statement appears to be to establish the claim for the Tribunal lump sum costs to be fixed (since withdrawn). This is clearly how the builder viewed it as is evidenced from its submissions in reply.
I have taken the same view and regarded it as irrelevant to the costs issues now that fixed costs are not sought. I note insofar as the documents contains evidence of the history of the proceeding that might be seen as relevant to the issues in appeal, all that material was available to the homeowners well before the costs decision was made. There is no explanation as to why it is sought to be relied on its current form on appeal. Insofar, as the homeowners seek to rely on it on appeal, leave is refused now that the issue of fixed costs in not a live issue.

The amount claimed or in dispute

Rule 38 of the NCAT Rules provides: (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.
The same rule applies with respect to internal appeals from the CCD: see rule 38A which is concerned with the costs of internal appeals.
In Allen v TriCare (Hastings) Ltd [2017] NSWCATAP 25 the Appeal Panel considered the meaning of 'the amount claimed' and "the amount … in dispute" in rule 38(2)(b) in appeal proceedings. In doing so, the Appeal Panel derived assistance from the authorities that had considered the provisions of s 101(2)(r)(i) of the Supreme Court Act 1970 (NSW) which was concerned with "an appeal... that involves a matter at issue amounting to or of the value of $100,000 or more."
The Appeal Panel said, in a frequently cited passage, at [57] - Adapting these principles to the circumstances of the present appeals and having regard to the specific wording of r 38, it appears to us that in applying r 38(2)(b): (1) The determinative factor is the amount in dispute in each appeal, not the amount in dispute in the proceedings at first instance; (2) The phrase "in dispute" is to be construed as meaning truly in dispute or at issue or, inversely, not unrealistically in dispute; (3) Whether "the amount ... in dispute" in each appeal is more than $30,000 depends on whether there is a realistic prospect that in each appeal the wealth of the appealing party would be changed by more than $30,000 or, put another way, whether the right claimed by the appealing party, but denied by the decision at first instance, prejudices that party to an amount in excess of $30,000; (4) The fact that the value of the property the subject of any appeal exceeds $30,000 does not, of itself, mean that "the amount ... in dispute" in that appeal is greater than $30,000.
With respect to the amount claimed or in dispute in this case, the Tribunal noted that builder submitted that, at [17]: … that the amount really in dispute was in the order of $11,737. This, in the estimate of the respondent, is the total cost of works undertaken in November 2018 and January 2020 and also includes the estimated cost for the remaining works. Accordingly it is the respondent's position that the amount in dispute does not exceed $30,000.
On the other hand, the homeowner's position relevantly was that, at [22], the builder's: … submissions as to the value of the work should be rejected as it is unsupported by evidence. It is submitted that in a matter where the experts have been retained and each party has been legally represented it would be anomalous for there to be a presumption against the awarding of costs, Bonita v Shen [2016] NSWCATAP 159 at [73]. …. It is submitted that, having regard to the expert report served by the applicants, valuing the work in the vicinity of $60,000, it must be found that the claim as made did not unrealistically exceed $30,000. This amount was estimated after (emphasis added) the other items of defective work had been rectified by the respondent in late 2018, early 2019.
The Tribunal concluded, at [29 - 31] - 29 It is the lodging of the substantive application that is the "process set in motion or commenced" (see Allan v TriCare at [37]) and in my view it is that process that determines the amount in dispute. In the circumstances of this case, I am satisfied that the owners had the intention to seek a work order, and in the alternative sought compensation or damages for breaches of statutory warranties exceeding the sum of $30,000. Their intention to claim a money order, in the alternative, was made apparent from the email to the Tribunal seeking a money order and the "value of the work exceeding $100,000". 30 … 31 It is the respondent's argument that the value of that outstanding work determines the "value of the claim" or 'the claim as made" for the purpose of rule 38. The fact that the respondent values what it would cost itself to carry out the work, using its own labour and materials, is in my view not determinative of the amount claimed or in dispute. The damages for breach of statutory warranty were set out by the Bayliss and Worthington reports and the costs in dispute are those that may be charged by independent third party contractors, who charge for rectifying work adding the customary margins, set up costs and GST. The fact that the respondent could perform the work at cost, with its own labour and materials for less, is not a relevant consideration to determine the value of a claim "as made", unless the respondent has, at a contested hearing, established before a Tribunal of fact that the value of the damages for breach of statutory warranty, in this case limited to defective items 8, 11, 12 and 13 is less than $55,000.
On appeal, the builder argues that by determining the amount claimed or in dispute by reference to what the homeowners intended to claim at the commencement of the proceedings, and in the subsequent amendment of the claim to $100,000 four days later, the Tribunal fell into error. The Tribunal should have asked what was 'truly in issue' or, inversely, not 'unrealistically at issue.'
The homeowners submit that as there was no hearing on the merits, the Tribunal was not obliged to reach a conclusion as to the precise amount in dispute before it. The claim for a work order was amended to include an alternative claim for damages in excess of $100,000, four days after the claim was lodged, and before the builder was required to respond to it. The subsequent rectification work undertaken by the builder, they submit, demonstrates that the proceedings were justified. The Tribunal was not bound to accept the builder's costings. The Tribunal was entitled to prefer the Bayliss and Worthington report.
It is plain from paragraph 29 of the Tribunal's decision, that the Tribunal decided that in the circumstances the amount claimed or in dispute for the purposes of rule 38 (2)(b) of the NCAT Rules is to be determined by reference to the amount claimed or the value of the work order sought when the application was lodged. This is incorrect. Such an interpretation would allow applicants to bring themselves within the scope of rule 38(2)(b), simply by claiming an amount in excess of $30,000, irrespective of the fact that that their true claim is for less that that amount. Whether or not the $30,000 threshold in rule 38(2)(b) has been satisfied requires the Tribunal, in the light of the available evidence before it, to make an assessment of whether the amount truly in issue, or put another way, the true value of the work in issue, is more than $30,000.
This does not require the Tribunal to arrive at an exact figure for the cost of rectification or damages payable, but to make an assessment, in the light of the available evidence, as to whether the $30,000 threshold has been exceeded or not. If a detailed consideration of the available evidence is required to reach such a conclusion, then - as is the discussed below - the decision of the Court of Appeal in Nichols v NFS Agribusiness Pty Ltd [2018] 97 NSWLR 691 indicates that the Tribunal should decline to undertake that task. In those circumstances the usual rule in the Tribunal, found in s 60 of the NCAT Act, that each party bear their own costs, save in special circumstances, would apply. It could be argued that the difficulty of determining the issue in this case was such that the Tribunal should have declined to consider the application for costs under rule 38(2)(b), In the absence of relevant submissions form the parties addressing that issue, I have not considered that possibility further.
The builder also says that the Tribunal mischaracterised its evidence with respect to the amount of damages, by finding that the builder's costings was based on what it would cost it, using its own labour and materials, without an allowance for the 'customary margins, set up costs and GST'. That issue will be considered later when I turn to the builder's application for leave to appeal.

Should a cost order have been made when the proceedings had been resolved by consent orders?

The Tribunal, at [32 to 34], noted that the principles concerning whether or not a costs order should be made, when there has been no determination of the proceedings on the merits, are set out in the decisions of McHugh J in Ex Parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 and of Preston CJ in Kiama Council v Grant [2006] NSWLEC 96. Both cases are concerned with the exceptions to the usual course that follows where proceedings have been resolved without a hearing, which is that both parties bear their own costs.
In Lai Qin McHugh J explained, at [6-9], references removed: 6. In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order. 7. In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation. Thus, for example, in R v Gold Coast City Council; Ex parte Raysun Pty Ltd[, the Full Court of the Supreme Court of Queensland gave a prosecutor seeking mandamus the costs of the proceedings up to the date when the respondent council notified the prosecutor that it would give the prosecutor the relief that it sought. The Full Court said that the prosecutor had reasonable ground for complaint in respect of the attitude taken by the respondent in failing to consider the application by the prosecutor for approval of road and drainage plans. 8. Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. This is perhaps the best explanation of the unreported decision of Pincus J in The South East Queensland Electricity Board v Australian Telecommunications Commission where his Honour ordered the respondent to pay 80 per cent of the applicant's taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare. 9. 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. This approach has been adopted in a large number of cases[7].
Kiama Council v Grant [2006] NSWLEC 96, decided after Lai Qin, concerned enforcement proceedings in the Land and Environment Court, which had been settled by consent orders, save as to costs. Preston CJ heard an application for costs. Having reviewed a large number of cases his honour concluded that there are two types of cases which explain why orders for costs might be made in such circumstances. This distinction was made by Burchett J in One.Tel Limited v Commissioner of Taxation (2001) 101 FCR 548, at 6. It is one between cases : "… in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case there will commonly be lacking any basis for an exercise of the Court's discretion otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs."
Preston CJ considered Lai Qin an example of the second type of case. He summarised the principles arising from the second type of decided cases, at [80]: 80 The principles that emerge from these cases are that in a civil enforcement or judicial review case where there has been no hearing on the merits: (a) where one party effectively surrenders to the other party by: (i) discontinuing without the consent of the other party; or (ii) giving undertakings to the Court or submitting to the Court making orders against the party substantially in the terms or to the effect claimed by the other party; the proper exercise of the costs discretion will ordinarily be to make the usual order as to costs, unless there is disentitling conduct on the part of the other party; and (b) where some supervening event or settlement so removes or modifies the subject of the dispute that no issue remains except that of costs, the proper exercise of the costs discretion will ordinarily be to make no order as to costs unless: (i) one of the parties has acted so unreasonably that the other party should obtain the costs of the action; or (ii) even if both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried so that the party should obtain the costs of the action.
Having referred to Lai Qin and Kiama, the Tribunal found, at [35-37]: 35 In the instant case I am of the view that the respondent by consenting to the work order, although not surrendering the case, at the very least gives an undertaking to the Tribunal or submits to the Tribunal making orders against the respondent substantially in the terms or to the effect claimed by the applicants, namely the continued rectification of defective items 8, 11, 12 and 13 (see Kiama). 36 In these circumstances it is appropriate that the applicants, who have incurred costs to secure the complete and satisfactory rectification of the defective items caused by the other party be reimbursed. 37 In coming to my conclusion I must consider whether the applicants acted so unreasonably that the respondent should obtain the costs of the action or whether, even though both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. I have had regard to the purported disentitling conduct of the applicants as set out by the respondent. I am not persuaded that the conduct before proceedings can relevantly be taken into account when considering whether costs should be awarded. The fact that the applicants refused to allow the respondent or his contractor back on site in 2017 is in my view not relevant to the question of costs of the proceedings. I find that no delinquency can be attributed to the applicants which would disentitle the applicants from an order for costs in their favour.
The Tribunal, at [40], explained: 40 In my view, it is appropriate in these proceedings for the party who incurred costs, which were incurred as a result of the actions of the other party in the litigation, to be reimbursed, not as any punishment against the respondent but as some compensation for the costs the applicants necessarily incurred because the work order of the Department of Fair Trading was not complied with.
The builder's criticism of this part of the Tribunal's decision is twofold. With respect to the Tribunal's decision that a cost order should be made in proceedings that had settled, the builder says that: 1. following the principles in Lai Qin and Kiama and in the Court of Appeal decision in Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84; no order for costs should have been made consequent upon the consent work orders being agreed to and made; 2. the exception referred to by Preston CJ in Kiama at [80] did not apply in the instant case and there was no disentitling conduct by the builder; and, 3. this was a case in which there was a supervening settlement and neither of the exceptions referred to by Preston CJ applied.
The builder also submits that, if it is a case in which a costs order could be made, irrespective of the settlement, then the Tribunal erred by finding no delinquency on the homeowner's part, with respect to the homeowner's refusal to allow the builder on site to comply with the Rectification Order issued by the Department of Fair Trading.
The homeowners counter that the builder's failure to complete the works in accordance with the consent work order provided a sufficient basis for the Tribunal to make an order for costs against the builder, despite the fact that the proceedings had settled. The homeowners cited a series of cases where the general rule in Lai Qin has been departed from: see for example Saravinovski v Saravinovski [2020] NSWSC 1232 at [126] per Ward CJ. In Equity, The homeowners' submissions were silent with respect to the Tribunal's decision not to take into account their refusal to allow the builder on site to comply with the rectification order, and whether that conduct amounted to unreasonable conduct on their part.
In Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 Payne JA, with whom Meagher JA agreed, said, with respect to a consideration of the conduct of the parties in such circumstances, that, at [30]: 30 If both parties to a proceeding which has been settled without a hearing on the merits 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.
Payne JA also found, ay [32], that the approach of the Court when determining the costs issue, of reading more than 200 pages of affidavit evidence in order to do so, was in error. The same points were made by Basten JA at [8-9]: 8 Secondly, although it is possible to make an order for costs against one party if it can be shown that it has invited the litigation by its unreasonable behaviour, or has unreasonably pursued the litigation, such an order should only be made where that judgment is manifest by reference to known circumstances, not in dispute between the parties. If the question cannot be answered without reviewing large swathes of evidence and resolving, on a tentative basis, disputed questions of fact, the task should not be embarked upon. 9 Thirdly, if contrary to the views set out above, it was appropriate to investigate whether the applicants or the respondent had been unreasonable, either in their conduct prior to the proceedings, or in their conduct of the proceedings, the approach adopted was untenable. Thus, regard was had to the motives of the respondent in commencing proceedings, but no account was taken of the motives of the applicants in capitulating. …
Where, as here, the Tribunal is asked to make a costs order under rule 38(2)(b) in circumstances where the substantive proceedings have been resolved between the parties, apart from the issue of costs, the usual order is no order as to costs. However, the Tribunal may be persuaded that a costs order is appropriate where one party effectively surrenders to the other's claim; or where one party has acted so unreasonably that the other party should obtain their costs; or, where they have both acted reasonably and one party was certain to succeed in the proceedings.
In the instant case, in terms of the formulation of principle in Kiama, the Tribunal found that while the builder had not surrendered the case, it had, by agreeing to the consent orders, consented to the Tribunal making orders against it with respect to the rectification of outstanding defective items 8, 11, 12 and 13. The Tribunal did not refer to the first consent order made in November 2018, but the consent order made on 1 November 2019. Central to the formulation in Kiama is the requirement that the party surrender the case.
The Tribunal's finding that the builder had not surrendered the case, albeit it agreed to consent work orders being made, is inconsistent with the formulation in Kiama which the Tribunal purported to follow, when finding it could make an order for costs. The making of the consent work order on 1 November 2019 was not a capitulation, but an agreement for work to be done following a conclave and mediation in terms different to that claimed.
The original work order made by the Tribunal on 18 November 2018, however, bears hallmarks of a surrender. It required the builder to carry out rectification work in accordance with the Rectification Order made by the Department of Fair Trading on 2 August 2017. This was work which the homeowners had not allowed the builder to undertake before the proceedings issued.
The Tribunal found that the homeowners' refusal to allow the homebuilder back on site, to rectify the works in accordance with the Rectification Order made by the Department of Fair Trading, was not relevant to the question of costs.
As was made clear by the Court of Appeal in Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 the reasonableness of the conduct of the owners in commencing and continuing the proceedings is a relevant factor to the exercise of the costs discretion. In finding that the homeowners' refusal to allow the builder access to undertake the work specified in the work order was irrelevant, the Tribunal did not have regard to the fact that the homeowners' application in the proceedings sought a work order relating to the same defective work (and later damages). They sought a work order to the same effect as that they had previously - before commencing proceedings - refused the builder a chance to do. Such a refusal was, in the context of the proceedings as a whole, unreasonable and therefore relevant to the exercise of the costs discretion. Also relevant is the scheme established by the Home Building Act 1989 (NSW) under which remedying defective work in accordance with Fair Trading reports is an important part of the dispute resolution scheme. These are factors that the Tribunal should have considered when exercising its discretion. In the circumstances of this case, that conduct by the homeowners was relevant.
I have concluded that - assuming rule 38(2](b) of the NCAT Rules is enlivened - the Tribunal acted upon a wrong principle by making a costs order in the circumstances. I am also satisfied that the Tribunal erred by not taking into account, as unreasonable conduct, the homeowners' refusal to allow the builder to rectify works in accordance with the Rectification Order made by the Department of Fair Trading.
In the light of the above I am satisfied that the Tribunal's discretion to award costs miscarried in the sense described in House v R [1936] HCA 40; (1936) 55 CLR 499 at [5] per Dixon Evatt and Mc Teirnan JJ.

Leave to appeal

The builder also seeks leave to appeal against the Tribunal's finding that "the amount claimed or in dispute" in the proceedings exceeded $30,000. It argues that the decision was against the weight of the evidence.
Clause 12(1) of Schedule 4 of the NCAT Act relevantly provides: (1) An Appeal Panel may grant leave under section 80 (2) (b) of this Act for an internal appeal against a Division decision only if the Appeal Panel is satisfied the appellant may have suffered a substantial miscarriage of justice because: (a) (b) the decision of the Tribunal under appeal was against the weight of evidence, or … Note. Under section 80 of this Act, a party to proceedings in which a Division decision that is an internally appealable decision is made may appeal against the decision on a question of law as of right. The leave of the Appeal Panel is required for an internal appeal on any other grounds.
This provision was discussed in detail by the Appeal Panel in Collins v Urban [2014] NSWCATAP 17 in which the Appeal Panel concluded that - Accordingly, it should be accepted that a substantial miscarriage of justice may have been suffered because of any of the circumstances referred to in cl 12(1)(a), (b) or (c) where there was a "significant possibility" or a "chance which was fairly open" that a different and more favourable result would have been achieved for the appellant had the relevant circumstance in para (a) or (b) not occurred or if the fresh evidence under para (c) had been before the Tribunal at first instance. As to the particular grounds in cl 12(1)(a) and (b), without seeking to be exhaustive in any way, the authorities establish that: (1) … (1) The decision under appeal can be said to be "against the weight of evidence" (which is an expression also used to describe a ground upon which a jury verdict can be set aside) where the evidence in its totality preponderates so strongly against the conclusion found by the tribunal at first instance that it can be said that the conclusion was not one that a reasonable tribunal member could reach - Calin v The Greater Union Organisation Pty Ltd (1991) 173 CLR 33 at 41-42, Mainteck Services Pty Limited v Stein Heurtey SA [2013] NSWSC 266 at [153]. If in either of those circumstances the appellant may have been deprived of a "significant possibility" or a "chance which was fairly open" that a different and more favourable result would have been achieved then the Appeal Panel may be satisfied that the appellant may have suffered a substantial miscarriage of justice because the decision was not fair and equitable or because the decision was against the weight of the evidence. In order to show that a party has been deprived of a "significant possibility" or a "chance which was fairly open" of achieving a different and more favourable result because of one of the circumstances referred to in cl 12(1)(a), (b) or (c), it will be generally be necessary for the party to explain what its case would have been and show that it was fairly arguable. If the party fails to do this, even if there has been a denial of procedural fairness, the Appeal Panel may conclude that it is not satisfied that any substantial miscarriage of justice may have occurred - see the general discussion in Kyriakou v Long [2013] NSWSC 1890 at [32] ff concerning the corresponding provisions of s 68 of the CTTT Act and especially at [46] and [55].
Among the materials before the Tribunal when making its costs decision were the builder's submissions on costs dated 3 July 2020 with annexures. Those submissions addressed the costs of rectification undertaken by the builder in accordance with the consent orders and submitted that the cost of rectification on completion would be $11,737.02, comprised of: 1. rectification works carried out by the builder in December 2018 - and attached paid invoices from contractors who had done the work totaling $3,494.07. 2. rectification works carried out for the builder the builder in in December 2019 and January 2020 - and attached invoices from who contractors who had done the work totaling $6,903.95. 3. quotes for the remaining works as specified in David Hall's (an expert retained in accordance with the consent orders) final report: 1. from wide line windows for the repairs to window frames $549.00; and, 2. from the builder itself for completing works as per David Hall's report $790.00.
This is substantially below the $30,000 threshold set by rule 38(2)(b).
On the other hand, the homeowners relied on a report claiming the costs of rectification was in excess $55,000.
There is a significant difference between the amount claimed by the homeowners and the $11,737.02 pressed by the builder. In its decision the Tribunal dismissed the costings relied on by the builder, at [32]: The fact that the respondent values what it would cost itself to carry out the work, using its own labour and materials, is in my view not determinative of the amount claimed or in dispute. The damages for breach of statutory warranty were set out by the Bayliss and Worthington reports and the costs in dispute are those that may be charged by independent third party contractors, who charge for rectifying work adding the customary margins, set up costs and GST. The fact that the respondent could perform the work at cost, with its own labour and materials for less, is not a relevant consideration to determine the value of a claim "as made", unless the respondent has, at a contested hearing, established before a Tribunal of fact that the value of the damages for breach of statutory warranty, in this case limited to defective items 8, 11, 12 and 13 is less than $55,000.
The builder submits that the Tribunal did not give any proper consideration to the value of the rectification work performed, instead finding that it was not relevant to an assessment of the amount claimed or in dispute. The Tribunal concluded that the amount claimed or in dispute would exceed $30,000. The Tribunal did purport to assess the amount truly in dispute, just that claimed. Beyond asserting that the Tribunal was entitled to reach that conclusion, the homeowners' submissions do not address whether the Tribunal should have had regard to evidence of the actual cost of rectification.
The material relied on by the builder demonstrated the actual costs it had incurred in undertaking most of the rectification work. There were quotes for the uncompleted part of that work totaling $1,339. This was on top of actual expenditure of $10,398.02. Aside from those quotes, the invoices relied on by the builder for the completed works showed that they had been contracted out and completed.
The Tribunal referred to this material as "not determinative of the amount claimed" and later said that the cost of the rectification work was "not a relevant" consideration when determining the amount claimed for the purpose of r 38(2)(b).
The builder's material concerning the cost of rectification did not necessarily demonstrate the amount truly in dispute. Other evidence, such as expert assessments, was also relevant to the Tribunal's consideration when determining the amount truly in dispute. The Tribunals dismissal of the builder's costings as irrelevant resulted in the Tribunal's not having regard to substantial and probative evidence, relating to the actual cost of rectification, which was relevant to a consideration of the amount truly in dispute. If the Tribunal had not confined its consideration to the "amount claimed" and instead asked what the amount truly in dispute was, then it likely that the rejection of the builder's material would not have occurred.
The report relied on by the homeowners involved significantly more work - replacing the rear deck and affected windows - than the work ordered and that remaining to be done. The homeowners relied on the report to demonstrate the basis of the amount claimed.
Evidence of the actual costs expended in undertaking the rectification work is necessarily more persuasive than expert costings for a scope of work that significantly exceeded that agreed to be done following the mediation and consent orders. Even allowing for an additional, significant margin for profit plus GST, over and above the actual costings, it is difficult to see how the true costs of rectification in this case would reach anywhere near $30,000. Allowing a margin of 100% of the builder's costing, plus GST, would still result in an amount in truly dispute less than $30,000. To reject the evidence of the actual costs expended in complying with the consent work orders, and the fresh quotes for that remaining, was not reasonable in the circumstances.
Once the material relied on by the builder, with respect to the actual cost of rectification, is considered in assessing the true cost of rectification, the preponderance and weight of evidence points to the costs of rectification being less than $30,000. Given the evidence as to the actual costs involved, which the Tribunal disregarded, it was not open to the Tribunal to conclude that the true amount claimed or in dispute exceeded $30,000.
The Tribunal's conclusion that the rule 38(2)(b) threshold had been satisfied was against the weight of the evidence and may have resulted in a substantial injustice.

Conclusion

It follows from the above that I am satisfied that the Tribunal should not have departed from that general rule in s 60 of the NCAT that each party bear their own costs in this case because: 1. the true amount claimed or in dispute did not exceed the $30,000 threshold required to engage rule 38(2)(b) of the NCAT rules; and, 2. if it had exceeded the $30,000 threshold, it was not an appropriate case in which to make an order for costs.
I will grant the builder leave to appeal. The appeal will be allowed. The order made by the Tribunal on 29 September 2020 is set aside, and in lieu thereof there shall be no order as to costs, with the intent that each party will bear their own costs.

Costs of the appeal

The builder seeks no order as to costs with the intent that each party will bear their own costs of the appeal. The homeowners sought costs if they were successful on appeal. They are not.
I will make an order that there be no order as to costs of the appeal.

Orders

The Appeal Panel makes the following orders: 1. An oral hearing of the appeal is dispensed with in accordance with s 50(2) of the Civil and Administrative Tribunal Act 2013. 2. Leave to appeal granted. 3. Appeal allowed. 4. Order 2 made by the Tribunal on 29 September 2020 is set aside, and in lieu thereof there is no order as to costs, with the intent that each party bear their own costs of the proceedings. 5. No order as to the costs of the appeal.

I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Registrar 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: 24 June 2021

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