Terence Eve and Lindy Eve v John Boyd t/as Kalana Homes

The applicants' case on costs 4The applicants entered into a contract with the respondent on 25 February 2010 for the construction of a dwelling at xxxxx Woodrising, NSW. Following completion in or about March 2011 the applicants identified a series of defects. The applicants requested and the respondent returned to rectify the defects. When this was not done to their satisfaction the applicants complained to the Department of Fair Trading. 5The current proceedings were commenced on 14 November 2014. The applicants filed an application against the respondent and as originally particularised, the applicants sought damages for breach agreement and breach of statutory warranties pursuant to section 18B of the Home Building Act 1989 in the sum of $102,732. The report of Pink Slip Building Reports filed with the application form squarely raised the issue of encroachment and the amount claimed was particularised as TBC 'to be confirmed'. 6The claim pursued at hearing was considerably more than originally claimed. Following the realisation that local government authority easement had been encroached by up to 900mm the damages and sought included demolition and rebuilding of the dwelling and the amount claimed was amended to $305,961. Once a 30% margin was added the applicants' total claim for damages amounted to $437,524.23. This amount was calculated on the basis of demolition of the entire dwelling and the construction of a new identical dwelling set back approximately 900mm away from the road. 7On 25 June 2014 the Tribunal made consent orders that the respondent pay $50,000 to the applicant. 8The applicants submitted that they were successful in their claim before the Tribunal and that a costs order should follow. There must be some special circumstances to justify depriving the successful litigant from costs (Latoudis v Casey [1990] 170 CLR 434). Further it was submitted there are few, if any, exceptions when awarding costs to the general approach that costs follow the event other than conduct by the successful party which disentitles the successful litigant to a costs order in his favour. It was submitted that the applicants have been wholly successful in these proceedings and there has been no adverse conduct which should deprive them of an order for costs. 9The applicants submitted they should not be criticised for commencing proceedings on all bases, including item one in the Scott schedule, the demolition and rebuild of the premises. Ultimately the local council granted an easement. At the time the proceedings were commenced there was a real and distinct possibility that the home may have to be demolished and rebuilt. The fact remained that the home was built encroaching upon an easement for batter in favour of the local government authority. At the time proceedings were commenced it was not certain whether the local government authority would grant an easement in respect of the encroachment. 10Should the local council have refused to release part of the easement and required the partial or total demolition of the dwelling, item one in the scott schedule was open for determination by the Tribunal at the hearing. It was therefore not unreasonable to maintain a claim for demolition until the local government authority granted the easement. 11It was submitted that had item one in the Scott schedule not been claimed the applicant would have been precluded from having the issue determined at the hearing. It was therefore prudent to plead the issue and to have the issue dealt with. The final confirmation in writing from the local government authority was not provided until about 24 March 2014, or some 12 weeks before the hearing. 12It is further submitted that the bulk of the experts' costs and disbursement were incurred in relation to the determining liability and quantum in relation to item 2 and following in the scott schedule (the defects). Any costs in relation to item one (the encroachment) was a surveyor's report only. The applicants submitted that virtually no costs were incurred by either party in relation to the encroachment for the determination of liability on the case of encroachment as the issue was not in dispute. The respondent's surveyor's report was requested to provide advice as to the release or partial release of the easement from the local government authority. 13The applicants submitted that Regulation 20(4) applied and sought orders that costs be payable on the ordinary basis. 14As there was no evidence before the Tribunal to suggest that the applicants acted "unjustly or unreasonably" the applicant sought orders that costs follow the event. 15On 24 June 2014 the applicants made an offer in writing that the respondent pay the applicants $50,000 plus costs of $25,000 inclusive of all legal and expert costs within 28 days of acceptance of the offer. It was a further term of the Calderbank offer that the builder carry out the balance of "legal and associated work with respect to the partial release of easement at his own costs". This offer was rejected. 16The Tribunal orders for payment of $50,000 (clear of any potential costs orders) was comparable with the applicants' offer of 24 June 2014.

Findings and Decisions 22As these proceedings were commenced in 2012 the transitional provisions of the Civil and Administrative Tribunal Act 2013 dictate that I follow the pre-existing CTTT Act principles as set out in section 53 and Regulation 20. The applicable principles are: (i)Costs are to compensate and are not to be punitive. (ii)The usual principle is that costs are to follow the event. (iii)The Tribunal's Act and Regulation confer a very wide discretion on the Tribunal in relation to an order for costs. 23The discretion must be exercised judicially and in accordance with the enabling legislation: 53 Costs (1) Subject to this section and the regulations, the parties in any proceedings are to pay their own costs. (2) The Tribunal may, in accordance with the regulations, award costs in relation to any proceedings. (3) If costs are to be awarded by the Tribunal in accordance with the regulations, 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 Division 11 of Part 3.2 of the Legal Profession Act 2004 or on any other basis. (4) In this section, "costs" includes the costs of, or incidental to, proceedings. Regulation 20 provides as follows: 20 Costs generally (1) This clause applies to the awarding of costs by the Tribunal as provided by section 53 of the Act. ... (3) In any proceedings in respect of which the amount claimed or in dispute is more than $10,000 but not more than $30,000, the Tribunal may award costs in relation to the proceedings only if: (a) the Tribunal is satisfied that there are exceptional circumstances that warrant the awarding of costs, or (b) the Tribunal has made an order under section 30 (2) of the Act in relation to the proceedings. (4) In any proceedings in respect of which the 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. 24The Tribunal may exercise its discretion pursuant to section 53 of the Act to award costs on an indemnity basis. This requires the exercise of its discretion, as to which sufficient reasons should be given. The discretion must be exercised judicially (Mead v Watson [2005] NSWCA 133). 25I have had regard to all arguments raised by both parties. I am satisfied that it was reasonable by the applicants to go to hearing with all issues remaining in dispute. I am satisfied that the ultimate comfort, a letter from council confirming the granting of an easement was not obtained until 24 March 2014 and that the issue remained live until about 3 months before the hearing. The costs necessarily incurred to bring about the contractual result in relation to the encroachment would have already been incurred by that date. I am not satisfied, and there is no evidence before me, that the encroachment issue incurred further costs after that date. Further I am satisfied that costs incurred by the respondent in respect of the encroachment were necessarily incurred as a direct result of the breach of agreement and because the respondent mitigated its losses in securing an easement from LMCC, rather than being faced with the cost of demolition and re-building costs for the dwelling. 26I also reject the argument that the applicant could not have secured a finding on the encroachment, because they "made no enquiries whatsoever" of LMCC as to the release or partial release of the easement ". It is not persuasive to criticise the applicant for not making the enquiries with LMCC in circumstances where the respondent took full responsibility for corresponding with LMCC to obtain the necessary consent. I am satisfied that the respondent necessarily maintained a claim for demolition until 24 March 2014 in the absence of an admission or confirmation by LMCC that the easement be granted. 27Even if the encroachment issue was resolved by the time the matter was called on for hearing, the remaining issues as to defects remained in dispute and the matter was, quite appropriately, listed for a two day hearing on the remaining issues. 28The applicant submits that the Tribunal should not consider any Calderbank letters. I reject this submission. While the Civil Procedure Rules do not apply in the Tribunal and an Offer of Compromise as made under the Rules may have no application, Calderbank letters issued pursuant to common law principles can be considered by the Tribunal. 29I refer to the recent Court of Appeal decision in Miwa Pty Ltd v Siantan Properties Pte Ltd (No. 2) [2011] NSWCA 344. In that case Basten JA identified two questions which are relevant to a 'Calderbank' offer and a claim for indemnity costs. They are whether: (b)there was a genuine offer of compromise, and (c)it was unreasonable for the offeree not to accept it.' 30The determination of whether or not the rejection of an offer was reasonable is an evaluative judgment requiring a consideration of the facts and circumstance specific to the case: Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd (No 2) [2009] NSWCA 12 at [19]. 31Reasonableness is not to be determined with hindsight; rather, the strength or otherwise of the applicants' claim should be considered as at the time of the offer (Gretton v Commonwealth of Australia [2007] NSWSC 149). 32The applicants submitted that they could not have accepted the builder's Calderbank offer as the offers were contingent upon formal council consent and payment of all fees and the registration of the partial release of the easement. Once the consent was issued the agreement was "perfected" and until such time the applicants could not reasonably have accepted the offer. I agree with this submission. Only once the encroachment issue was "perfected" was the matter capable of resolution before the hearing. I therefore find it reasonable of the homeowners to have rejected the Calderbank offers. 33There appears to be no fixed rule or rationale as to when the discretion to replace the ordinary order for costs. The unsuccessful party should be ordered to the pay the successful party's costs, except where there is a "sufficient or unusual feature" or some "relevant delinquency": Oshlack v Richmond River Council (1998) 193 CLR 72. Relevant delinquency does not mean moral delinquency but delinquency bearing a relevant relation to the conduct of the case (White ACT (in liq) v G B White [2004] NSWSC 303). 34In my opinion, it has not been shown that it was unreasonable for the homeowners not to accept the respondent's Calderbank offer. I am satisfied that it was not entirely unreasonable, hopeless or "delinquent", within the meaning of Oshlak, to proceed to hearing on the remaining defects items and to await a finding of the Tribunal. I cannot arrive at a finding that the homeowner's conduct of the case was delinquent by rejecting the builder's Calderbank offer 23 June 2014. 35As the owners were wholly successful in their claim and applying the principles enunciated by McHugh J in Latoudis v Casey (1990) 170 CLR 534, I am satisfied that the owners should be compensated for professional fees and out of pocket expenses reasonably incurred with the litigation. 36Accordingly, I make the order on page one above.

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