The Owners - Strata Plan 72347 v P&D Bush Pty Ltd - [2019] NSWCATCD 69 - NSWCATCD 2019 case summary

Respondent's application for costs

The respondent requests that the order made dismissing the substantive proceedings be amended to include that the basis of the dismissal was rule 38(2)(a) of the Rules. This is understood to be a request that the proceedings be dismissed under clause 10(2) of schedule 4 to the Act on the basis that the applicant conducted the proceedings in such a way that unreasonably disadvantaged the respondent by any conduct, thereby enlivening rule 38(2) of the Rules.
The factors from s60(3) of the Act relied upon by the respondent are s60(3)(c) - the relative strengths of the claims made by each of the parties; and s60(3) (e) - that the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance.
The respondent submits that the applicant's case was inherently weak, and destined to fail. The applicant should have been aware of the hopelessness of their position prior to commencing the proceedings, noting their expert evidence stated that "…the scope of works was deficient …" to allow for the water ingress to be stopped. The respondent advised the applicant of that exact issue prior to them commencing the works in 2015, and rather than engaging with the respondent and preparing a comprehensive scope of works to fix the underlying issue in 2015, the applicant instructed the respondent to undertake a deficient scope of works, and then sought to claim from the respondent the costs to rectify the underlying issue.
The respondent seeks costs on the ordinary basis from the commencement of proceedings (16 January 2019) to 23 February 2019, and on an indemnity basis thereafter on the basis that an offer to settle the proceedings by the respondent paying $4,000 was made by letter on 22 February 2019 and was unreasonably refused. The offer was open until 4.00pm on 1 March 2019, and was stated to be a Calderbank offer.

Consideration

I am not satisfied the Tribunal is functus officio and unable to consider a costs application in the circumstances of this case. The Tribunal will only consider whether an award of costs will be made if an application is made for costs. Often such an application will only be made after the outcome of the substantive proceedings is known. In cases such as this, when the decision was given in writing rather than orally at the hearing, the parties cannot know the outcome of the decision until sometime after it is made. In my view, a party should be permitted to apply for costs within a reasonable time after the outcome of the proceedings is known; and once costs are applied for, then the Tribunal has jurisdiction to consider the application. This position is supported, albeit in different factual situations, by Frederiksen v Port Stephens Veterans and Citizens Aged Care Limited [2014] NSWCATAD 52 and The Owners - Strata Plan 4521 v Zouk & Anor [2007] NSWCA 243.
In this case, the application for costs was made within a reasonable time after the determination of the substantive proceedings, and it is not unfair to the applicant to proceed to consider the application as the applicant was clearly put on notice by the Respondent's Offer that costs would likely be sought should the applicant be unsuccessful in the proceedings. In the circumstances, the costs application will be considered.
The parties have consented to the costs application being dealt with on the papers, and I am satisfied that the issues for determination can be adequately determined in the absence of the parties by considering the written submissions and other documents provided. A hearing on costs is therefore dispensed with in accordance with s 50(1)(c) of the Act.
The amount sought in the proceedings was about $19,000 (although slightly more prior to the hearing) and rule 38(2)(b) therefore does not apply. No order dismissing the proceedings under clause 10(2) of schedule 4 to the Act was sought by the respondent prior to the determination of the substantive proceedings, and in event, I am not satisfied that the applicant conducted the proceedings in such a way that unreasonably disadvantaged the respondent. The applicant complied with the directions made by the Tribunal. Although the applicant's case failed, I am not satisfied that the strength of the case alone would have warranted the proceedings being dismissed under clause 10(2) of schedule 4 to the Act. Rule 38(2) of the Rules therefore does not apply.
For the reasons set out below, I am satisfied that an order for costs should be made in favour of the respondent, in the terms set out below. In reaching that conclusion, I have considered each party's submissions on the application for costs and the overall circumstances of the proceedings.
The substantive proceedings were dismissed on the basis that the Tribunal was not satisfied that the respondent's scope of works was inadequate to address the water ingress issues, or that the respondent failed to adequately and/or entirely carry out the works included in the respondent's scope of works.
Although ultimately unsuccessful, and not a particularly strong case, I am not satisfied the applicant's case was unarguable. For example, the dispute about whether the scope of works provided by the respondent, which was accepted by the applicant and was the basis of the work done, was to address all water ingress issues into unit 117 (as the applicant claimed) or was limited to the initial scope of works provided to the respondent by the applicant (as the respondent claimed) was a factual issue to be determined on the basis of evidence of communications between the parties. The applicant's position in relation to that was not particularly strong: the applicant did not provide any evidence from the strata manager as to the telephone conversation in which the respondent claims he was told to provide a quote against the initial scope of works, nor any explanation as to why that could not be done; and instead relied on an email referring to "investigation works" and a submission that the respondent's scope of works went beyond the initial scope of works. Nevertheless, it was a factual issue to be determined and the applicant's position was not unarguable or bound to fail. Similarly, there was no evidence by anyone inspecting the respondent's work to the effect that it was defective, indicating that the applicant's case on this point was not strong, but the applicant did have the BAAM Consulting report and reports from occupants that there were ongoing issues, so I am not satisfied this part of the case was unarguable or bound to fail. It had to be determined by weighing up the evidence.
I am not satisfied the applicant's case had no tenable basis in fact or law; or that the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance. I do take into account though that the applicant's case was not particularly strong, and ultimately was completely unsuccessful.
The bases upon which the substantive proceedings were dismissed were identified in the Respondent's Offer. The amount offered was about 20% of the amount claimed by the applicant, and the Respondent's Offer was made at a time sufficiently before the hearing that the applicant would have avoided significant time, effort and cost in preparing for and running the hearing if it had have been accepted. I am satisfied it was unreasonable for the applicant not to accept the offer, taking into account these matters and also the relative strengths of the applicant's case.
I am satisfied there are special circumstances in this case warranting an award of costs, being the unreasonable refusal of the Respondent's Offer.
I am not satisfied that costs should be awarded on an indemnity basis. In the absence of the Respondent's Offer, it is unlikely an award of costs would have been made at all. In light of the amount offered in the Respondent's Offer, it would be unfair to the applicant to order costs on an indemnity basis from that time.
I am not satisfied it is appropriate to limit the costs order to that of expert's costs. A party may obtain legal advice or assistance in the conduct of their case without being formally represented in the proceedings, and does not need the leave of the Tribunal to do so.

The Owners - Strata Plan 72347 v P&D Bush Pty Ltd

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