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

Legislation and legal principles.

1. Section 60 of the Civil and Administrative Tribunal Act 2013 ("Act") provides, relevantly: 60 Costs (1) Each party to proceedings in the Tribunal is to pay the party's own costs. (2) The Tribunal may award costs in relation to proceedings before it only if it is satisfied that there are special circumstances warranting an award of costs. (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) [that is, the duty to co-operate with the Tribunal to give effect to the Tribunal's guiding principle - to facilitate the just, quick and cheap resolution of the real issues in the proceedings - and, for that purpose, to participate in the processes of the Tribunal and to comply with directions and orders of the Tribunal.] (g) any other matter that the Tribunal considers relevant.
2. Guidance in consideration of costs applications under s 60 is provided by the decision of the Appeal Panel in Foster v Byrnes [2016] NSWCATAP 197, where it was stated (citations omitted): [50] The term "special circumstances" is not defined in the Act. It has been interpreted to mean circumstances that are out of the ordinary but not necessarily extraordinary or exceptional. The discretion to award costs must be exercised judicially having regard to the underlying principle that parties to proceedings in the Tribunal are ordinarily to bear their own costs… [51] [The Tribunal] must decide whether the factors relied upon by [the party seeking costs] separately, or in combination, establish special circumstances warranting an award for costs in the appeal.
3. Rule 38 of the Civil and Administrative Tribunal Rules 2014 ("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.
4. Clause 10 of schedule 4 to the Act relevantly provides: 10 Proceedings causing disadvantage (1) The Tribunal may exercise the powers conferred by this clause if the Tribunal is of the opinion that a party in any proceedings for the exercise of a Division function is conducting the proceedings in such a way that unreasonably disadvantages another party in the proceedings by any conduct (including by failing to comply with an order or direction of the Tribunal). (2) The Tribunal may: (a) if the party causing the disadvantage is the applicant - order that the proceedings (or part of the proceedings) be dismissed or struck out, or ... (3) Before making any order under subclause (2) against a party, the Tribunal is to have regard to the following: (a) the extent to which the party is familiar with the procedures of the Tribunal, (b) the party's capacity to understand, and act on, a direction of the Tribunal, (c) whether the party suffers from a disability, (d) whether the party is acting deliberately in failing to comply with the Tribunal's directions. (4) The provisions of this clause are in addition to, and do not limit, the provisions of section 55 (Dismissal of proceedings) of this Act.

Respondent's application for costs

1. 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.
2. 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.
3. 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.
4. 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.

Applicant's response to costs application

1. The applicant submits that the Tribunal is functus officio and has no power to consider a costs application as the issue of costs was not raised prior to the substantive proceedings being determined.
2. It also submits there is no basis upon which a costs order should be made, including taking into account the matters outlined in s60(3)(c) and (e) of the Act. The applicant also submitted that an award of costs should not be on an indemnity basis and, if made, should be limited to expert's costs.

Consideration

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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.
8. 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.
9. 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.
10. I am satisfied there are special circumstances in this case warranting an award of costs, being the unreasonable refusal of the Respondent's Offer.
11. 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.
12. 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.

Conclusion

1. Taking into account the circumstances of the case and all the relevant matters raised by the parties, I am satisfied that the respondent is entitled to an award of costs from 2 March 2019, being the day after expiry of the Respondent's Offer.
2. I am satisfied that any order for costs should be as agreed or assessed on the ordinary basis, but should not exceed $5,000. I am satisfied that is appropriate, in light of the amount in dispute in the proceedings, the amount offered in the Respondent's Offer, and that as noted above in the absence of the Respondent's Offer it is unlikely any award of costs would be made.

Orders

1. The orders are: 1. A hearing on costs is dispensed with in accordance with s 50(1)(c) of the Civil and Administrative Tribunal Act 2013. 2. The applicant is to pay the respondent's costs of the proceedings from 2 March 2019 on the ordinary basis, as agreed or assessed, but limited to a maximum amount of $5,000.

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: 26 November 2020