The Owners - Strata Plan No. 85292 v JD Projects Pty Ltd

Applicant's case

1. The applicant relied on written submissions and a statement by Craig Blackwell. Its case was that the amount claimed or in issue exceeded $30,000 with the result that costs should follow the event. In the alternative, it was contended that there were special circumstances which warranted an order for costs being made in favour of the applicant.
2. Matters said to constitute special circumstances were said to be (1) the failure to comply with the original work order, (2) the failure to acknowledge that work was incomplete or defective despite the 3 November 2020 report of Mr Cavanagh, (3) the respondent's conduct in contesting the renewal application for more than six months, until 31 January 2022, shortly before the hearing.
3. Mr Blackwell's statement served to provide the Tribunal with a chronology of relevant events and copies of relevant documents, namely (1) the original work order, (2) the 16 November 2020 report of Mr Cavanagh, (3) a letter sent by the applicant to the respondent on 19 March 2021, (4) a 7 April 2021 reply, (5) the 7 July 2021 report of Mr Hudson, (6) the 16 August 2021 report of Mr Cavanagh, (7) the 10 November 2021 report of Mr O'Donnell, (8) a Joint Report dated 11 January 2022, (9) subsequent communications between the parties, and (10) the 28 January 2022 letter of Mr Cavanagh.
4. References was made to cases relating to where a settlement offer is unreasonably refused but no such offer appears to have been made.

Respondent's case

1. The respondent relied on written submissions and did not provide any evidence. Relevant to the question of costs of the renewal proceedings, it was contended that (1) the renewal application contained 68 items of which 8 were not only new items but also were claims made out of time, (2) those 8 items were abandoned on 27 January 2022, (3) of the remaining 60 items, 40 were accepted as having been completed, (4) no order was made for further evidence to be filed in respect of costs, (5) the purported costings for the work the subject of the renewal application was $32,890 but that included $6,000 for new items and an indication that the costs are only for guidance, (6) cases dealing with indemnity costs and Calderbank letters were not relevant, (7) there were no special circumstances, and (8) alternatively, the renewal application was not limited to "grounds which had a basis in law". For those reasons, it was contended that each party should bear their own costs.

Consideration

1. From the documents submitted, the following chronology has been prepared: 18 Dec 19 Work order made, by consent, in the original proceedings 18 Jun 20 Date for completion of work order 03 Nov 20 Inspection of rectification work by Mr Cavanagh 16 Nov 20 Report issued by Mr Cavanagh 19 Mar 21 Letter sent, requesting performance of work as per that report 07 Apr 21 Reply denied liability for further work 17 May 21 Renewal proceedings commenced 25 Jun 21 The developer (second respondent) was removed from the proceedings 07 Jul 21 Report of Mr Hudson provided 16 Aug 21 Mr Cavanagh accepted two further two items had been rectified 19 Oct 21 The respondent's expert (Mr O'Donnell) inspected the property 10 Nov 21 Respondent's lay and expert evidence served 21 Dec 21 The experts met for the purpose of preparing a Joint Report 11 Jan 22 The Joint Report was provided 25 Jan 22 A draft work order was sent to the respondent 27 Jan 22 The parties reached agreement, save as to costs 31 Jan 22 Work order made, by consent, in these (renewal) proceedings 01 Feb 22 Letter suggesting the value of the works was $32,890 provided
2. It is clear the renewal application included eight items that were not part of the original application and that the estimated cost of rectification of those items was $6,000. The amounts which Mr Cavanagh said in his letter dated 28 January 2022 "are to be used as a guide" totalled $32,890.
3. Applying the test suggested by Malachite, even if those amounts are elevated to assessments of the cost of rectification, there is only credible evidence for an amount of $26,890 which is less than $30,000. That amount of $26,890 reflects the fact that the Tribunal does not consider a party can use costs which are not properly part of a renewal application to operate to render the amount claimed more than $30,000. In those circumstances, the Tribunal is not satisfied that Rule 38 applies in this instance.
4. It is convenient to here noted that, since the agreed work order excluded items 5, 16, 27 and 56, and the suggested cost of rectification for those items totals $4,800, the estimated cost of rectification of the items covered by the work order made on 31 January 2022 is $22,090.
5. While the directions made on 31 January 2022 only referred to submissions and not evidence, it is common for evidence to be submitted with submissions, such as when letters containing settlement offers are annexed to submissions of where, as in this case, a party seeks to establish that costs should be determined by reference to rule 38 rather than s 60.
6. In this instance, the 15 February 2022 submissions of the applicant included a copy of the 14 February 2022 statement of Mr Blackwell. It was plainly open to the respondent to include a witness statement or affidavit with its submissions dated 7 March 2022, three weeks later. However, the question of whether the applicant should be permitted to rely on the statement of Mr Blackwell is of no moment since the Tribunal is not satisfied that it operates to bring the question of costs within the ambit or rule 38.
7. It is therefore necessary to consider the question of costs by reference to s 60 which requires a determination of (1) whether there are special circumstances, and (2) if so, whether those circumstances warrant an order for costs.
8. The Tribunal first notes three matters in relation to the litigation between the applicant and the respondent. First, in the original application, while an unrestricted costs order was made against the second respondent, the first respondent was, by consent, only required to pay $2,200 in respect of costs.
9. Secondly, there were 60 items which fell under the original work order, it was initially accepted that 40 of those items had been rectified and later accepted that 42 of those items had been rectified with the result that, leaving the eight additional items which should not have been claimed in the renewal proceedings, there were only 18 items in dispute and the estimated cost of rectification for those items is $22,090.
10. Thirdly, the letter from the applicant's solicitors to the respondent's solicitors dated 19 March 2021, sent just under two months before the renewal proceedings were commenced, sought $23,020.26 in respect of expert fees and legal fees of $9,775.34, a total of $32,795.60.
11. As to paragraph (a) of s 60(2), the applicant disadvantaged the respondent by including eight items which should not have been included and the respondent disadvantaged the applicant by the time taken to concede any of the 14 items included in the work order, calculated as 18 remaining less the four items excluded (being items 5, 16, 27 and 56).
12. As to paragraph (b), the proceedings were commenced on 17 May 2021 and were finalised on 31 January 2022, just under three weeks after a Joint report was prepared. It is noted that the applicant provided no explanation for why, after obtaining a report from Mr Cavanagh on 16 November 2020, it was not until 19 March 2021 that a letter was sent, seeking performance of the work requested in that report. Given that unexplained delay, the complaint that it took the respondent more than six months to agree to a work order carries less weight. The respondent was entitled to obtain a report from its expert to be able to respond to the report of the expert upon whom the applicant relied. The Tribunal considers the only relevant prolongation of the proceedings is that a Joint Report should have been sought earlier.
13. As to paragraph (c), the applicant had 14 valid items while the respondent can also be said to have had success in relation to 14 items in that it was able to achieve a result which reflects two additional items having been rectified, eight items should not have been included, and that four items should be excluded from the work order which finalised the renewal application.
14. As to paragraph (d), the proceedings cannot be considered to have been complex. Save for the eight additional items, paragraph (e) is not applicable. Bearing in mind the inclusion of paragraph (g) in s 60(3), the Tribunal does not consider there are any other relevant matters.
15. As to paragraph (f), the Tribunal considers both parties failed to comply with the duty imposed by s 36(3). A proper consideration of s 36(3), which sets the goal of "the just, quick and cheap resolution of the real issues in these proceedings", needs to bear in mind the entirety of s36 and not just that subsection. It is to be noted that s 36(4) sets the objective of keeping costs proportionate to the amount in issue.
16. In this case, even before the renewal proceedings were commenced, a claim was being made for costs of $32,795.60 in respect of rectification work which is now estimated to have a cost of between $22,090 and $26,890. It is sometimes the case that a party seeking an order for costs indicates to the Tribunal the amount of costs incurred and, in some instances, a request is made for the Tribunal to determine an amount under s 60(4) of the CATA. As this is not such a case, the Tribunal is left to wonder what amount would be sought if a costs order were to be made.
17. If the applicant's costs were said to be more than $30,000 in March 2021, about two months before the renewal application was lodged in May 2021, the amount that would be sought up to the finalisation of the consent order in January 2022, eight months after the renewal application was lodged - plus the costs of pursuing an application for costs - are undoubtedly substantial to the point where they are disproportionate to the amount in issue.
18. It is noted that the expert reports, copies of which were included with Mr Blackwell's statement, ranged over all 68 items (60 original items plus 8 new items) and did not omit the 40 items which the applicant conceded had been rectified. What should have happened in this case is that the two experts should have been asked to prepare a Joint Report. Had that been done, the matter would have been finalised either without the need for a renewal application or by way of an application which resulted in consent orders soon after it was filed.
19. There does not appear to be anything out of the ordinary in this instance. Accordingly, the Tribunal is not satisfied that there are special circumstances in this case and, even if it could be said there are special circumstances, the Tribunal is not satisfied that such circumstances warrant an order for costs by reason of the failure to keep costs proportionate to the amount in issue. Neither party should be rewarded with a costs order.

Orders

1. Neither party contended that there should be a hearing on the question of costs and the Tribunal is satisfied there would be no utility in doing so. Accordingly, for the reasons set out above, the following order are made: 1. The Tribunal dispenses with a hearing on the question of costs, pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013. 2. Each party is to pay their own costs.

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: 02 May 2022