In these proceedings, the parties were able to agree as to the outcome of the application but not as to the costs of that application. The application was a renewal application, arising from an alleged failure to comply with a consent work order, which resulted in another consent work order being made.
Having considered the submissions of the parties, the Tribunal determined that the questions of costs had to be considered by reference to s 60 of the Civil and Administrative Tribunal Act 2013 (the CATA) and, having done so, the Tribunal determined that each party should pay their own costs.
[2]
Relevant law
Before setting out the statutory provisions and reported decisions referable to the two ways in which the costs of proceedings in the Tribunal may be determined, it is desirable to note s 36 of the CATA, headed "Guiding principle to be applied to practice and procedure" which is quoted in full below:
(1) The guiding principle for this Act and the procedural rules, in their application to proceedings in the Tribunal, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings.
(2) The Tribunal must seek to give effect to the guiding principle when it - (a) exercises any power given to it by this Act or the procedural rules, or (b) interprets any provision of this Act or the procedural rules.
(3) Each of the following persons is under a duty to co-operate with the Tribunal to give effect to the guiding principle and, for that purpose, to participate in the processes of the Tribunal and to comply with directions and orders of the Tribunal-
(a) a party to proceedings in the Tribunal,
(b) an Australian legal practitioner or other person who is representing a party in proceedings in the Tribunal.
(4) In addition, the practice and procedure of the Tribunal should be implemented so as to facilitate the resolution of the issues between the parties in such a way that the cost to the parties and the Tribunal is proportionate to the importance and complexity of the subject-matter of the proceedings.
(5) However, nothing in this section requires or permits the Tribunal to exercise any functions that are conferred or imposed on it under enabling legislation in a manner that is inconsistent with the objects or principles for which that legislation provides in relation to the exercise of those functions.
The effect of s 60 of the CATA is that s 60(1) provides that "Each party to proceedings in the Tribunal is to pay the party's own costs" but s 60(2) relaxes that default position by providing that "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". The following non-exhaustive list of considerations is set out in s 60(3):
(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),
(g) any other matter the Tribunal considers relevant.
Although it common for parties to focus upon whether any of those individual considerations apply, the Tribunal is required to make a global assessment of whether there are special circumstances, having regard to the matters set out in s 60(3).
It is well-established that the adjective "special" requires circumstances that are out of the ordinary but do not need to be extraordinary or exceptional: Megerditchian v Kumond Homes Pty Ltd [2014] NSWCATAP 120, adopting what was said in Cripps v G & M Mawson [2006] NSWCA 84 at [60].
Since s 60(2) commences with the words "The Tribunal may award costs …", it is clear the Tribunal has a discretion which must be exercised. It is necessary to consider not only whether there are special circumstances but also whether those circumstances warrant an award of costs.
However, s 35 of the CATA operates to make s 60 subject to Rule 38 of the Civil and Administrative Tribunal Rules 2014 which provides as follows:
(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:
…
(b) the amount claimed or in dispute in the proceedings is more than $30,000.
When rule 38 applies there is a general discretion to award costs and it is well established, by decisions such as News v Cotes [2019] NSWCATAP 186, Bonita v Shen [2016] NSWCATAP 159 and Thompson v Chapman [2016] NSWCATAP 6, that: (1) the starting point is that the usual order for costs should be in favour of the successful party, (2) the award is not to punish the unsuccessful party but to compensate the successful party for the costs incurred in the proceedings, and (3) departure from the usual order is permissible if the circumstances favour that course of action.
Simply stated, when rule 38 applies it is not necessary to establish special circumstances and the usual order is that costs follow the event (ie follow the outcome of the case) unless there is disentitling behaviour by the successful party: Latoudis v Casey [1990] HCA 59, Oshlak v Richmond River Council [1998] HCA 11.
The question of whether rule 38(2)(b) applies was considered in The Owners Corporation Strata Plan No. 63341 v Malachite Holdings Pty Ltd [2018] NSWCATAP 256. That decision suggests that rule 38(2)(b) WILL apply where: (1) the amount claimed to exceed $30,000, or (2) the amount in dispute to exceed $30,000, or (3) there to be credible evidence which, if accepted, would establish an entitlement to an order for more than $30,000.
On the other hand, rule 38(2)(b) does NOT apply where either: (1) the proceedings do not involve a request for payment, or relief from payment, of $30,000 or less, or (2) the relief sought does not depend on a finding that an amount of money is owed.
[3]
Applicant's case
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.
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.
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.
References was made to cases relating to where a settlement offer is unreasonably refused but no such offer appears to have been made.
[4]
Respondent's case
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.
[5]
Consideration
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
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.
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.
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.
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.
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.
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.
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.
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.
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.
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).
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.
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.
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.
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.
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.
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.
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.
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.
[6]
Orders
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.
[7]
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
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Decision last updated: 02 May 2022