Thompson v Chapman

Notices of appeal and grounds of appeal

1. Three notices of appeal have been filed. These became appeal proceedings AP 15/53790, AP 15/56931 and AP 15/56942.

Appeal proceeding 15/53790 (First Appeal)

1. In this appeal the appellant is the homeowner and the respondent was the builder.
2. The Notice of Appeal is dated 23 September 2015 and records the date the Costs Decision was received by the appellant as 28 August 2015.
3. The homeowner challenges the orders for costs in favour of the builder. In this Notice of Appeal she contends that: 1. The appeal should be allowed. 2. The builder should pay the homeowner's costs of and incidental to the proceedings on a party/party basis, such costs to be assessed if not agreed; 3. In the alternative, that each party bears their own costs of and incidental to the proceedings; 4. Or such further or other order as the court thinks fit.
4. The Notice of Appeal also sought leave to appeal and a stay of the original orders for costs made in the Costs Decision.
5. The builder filed a reply this appeal dated 13 October 2015. In this appeal he accepted the fact it had been lodged in time.
6. The builder resisted the orders sought by the homeowner and said that he was properly entitled to orders for costs in his favour, including costs on an indemnity basis on and from 20 February 2014 by reason of offers of compromise which had been made. Alternatively, the builder contended he should receive costs on a party/party basis up until 16 May 2014, and thereafter on an indemnity basis by reason of an offer made on that date.

Appeal proceeding 15/56931 Chapman v Thompson (Second Appeal)

1. The second appeal was made by Notice of Appeal dated 14 October 2015. In this appeal the builder was the appellant and the homeowner was the respondent.
2. No application for leave to appeal was made, however the appellant sought an extension of time in which to lodge the appeal. The Notice of Appeal did not state the date the decision was received by the builder. However, it indicated the date of decision from which the appeal was brought was 27 August 2015.
3. The Notice of Appeal had attached to it the orders made by the Tribunal on 16 June 2015 and a copy of the Principal Decision.
4. The Second Appeal sought an award for interest on the amounts awarded by the Tribunal pursuant to orders made 16 June 2015 up to and including the date that award was made.
5. The homeowner filed a reply to this appeal dated 4 November 2015. In the reply the homeowner opposed the appeal and said that the decision, the subject of the appeal, was made by the Tribunal on 16 June 2015 and was substantially out of time.
6. Because this appeal in respect of the failure to give reasons in connection with an application for an award of interest was withdrawn, it is appropriate that the Appeal Panel make an order that this appeal be dismissed.
7. In respect of this appeal it is sufficient to record at this point that the appeal was withdrawn at the commencement of the hearing before the Appeal Panel. This occurred in circumstances where the Appeal Panel asked the builder to identify a source of power which the Tribunal had to make an award in the nature of prejudgement interest of the type permitted by s 100 of the Civil Procedure Act, 2005.

Appeal proceedings 15/56942 Chapman v Thompson (Third Appeal)

1. The Third Appeal was also commenced on 14 October 2015 pursuant to a Notice of Appeal on that date. In this appeal the builder is the appellant and the homeowner is the respondent. The builder challenged the cost decision on three bases: 1. That the Member failed to take account of relevant considerations when exercising his discretion about whether to award indemnity costs in consequence of three offers of settlement made by the builder; 2. The Member took irrelevant considerations into account in exercising his discretion about whether or not to award indemnity costs; 3. The Member erred in his discretion in not awarding costs of the appellant who had been largely successful in defending the claim HB 13/46596.
2. The builder contended in the alternative that the following orders should have been made in respect of each Home Building application: In respect of HB 13/46596 That Elizabeth Jane Thompson must pay to Andrew Chapman 95% of the party/party costs, as agreed or assessed, up until 6 February 2014 and on an indemnity basis thereafter. Or in the alternative That Elizabeth Jane Thompson must pay to Andrew Chapman 95% of party/party costs, as agreed or assessed, up until 4 March 2014 and on an indemnity basis thereafter. Or in the alternative That Elizabeth Jane Thompson must pay to Andrew Chapman 95% of party/party costs, as agreed or assessed, up until 16 May 2014 and on an indemnity basis thereafter. Or in the alternative That Elizabeth Jane Thompson must pay to Andrew Chapman 95% of party/party costs, as agreed or assessed. In respect of HB 14/15658 That Elizabeth Jane Thompson must pay to Andrew Chapman party/party costs, as agreed or assessed, up until 16 May 2014 and on an indemnity basis thereafter
3. The Notice of Appeal identified the date of the Costs Decision as 27 August 2015 but did not record the date the notice of decision was received by the builder. In respect of this appeal, the builder did not seek leave to appeal however the builder did request an extension of time in which to file the appeal.
4. The homeowner filed a reply to this appeal dated 4 November 2015. The essence of this reply is that no question of law was identified by the appellant. In particular, the homeowner said that the appellant did not specify: 1. Any relevant considerations that the Tribunal failed to take into account; 2. Any irrelevant considerations that the Tribunal took into account when exercising its discretion or; 3. Any error of law in the exercise of the discretion.
5. The homeowner also says that this appeal is out of time and that the appellant has failed to provide any evidence or offer any reason as to why time to appeal should be extended. In this regard the homeowner asserts the builder does not have an arguable case.

Hearing of the appeal and submissions

1. At the commencement of the hearing of the appeal, the homeowner's counsel handed up to the Appeal Panel three bundles of documents and a folder of authorities which were marked as follows: 1. Thompson Appeal Documents (TAD); 2. Chapman Appeal Documents (CAD); 3. Appeal Bundle (AB); and 4. Bundle of Authorities (BoA).
2. The homeowner also handed up to the Appeal Panel a copy of the Costs Decision of the Tribunal at first instance in Urban Constructions (NSW) Pty Ltd v Brett Shearer and Bronwyn Shearer, Home Building application HB 10/44316 and HB 11/27833.
3. References in these reasons to particular documents will be made using the acronyms set out above against each of the identified bundles which have been individually paginated.
4. At the hearing of the appeal, which was essentially in relation to the Costs Decision, the parties were also asked to make submissions in respect of the costs of the appeal. In this regard there were two issues. The first issue was in connection with a stay application and orders for stay made on 13 November 2015 by the Appeal Panel. The second was whether or not there should be a costs order in favour of either party in respect of the appeals generally.
5. Submissions made in relation on each of these aspects of the costs of appeal and the decision in relation to those matters are dealt with separately below.

Homeowner's submissions in respect of the appeals

1. The homeowner provided written and oral submissions to the Appeal Panel.
2. To the extent required, the homeowner sought leave to appeal the Costs Decision and submitted that the leave should be granted as the decision was not fair and equitable. The homeowner said the decision was not fair and equitable because: a) the Tribunal failed to take into account, in making the award costs, that the Appeal Respondent was seeking the indulgence of the Tribunal; b) the Appellant was entitled to, at all material times up until the decision of the Tribunal, to maintain the position that the Appeal Respondent was not entitled to recover for the work that he had carried by reason of the operation of section 94(1A) of the HBA; and c) it was not unreasonable for the Appellant to oppose the Appeal Respondent seeking a just and equitable finding under the HBA.
3. The homeowner identified four grounds of appeal, three of which was said to constitute errors of law and one of which asserted the decision was not fair and equitable in the circumstances of the case. These grounds were set out at TAD page 10 under 11A Grounds of Appeal. These grounds were: 1. The Tribunal erred in that it applied a wrong principle of law in finding (at paragraph [25]) that the Appeal Respondent was entitled to an order for costs in his favour in the circumstances of this case, namely that the Appeal Respondent was seeking the indulgence of the Tribunal pursuant to section 94(1A) of the Home Building Act, 1989. 2. The Tribunal erred in that it failed to take into account relevant considerations, in that the Tribunal failed to take into account in its determination of an award for costs that the Appeal Respondent was seeking the indulgence of the Tribunal. 3. The Tribunal failed to give proper reasons (or any reason at all) as to why the Appellant's application that the Appeal Respondent pay the Appellant's costs (paragraph [32] of the Appellant's submissions dated 7 July 2015) were not accepted. 4. The Tribunal's decision was not fair and equitable in the circumstances of the case, because: 1. the Tribunal failed to take into account, in making the award costs, that the Appeal Respondent was seeking the indulgence of the Tribunal; 2. the Appellant was entitled to, at all material times up until the decision of the Tribunal, to maintain the position that the Appeal Respondent was not entitled to recover for the work that he had carried by reason of the operation of section 94(1A) of the Home Building Act, 1989; and 3. it was not unreasonable for the Appellant to oppose the Appeal Respondent seeking a just and equitable finding under the Home Building Act, 1989.
4. The essence of the homeowner's submissions can be summarised as follows: 1. The builder had failed to obtain home owner's warranty insurance and therefore needed to satisfy the Tribunal that, pursuant to section 94(1A) of the HB Act that it was just and equitable the builder be entitled to recover money in respect of work performed on a quantum meruit basis. 2. The failure by the builder to affect home warranty insurance caused detriment to the homeowner because she has been denied protection afforded by such insurance; 3. This amounted to serious misconduct by the builder as recognised in the HB Act, and was a matter for which "leave of the Tribunal" was required in order for the builder to recover money in respect of the work performed. 4. The statutory regime in s 94 provides that a contractor is deprived of its right to recover under a contract where there is no home warranty insurance: see s 94 (1) and s 94 (1A) provided an exception that "must be established" and was "not there for the asking". 5. There was no antecedent right and that an entitlement to recover under s 94(1A) in respect of recovery due to s 92 quantum meruit "only arises after proceedings are brought and the Court or Tribunal is satisfied that the criteria for the section 94(1A) power has been established". 6. Because no antecedent right is being enforced the Tribunal is required to take into account this fact, which the homeowner described as the builder asking for an "indulgence", when seeking an order under s 94(1A). 7. The exercise of the cost discretion required the Tribunal to take account of this fact. In this regard the homeowner relied on the costs decision in Urban Constructions [38]-[39] and the decision of White J in Dee-Tech Limited and another v Neddam Holdings Pty Ltd (No2) [2012] NSWSC 517. 8. In relation to the decision in Dee-Tech, the homeowner said that the principle established in that case, which concerned relief against forfeiture, was that it was open to the court to require a plaintiff who succeeded in obtaining relief from forfeiture to pay the costs of the proceedings, despite being successful. The homeowner submitted that the Tribunal in Urban Constructions had applied the same principle in determining that a successful builder in that case should bear its own costs even though it had succeeded in obtaining an order under s 94(1A) of the HB Act.
5. In making these submissions, the homeowner made clear to the Appeal Panel that she was not asserting that s 94 (1A) displaced the costs rules that gave to the Tribunal a general discretion, but rather the fact that an order was sought under s 94(1A) by the builder was a factor to be considered in the proper exercise of the discretion. However, the homeowner did say that in most cases, a successful builder should pay their own costs.
6. The homeowner also said that such orders should be made as it sends a clear message to a builder that they must not "snub their nose at the legislation" and that the policy of the legislation is a relevant factor to be considered when awarding costs.
7. The appellant submitted that there was a conscious decision of the builder not to obtain insurance which was persisted with.
8. When asked by the Appeal Panel what order should be made if the appeal was allowed, the homeowner said that the Appeal Panel should make an order that each party bear its own costs.

Builder's submissions

1. The builder submitted that the Tribunal in exercising powers under the Consumer, Trader and Tenancy Tribunal Act 2001 (CTTT Act) and Reg 20(4) of the Consumer, Trader and Tenancy Tribunal Regulation 2002 (CTTT Regulations) had a general discretion in the award of costs.
2. The builder said this discretion was not unqualified and could not be exercised capriciously and must be exercised judicially and in accordance with established principles and factors connected with the litigation. The builder relied on the reasoning of Brennan CJ at 96-98 in Oshlack v Richmond River Council (1998) 193 CLR 72.
3. During oral submissions, counsel for the builder submitted that the provisions of s 94(1A) were an irrelevant consideration and that it would be an odd result if the Tribunal had found that it was just and equitable for the builder to be entitled to recover its costs of carrying out the building work on a quantum meruit basis but was not entitled to its costs in proceedings which it successful prosecuted.
4. The builder submitted that he was clearly the successful party in the litigation and therefore he should be awarded all of his costs.
5. Further, the builder submitted that the offers of compromise which he had made entitled him to special orders for costs of the type set out above on and from various alternative dates in 2014 when offers had been made.
6. In relation to the success of the builder and his entitlement to costs in the litigation, the builder submitted that the Tribunal was in error in not awarding costs to the builder in respect of a portion of the costs referrable to the homeowner's application HB 13/46658. In this regard the builder pointed to the fact that the Tribunal found the homeowner was entitled to $2098.97 and not the sum of $65,359.39 which she had claimed for "money overpaid, defective and incomplete work": see Principal Decision [2] and [147].
7. The builder also submitted in respect of costs associated with the homeowners claim that the orders made by the Tribunal are unfair in part because there was a requirement of the builder to pay part of the costs of an engineering report ordered by the Tribunal on the first day of the hearing: see builder's submissions CAD [7]. However the Appeal Panel notes that no submissions were made to the Tribunal on this issue in support of the builder's original application for costs.
8. In relation to the offers of settlement, the builder submitted that the Tribunal was in error in failing to conclude that the conduct of the homeowner in not accepting the offer made on 6 February 2014 (first offer), 4 March 2014 (second offer) and the offer made 16 May 2014 (third offer) was unreasonable.
9. In essence, the builder submitted that the determinations made by the Tribunal in respect of the offers of compromise were not open to it and that the Tribunal should have concluded that it was unreasonable for the homeowner not to have accepted each of the offers and therefore orders for indemnity costs should have been made.

Homeowner's submission in reply at hearing of appeal

1. It is convenient to briefly set out some particular submissions which the homeowner made in oral argument before the Appeal Panel.
2. Firstly, the homeowner submitted that a reading of paragraphs [22] - [25] reveals that insofar as it was necessary to have regard to the fact that relief was sought under s 94(1A) of the HB Act in determining whether or not the builder should receive its costs, the Tribunal failed to address this fact which had been raised by the homeowner in its submissions. When questioned by the Appeal Panel about what paragraphs of the submissions before the Tribunal on costs the homeowner was referring, the homeowner referred the Appeal Panel to [25] - [31] of the homeowner's submission dated 7 July 2015 found at AB 59.
3. The homeowner submitted that the only consideration given to s 94(1A) of the HB Act by the Tribunal in its costs decision was on the question of whether or not special orders for costs should be made, not on the question of whether an order for costs should be made at all. In this regard the homeowner referred to the reasons of the Tribunal in the Costs Decision at [44] - [46].
4. In relation to the builder's submissions that the Tribunal was incorrect to conclude the conduct of the homeowner in not accepting the offers was not unreasonable, the homeowner submitted that the challenge requires leave as the determination of the Tribunal was based on findings of fact and that no application for leave has been sought. Further, and in any event, the homeowner relied on the fact that the appeal on this aspect was out of time, no evidence had been filed and leave should be refused.

Consideration

1. Cost orders were made in each of applications HB 13/46596 and HB 14/15658.
2. In relation to the 2013 application, these proceedings were commenced in the CTTT and finally determined by the Tribunal in 2014. There is no dispute that the power to award costs in those proceedings arises by reasons of s 53 of the CTTT Act and Reg 20(4) of the CTTT Regulation. In this regard the homeowners claim was greater than $30,000.00 had a discretion to "award costs in relation to the proceeding in such circumstances as it thinks fit".
3. Similarly, in relation to the 2014 proceedings, there is no dispute that the power to award costs was regulated by Rule 38 of the Civil and Administrative Tribunal Rules, 2014 (Rules). This power enables the award for costs even in the absence of special circumstances despite the provisions of s 60 of the Civil and Administrative Tribunal Act 2013 (NCAT Act). This was because the amount of the builders claim in the 2014 proceedings was greater than $30,000.00.
4. There is no dispute that the Appeal Panel has jurisdiction to hear this appeal. In particular: 1. The appeal is in respect of an ancillary decision being a decision concerning the award of costs in proceedings: see s 4(1) - definition of "ancillary decision"; 2. There is a right of appeal in connection with an ancillary decision: 1. As of right on a question of law; or 2. With leave of the Appeal Panel on any other grounds: see s 80(2)(b) of the NCAT Act.
5. The issues for determination are: 1. Whether s 94(1A) of the HB Act was a factor the Tribunal was required to consider in exercising its discretion as to costs; 2. If so, whether the discretion in relation to costs miscarried in any relevant sense. In this regard three matters need to be considered: 1. Party/party costs order in the builder's application; 2. Builder's "Calderbank" offers and failure to make special order for costs; 3. Builder's costs of homeowner's application; and 1. If the discretion had miscarried, what orders should be made by the Appeal Panel.
6. Each of these issues is dealt with below.

Relevance of section 94(1A) of the HB Act in exercising discretion to award costs

1. Section 92(2) of the HB Act provides: 92 Contract work must be insured (2) A person must not demand or receive a payment under a contract for residential building work (whether as a deposit or other payment and whether or not work under the contract has commenced) from any other party to the contract unless: (a) a contract of insurance that complies with this Act is in force in relation to that work in the name under which the person contracted to do the work, and (b) a certificate of insurance evidencing the contract of insurance, in a form prescribed by the regulations, has been provided to the other party (or one of the other parties) to the contract. Maximum penalty: 1,000 penalty units in the case of a corporation and 200 penalty units in any other case.
2. Section 94 of the HB Act provides as follows: 94 Effect of failure to insure residential building work (1) If a contract of insurance required by section 92 is not in force, in the name of the person who contracted to do the work, in relation to any residential building work done under a contract (the uninsured work), the contractor who did the work: (a) is not entitled to damages, or to enforce any other remedy in respect of a breach of the contract committed by any other party to the contract, in relation to that work, and (b) is not entitled to recover money in respect of that work under any other right of action (including a quantum meruit). (1A) Despite section 92 (2) and subsection (1), if a court or tribunal considers it just and equitable, the contractor, despite the absence of the required contract of insurance, is entitled to recover money in respect of that work on a quantum meruit basis. (1B) A contractor who applies to a court or tribunal for a remedy under this section, or who is awarded money under this section, is not guilty of an offence under section 92 (2) by virtue only of that fact. (1C) Without limiting the factors that a court or tribunal may consider in deciding what is just and equitable under subsection (1A): (a) in relation to any contract - the court or tribunal may have regard to the impact on the resale price of the property if no contract of insurance is provided, and (b) in relation only to a contract entered into before 30 July 1999 - the court or tribunal is not to be limited by the fact that the required contract of insurance was not obtained until after the date of the contract. (2) However, the contractor remains liable for damages and subject to any other remedy in respect of any breach of the contract committed by the contractor. (3) Residential building work that is uninsured work at the time the work is done ceases to be uninsured work for the purposes of this section if the required contract of insurance for the work is subsequently obtained. (4) If a person commenced residential building work before 30 July 1999 and entered into a contract of insurance that complies with this Act in relation to that work after the contract for the residential building work was entered into, that contract of insurance is, for the purposes of this section or any previous version of this section, taken to have been in force in relation to the residential building work done under the contract for the residential building work whether that work was done before or after the contract of insurance was entered into. Note. If a contract of insurance is in force in relation to part of the residential building work, this section applies only in relation to the part of the work that is not insured.
3. Section 94(1A) gives to the Tribunal a power to make an order for recovery in respect of work done by a builder on a quantum meruit basis if the Tribunal is satisfied it is just and equitable to do so.
4. By its terms, s 94 does not regulate costs in respect of proceedings in which such an order is sought. As set out above, the power to award costs is regulated by the applicable provisions of the CTTT Act, CTTT Regulations, NCAT Act and Rules as the case may be.
5. The effect of the homeowner's submissions is that the starting point to the exercise of a discretion in connection with costs where a builder seeks an order under s 94(1A) is that each party should pay their own costs and that a homeowner should not ordinarily be required to pay the costs of the successful builder.
6. In this regard the homeowner appears to rely upon the costs decision of the Tribunal in Urban Constructions. At paragraph 52 of that decision: 52 Because of the reasons for making the decision referred to, I have reached a conclusion that a Calderbank offer should not be considered in order to displace the principle that that when an applicant is seeking the indulgence of the Tribunal, that party will be required to pay costs and not receive the costs of the application.
7. Insofar as the Tribunal in Urban Constructions was suggesting that the usual order for costs in a case involving s 94(1A) required that the successful builder pay the costs of the unsuccessful homeowner, in our view this statement of principle is incorrect.
8. Rather, in circumstances where there is a general discretion to award costs, the correct statement of principle is that the Tribunal in exercising its discretion is to have regard to the nature of the proceedings before it and all relevant factors arising in connection with those proceedings for the purpose of determining whatorder for costs, if any, should be made.
9. Each of Regulation 20 of the CTTT Regulation and Rule 38 provide a general discretion in respect to the award of costs.
10. The starting point in exercising such discretion is that the "usual order for costs" is that a successful party should be entitled to an order for costs in their favour: see Latoudis v Casey [1990] 170 CLR 534 per Mason CJ at 554 and Oshlack v Richmond River Council per McHugh J at 97.
11. The reason for such an order is that it is appropriate for the party who incurred costs caused by the other party in litigation to be reimbursed. Further, an award of costs is by way of an indemnity to the successful party and not as punishment of the unsuccessful party: see Latoudis v Casey per Mason CJ at 543 and McHugh J at 567 and in Oshlack v Richmond River Council per Brennan CJ at 75.
12. Where there is a general discretion for costs there is no absolute rule that, absent disentitling conduct, a successful party is to be compensated by the unsuccessful party nor is there any rule that a successful party might not be ordered to bear the costs of an unsuccessful party: see Oshlack v Richmond River Council per Gaudron and Gummo JJ at 88 and Kirby J at 121 - 123.
13. The factors to be considered in awarding costs in a particular case are not to be confined as to do so would constrain the general discretion. However it is clear from the authorities that factors that might influence whether the usual order for costs should apply and, if so, to what extent include: 1. Whether, by reason of the relative success of the parties on different issues and the time taken to determine those that an order for costs based on issues should be made: see for example Bostick Australia Pty Ltd v Liddiard (No 2) [2009] NSWSCA 304; and 2. Whether, by reason of the nature of the proceedings the usual rule should otherwise be displaced in whole or in part: see Oshlack v Richmond River Council per Gaudron and Gummo JJ at 41 - 44.
14. An example of such an exception was the case of Dee-Tech, a claim for relief against forfeiture. In that case the Court determined that the entitlement of the lessee (Dee-Tech) to exercise an option for renewal required the favourable exercise of a discretion under s 133(F) of the Conveyancing Act 1919. In that case, White J said at [69]: The fact that Dee-Tech was in breach of the lease and was not entitled to exercise its option of renewal except for a favourable exercise of discretion under s 133F, is a reason why costs need not follow the event. On the other hand, the fact I found it entitled to conditional relief against forfeiture is a reason why it should have at least a proportion of its costs, reflecting the extent to which costs were increased by Needam Holdings' resistance to its claim.
15. However, as White J made clear in Dee-Tech, these are but some of the factors which need to be considered and weighed against each other in determining what order for costs should be made. Other factors considered by White J included whether or not the resistance of Neddam Holdings "went beyond what was reasonable" and pursued issues unsuccessfully and that Neddam was not successful on the predominate issues litigated: per White J at [70] - [71]. Further, the case of Dee-Tech is an example of those cases referred to in Oshlack where, by reason of the nature of the relief sought, it is appropriate for a claimant to pay the costs of the respondent at least up until the stage where the conduct of the respondent and/or issue put into dispute make it just and reasonable for the respondent to pay the successful applicant's costs.
16. That is not to say that, in all circumstances, an applicant who first requires an order in their favour in order to obtain the relief sought should be deprived of the whole or even part of their costs of the proceedings. Each case must be determined on its own facts and where the parties may, without order of a Court or Tribunal, agree to resolve all issues between themselves prior to the commencement of any proceedings, this is also a matter which needs to be considered in determining the proper exercise of any discretion in connection with the award of costs.
17. In short, the proper exercise of the discretion requires the Tribunal to do justice between the parties and to exercise the discretion having regard to relevant considerations and in a manner which is not arbitrary or capricious: see Oshlack v Richmond River Council per Gaudron and Gummo JJ at [22] and McHugh J at 65.
18. In the present circumstances, the nature of an application made by a builder where there is no homeowners warranty insurances requires the Tribunal to be satisfied under s 94(1A) that it is just and equitable that the builder be entitled to recover its costs for the work. The factors to be considered in making such an order are those described in Eddy Lau Constructions Pty Ltd v Transdevelopment Enterprises Pty Ltd [2004] NSWSC 273. Relevantly, it should be noted that the mere fact of a contravention of the HB Act by the builder failing to obtain insurance is not a relevant consideration as to whether it is just and equitable that the builder be entitled to recover. However the circumstances where which insurance where not obtained and the pre-condition was not satisfied are relevant considerations: see Eddy Lau at Barrett J [52].
19. Significantly, this feature of s 94(1A) makes it different to the situation of the position in Dee-Tech. This is because: 1. In the case of a breach of s 92 of the HB Act the builder is unable to demand or receive payment under the building contract. However from the position of the homeowner the contract remains on foot and can be enforced at the homeowner's suit; 2. Section 94(1) prevents recovery of money "under any cause of action (including quantum meruit)" but does not prevent requesting payment on a quantum meruit basis under s94(1A) because it is "just and equitable". 3. Section 94(1A) "confer(s) on the (builder) an entitlement to a quantum meruit if the (Tribunal) considers a quantum meruit to be just and equitable" and this is so "despite" ss 92(2) and 94(1A) see Eddy Lau Constructions Pty Ltd v Transdevelopment Enterprises Pty Ltd [2004] NSWSC 754 at [18].
20. On the other hand, in cases involving relief against forfeiture, the contract has been brought to an end by the landlord in consequence of the lessee's breach, for which relief sought in equity (or in the case of retail leases by order of the Tribunal in proceedings brought under the Retail Leases Act 1996) needs to be granted.
21. That is not to suggest that an applicant builder is relieved from the obligation of satisfying the Tribunal that it is just and equitable to be entitled to recover on a quantum merit basis, but rather any award for costs needs to be considered in the circumstances applicable to each cause of action, the remedies being sought and the particular position adopted by the parties in respect of the matters in dispute in the proceedings.
22. The appellant sought to characterise such cases, including cases of relief against forfeiture as requesting an "indulgence" and that applying that principle to the present case each party should pay their own costs.
23. In our view such an approach involves an inappropriate characterisation of the proceedings, directs the decision maker away from weighing all relevant factors and seeks to fetter the exercise of the general discretion in the particular case. The inappropriateness of such an approach when exercising a general discretion is supported by the comments of Young CL in Eq J in the Court of Appeal in Fordham v Fordyce [2007] NSWCA 129 where said at [50]: 50 Mr Simpkins, for the claimants, has put considerable store on what he has called "The Indulgence Principle", by which he means that, where a person seeks an indulgence of a court, that person should pay the opponent's reasonable costs unless the latter was based unreasonably. As I stated during argument, I doubt whether there is such an overarching principle. In saying this I do not doubt that in various standard situations, particularly in applications in the Equity Division, a person seeking a boon pursuant to statute or general rules of equity normally needs to pay the costs. However, I doubt whether one can conflate those cases into some overarching principle. 51 Mr Simpkins relied on what Campbell J said in Nardell Coal Corporation v Hunter Valley Coal Processing (2003) 178 FLR 400, particularly at 435-436. However, the illustrations given by Campbell J in that case do not convince me that there is some usual principle which is applied unless it is inappropriate to do so in a particular case. It may be that there is such a principle in cases under the old Two Guinea Rule in equity where applicants seeking to modify restrictions imposed by restrictive covenants had to tender two guineas to the other side so the opposing solicitor could investigate the case. It may be that there is some standard guideline in the exercise of discretion in other cases, but I do not think one can say there is an overarching principle known as "The Indulgence Principle" which is to apply unless it is inappropriate.
24. Further, as we indicated above, to suggest that the builder cannot recover money on a quantum meruit other than by order of the Tribunal misconstrues the effect of s92 (2) of the HB Act. This section prevents a builder making a "demand or receiv(ing) a payment under a contract (emphasis added) for residential building work". It does not prevent a builder asking for payment on a quantum meruit basis. A quantum meruit claim is not a claim under a contract. Further, while s94(1) prevents "recovery" by "right of action (including quantum meruit)", as we have set out above there is nonetheless such a right of recovery "despite" s94(1) if the Tribunal considers it is just and equitable.
25. It would be an anomalous result to suggest that a homeowner and a builder are required to obtain an order from the Tribunal under s94(1A) and could not resolve such a dispute and agree to a payment in appropriate circumstances, particularly as a claim for a quantum meruit is a claim for the homeowner to pay reasonable remuneration to a builder for work done which the homeowner has accepted: see eg Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 per Mason and Wilson JJ at 227-228 and Deane J at 263.
26. Lastly, we should note that the decision in Urban Constructions to which we have referred above was set aside by the Appeal Panel and remitted for rehearing by orders made on 21 December 2015: see Urban Constructions (NSW) Pty Ltd v Shearer [2015] NSWCATAP 278. Consistent with what we have said above, we agree with the statement at [51] and the conclusion at [52], save that where relief against forfeiture is sought and costs orders are made departing from the "usual order" in favour of a successful claimant, these are not "indulgence" cases for which particular rules apply. Rather, in our view, they are cases where the proper exercise of the general discretion requires a consideration of all the circumstances of the case and whether, in the particular case, a person should be indemnified for their costs in whole or in part by reason of what has occurred.

Has the discretion in relation to costs miscarried in any relevant sense

1. The principles applicable to determining whether the exercise of a discretion has miscarried are set out in House v The King [1936] HCA 40; (1936] 55 CLR 499 as summarised by the Court of Appeal in Hannaford v Commonwealth Bank of Australia [2014] NSWCA 297 at [14]. That is the appellant must demonstrate the decision maker: 1. made an error of legal principle, 2. made a material error of fact, 3. took into account some irrelevant matter, 4. failed to take into account, or gave insufficient weight to, some relevant matter, or 5. arrived at a result so unreasonable for just as to suggest that one of the foregoing categories of error had occurred, even though the error in question did not explicitly appear on the face of the reasoning."

Party/party costs order in builder's application

1. The homeowner asserts that the Tribunal was in error in making an award in favour of the builder that the homeowner should pay the builder's costs of the builder's application on a party/party basis. The homeowner says that the error is demonstrated by reading [22]-[25] of the Decision which reveal that in making such an order the Tribunal did not have regard to s94(1A) of the HB Act. Therefore there was a failure to take account or give weight to a relevant matter.
2. In our view there is merit to this submission and an error of law is established.
3. This is because the Tribunal only refers to s94(1A) in the Decision when dealing with offers of compromise and whether or not a special order for costs should be made. While we have concluded the "Indulgence Principle" does not apply, The Tribunal does not appear to have taken account of this factor or dealt with the homeowner's submissions as to whether an order for costs on a party/party basis should be made in favour of the homeowner in respect of the builder's claim by reason of the builder's non-compliance with s92 of the HB Act and the subsequent application under s94(1A): see AB page 59, paragraphs 30-33.

Builders "Calderbank" offers and failure to make special order for costs

1. The second matter to consider is whether or not the builder is correct in his submission that the Tribunal was in error in deciding not to make a special order for costs in favour of the builder in the builder's claim by reason of the failure of the homeowner to accept offers of compromise.
2. It is common ground that the form of the first offer and second offer were what is known as "Calderbank" offers. From cases such as SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37], Miwa Pty Ltd v Siantan Properties Pty Ltd (No2) [2011] NSWCA 344 and Nu Line Construction Group Pty Ltd v Fowler [2012] NSWSC 816 at [48]. The following principles can be derived in respect of whether a special order for costs should be made: 1. there must be a real and genuine element of compromise; 2. the refusal must be unreasonable; 3. the reasonableness in rejecting an offer must be considered at the time the offer is made, not with the benefit of hindsight; 4. relevant factors in relation to whether the rejection was unreasonable include: 1. the stage of the proceedings at which the offer was received; 2. the time allowed to consider the offer; 3. the extent of the compromise offered; 4. the offeree's prospects of success, assessed at the date of the offer; 5. the clarity with which the terms of the offer were expressed; 6. whether the offer foreshadowed an application for indemnity costs in the event of each rejection.
3. In the present case, the Tribunal determined both the first offer and the second offer were genuine offers. However, the Tribunal concluded at [45] that the rejection by the homeowner was reasonable because the builder needed to apply for an order under s 94 (1A) because: 1. those offers did not put the homeowner on notice that an application for indemnity costs might be sought; 2. at that stage of the proceedings there was no material provided to the homeowner sufficient to persuade the homeowner a finding under s94(1A) might be made; 3. the offer of 6 February 2014 did not mention the issue; 4. in relation to Home Owners Warranty Insurance, the Tribunal concluded there was no certainty that the builder could obtain such insurance, particularly having regard to the defects.
4. In our view the Tribunal was not in an error in taking account of these factors which are findings of fact. Therefore no error of law is shown. Further no application for leave to appeal on a question of fact has been sought in the Notice of Appeal. While leave was requested at the hearing, in our opinion it should be refused due to the lateness of the application and because these conclusions were open on the evidence.
5. Accordingly, the builder has failed to establish any error of the Tribunal in relation to the manner in which it dealt with the first and second offers.
6. Similarly, it seems to us that no error is demonstrated in relation to the consideration by the Tribunal of the third offer. Here, the Tribunal concluded that the refusal to accept the offer was not unreasonable having regard to the short period of time for which it was open.
7. The offer is found at TAD 42. It was dated 16 May 2014 and states that it "is open until 5pm today". It also states: This offer is made on the basis that we believe that the homeowner cannot be successful in the claims for defects and for incomplete work. We are also confident our client will succeed in his quantum meruit claim based on the evidence filed.
8. It is relevant to note at this point that the hearing of the claims in fact occurred on 16 June 2015, one month after the offer was made.
9. The finding made was a finding of fact and was reasonably available to the Tribunal on the evidence before it. No leave to appeal this decision has been sought and accordingly this ground of appeal fails.

Builder's costs of homeowner's application

1. The last matter to deal with is the builder's claim that it should have been entitled to costs in respect of the homeowner's application HB 13/46596.
2. Here the Tribunal ordered each party to pay their own costs of the homeowner's application. The reasons for doing so are set out in [8]-[18].
3. Ultimately, the Tribunal concluded that the homeowner's defects case "had only marginal success" but "played a relatively minor role in the proceedings as a whole". The Tribunal noted that the defects which were ultimately found by the Tribunal were "admitted soon after the defect was raised in proceedings" and that it would be unfair if a costs order was made against the builder in these circumstances.
4. Again, the builder submitted that the offers of compromise which had been made were relevant to determining what orders for costs should be made and, in the circumstances, the exercise of the Tribunal's discretion was unreasonable.
5. In our view, this ground of challenge to the exercise of the discretion fails. The builder seeks to focus upon the extent of the homeowner's success and the offers which the builder had made. However, in this case the Tribunal has evaluated the offers which were made, the history of the proceedings, the fact of the homeowner's success in relation to her claim and has determined that the usual order for costs in respect of the homeowner's claim should not apply, that is the homeowner should not receive the costs of her application despite being successful. Insofar as the Tribunal's conclusions were findings of fact, these findings were available to the Tribunal and no leave to appeal has been sought.
6. While the Tribunal determined costs in respect of each application separately, despite the fact that both applications were heard together, such an approach is permissible where different issues are involved or time has been taken up at a hearing dealing with particular matters: see Bostik.
7. Accordingly, no error has been demonstrated by the builder on this aspect of the appeal.

If the discretion has miscarried, what orders should be made by the Appeal Panel.

1. In our view, the evidence that has been provided to the Appeal Panel, including the Principal Decision and the Costs Decision, enable us to determine whether the discretion should be re-exercised in the present case so as to vary the order for costs in the builder's application or whether the appeal should be dismissed.
2. While we have found that the order for costs in relation to the builder's application miscarried, in that the Tribunal does not appear to have had regard to the nature of the proceedings in determining what costs order should be made, in our opinion the order for costs in application HB 14/15658 should not be varied or set aside. Rather, the appeal should be dismissed.
3. In our opinion, the order for costs that was made in respect of the builder's application was an appropriate order having regard to the following matters: 1. The builder commenced proceedings to recover money for work performed following the homeowner filing an application claiming for defective work; 2. There was an overlap between the two applications and there was significant success of the builder in the homeowner's claim but each party was required to pay their own costs; 3. the builder was ultimately successful in obtaining an order for payment on a quantum meruit basis pursuant to s94(1A) of the HB Act; 4. There was no dispute that original contract was in writing to do works of a value that did not require insurance. It was also not in dispute that the contract did allow for variations and that the variations, which gave rise to the builder's claims, were not in writing. However, there was no suggestion that the work performed was not at the request of the homeowner, albeit the homeowner made allegations of defects which claims were substantially rejected by the Tribunal; 5. The oral submission that an order for costs should not be made in favour of a builder who "snubs their nose" at the legislative requirements should be rejected. Firstly, this submission suggests a successful party should be "punished", an approach inappropriate to the exercise of a discretion, the question being whether or not there is conduct of a successful party which should disentitle that party to costs. Secondly, the Principal Decision makes clear that the circumstances in which there was no insurance in contravention of s92 arose by reason of variations of the contract and in circumstances where the parties had discussed the need for insurance in light of the changed circumstances: see eg Principal Decision at [46]; 6. The builder had sought recovery of an amount of $73,914 and had an award made in his favour of $68,828.31: see order 1 made 16 June 2015 and Principal Decision at [15]; 7. The builder had a right to seek recovery in respect of work done for and at the request of the homeowner and was substantially successful in respect of the amount claimed, resisting the homeowner's defence that an order should not be made because it was not "just and equitable"; 8. The Tribunal found the failure to accept offers was not unreasonable and therefore no special order for costs should be made. However the fact that offers were made shows that the builder was prepared to compromise his claim and recovered an amount more than he offered to accept. This is a relevant factor in deciding whether an order for costs should be made on a party/party basis.
4. Finally, the conclusions of the Tribunal in the Cost Decision at [22] and following are also relevant as to why the costs order made was appropriate in the circumstances.
5. Accordingly, the appeal should be dismissed.

Costs

1. The parties made submissions in relation to costs of the appeal.
2. Two issues were raised by the parties.
3. Firstly, the builder submitted that he should have an order in his favour in connection with the stay application. A stay was granted on 30 November 2015 by the Appeal Panel on terms that required a payment to be made by the homeowner. However, the payment was not in fact made and the stay was revoked in circumstances where the homeowner did not oppose such order for revocation.
4. Secondly, in relation to the appeals, both parties submitted that there were special circumstances and they should be entitled to costs if successful. In relation to the question of what were the special circumstances, the parties variously relied on s60(3)(d) of the NCAT Act and said that the proceedings were complex. It was also submitted that s60(3)(g) was applicable.
5. The award for costs on appeal can only be made in special circumstances. Special circumstances means out of the ordinary: see Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120 at [11].
6. In relation to the stay application, in our opinion there is nothing out of the ordinary that warrant an order being for costs being made. While the homeowner successfully obtained a stay, it was on terms that an amount of $50,000 be paid as security for costs in circumstances where costs had not been assessed. Rather, all that had occurred is that the builder had apparently delivered an invoice for the costs which he claimed. The amount was not paid and as a result an application to revoke the stay was made. The homeowner did not appear at that application. On the other hand, no suggestion was made that consent to discharge the order had been sought and refused. If this had occurred the need for any further hearing might have been removed.
7. Be that as it may, in this case we are not satisfied special circumstances exist which warrant the making of an order for costs in connection with the stay application.
8. In relation to the costs of the appeal, there are special circumstances which would entitle the Appeal Panel to make an order for costs. These circumstances include the fact that the Tribunal at first instance, constituted by the same member, appears to have made inconsistent decisions and that there was some complexity in relation to the manner in which a discretion in relation to costs is to be exercised having regard to the provisions of s 94(1A) of the HB Act.
9. However, as is evident above each of the parties has failed on their appeals which are to be dismissed. The issues raised by each party concerning costs are interrelated and each party contended that different costs orders should be made to those originally made.
10. To this extent each party should bear their own costs.
11. The exception is in the case of the builder's appeal AP 15/56931 in respect of interest which the builder claimed should have been awarded under s100 of the Civil Procedure Act, being "prejudgement interest". This appeal was abandoned at the hearing and rightly so. It had no merit because there is no power to award interest under s100 which has no application to proceedings in the Tribunal.
12. It follows that there are special circumstances within the meaning of s60(3)(c) of the NCAT Act because this appeal had "no tenable basis in fact or law".
13. Accordingly, the Appeal Panel will order that the builder is to pay the homeowner's cost of appeal AP 15/56931, such costs to be as agreed or assessed.

Orders

1. The Appeal Panel makes the following orders: 1. In appeal AP 15/53790 leave to appeal is refused, the appeal is dismissed and each party is to pay their own costs. 2. In appeal AP 15/56931, the appeal is dismissed and the appellant is to pay the respondent's costs as agreed or assessed on a party/party basis. 3. In appeal AP 15/56942 the appeal is dismissed and 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

Amendments 07 January 2016 - coversheet 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: 07 January 2016