Timilty Constructions Pty Ltd v Culina

Principal decision

1. In our principal decision, we granted Timilty leave to appeal and allowed the appeal in part. We held at [80]-[81] of the principal decision: 80. In our opinion, the high rate for the builder's margin and the amount for preliminaries does not warrant any additional sum to be allowed for contingencies: (1) Given the relatively simple nature of the rectification works; and (2) Where there is an agreed scope for that rectification work; and (3) Where there has been no concern raised by the experts in their agreed scope or the Tribunal identifying the likelihood of possible further risks when undertaking the agreed work; (4) Where the Tribunal's reasons did not canvas Timilty's expert not allowing any contingency amount and the respondent's expert report did not identify why a contingency amount was allowed. 81. We uphold that part of the appeal raised by Ground 2. Having regard to the Tribunal's calculations by reference to the Reasons at [83], we vary the Tribunal's decision by making an overall deduction of $7,840.49 from the Tribunal's order that the appellant pay the respondent $61,012.08 as follows: (1) $52,269.93 (for costs of rectification, preliminaries at 11%, builder's margin at 25% and GST) plus $901.66 (warranty insurance) = $53,171.59.
2. Accordingly, we varied the Tribunal's decision by ordering the appellant to pay the respondent the sum of $53,171.59.
3. We made the following comments and orders in relation to the costs of the appeal at [88]-[92]: Costs 88. Timilty does not seek its costs of the appeal in the orders sought at [38] of its written submissions. 89. The respondent seeks its costs on the presumed basis that the appeal would be dismissed. 90. The failure of Timilty to identify that it would seek an order as to costs if successful in the appeal may have been an oversight. 91. Timilty has had partial success in the appeal, although the variation of the monetary amount of the Tribunal's order is less than $10,000. 92. In the circumstances, we believe it is appropriate and consistent with s 38 (5) (c) of the NCAT Act to give both parties an opportunity to be heard on the issue of costs.
4. We made procedural directions to deal with any application by the parties for their costs of the appeal. In Order 5(d), the parties were required to address in their costs submissions whether that party seeks an oral hearing on the issue of costs or whether it was agreed for us dispense with a hearing and having the issue of costs being determined "on the papers" in accordance with s 50 (2) of the NCAT Act. As stated above, both parties consented to us dealing with the costs of the appeal "on the papers."
5. At [93], we also directed the parties in their costs submissions "to include reference to s 60 of the NCAT Act; r 38A of the Civil and Administrative Tribunal Rules 2014 (NSW) ('NCAT Rules') and applicable authorities on the issue of costs, including whether the amount claimed or in dispute in the appeal exceeds $30,000".

NCAT Rules Pertaining to Costs

1. Rules 38 and 38A of the NCAT Rules make provision with respect to costs in proceedings brought in the Consumer and Commercial Division of the Tribunal and on an (internal) appeal. Rules 38 and 38A provide: 38 Costs in Consumer and Commercial Division of the Tribunal (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. 38A Costs in internal appeals (1) This rule applies to an internal appeal lodged on or after 1 January 2016 if the provisions that applied to the determination of costs in the proceedings of the Tribunal at first instance (the first instance costs provisions) differed from those set out in section 60 of the Act because of the operation of - (a) enabling legislation, or (b) the Division Schedule for the Division of the Tribunal concerned, or (c) the procedural rules. (2) Despite section 60 of the Act, the Appeal Panel for an internal appeal to which this rule applies must apply the first instance costs provisions when deciding whether to award costs in relation to the internal appeal.
2. The principles that apply to a decision concerning the costs of an appeal from a decision of the Consumer and Commercial Division where the amount in the dispute at first instance was more than $30,000, invokes r 38(2)(b) of the NCAT Rules. On appeal, pursuant to r 38A, we are to apply the applicable first instance costs provisions when deciding whether to award costs in relation to an (internal) appeal.
3. As we have referred to above, our order varying the monetary amount of the Tribunal's order is less than $10,000. However, we are required to have regard to whether "the amount claimed or in dispute in the proceedings is more than $30,000": r 38(2)(b) - see Hanave Pty Ltd v Wine Nomad Pty Ltd: Wine Nomad Pty Ltd v Hanave Pty Ltd (No 2) [2022] NSWCATAP 361 at [41]. By reason of r 38A, "proceedings" includes an appeal.
4. There was no cross-appeal raised by the respondent, so to determine the amount claimed or in dispute on the appeal, we must have regard to the relief sought by the appellant in its Notice Appeal lodged on 20 July 2022. Relevantly, at Section 5.C of the Notice of Appeal, the order sought by the appellant was in the following terms: 1. That the Defendant [sic] Timilty Constructions Pty Ltd pay to Dean Culina the sum of $20,452.82 together with an amount of $3,268.13 being 16% on the sum of $20,425.82 being for preliminaries, margin and contingencies, being a total of $23,693.95 within 28 days from the date of these orders.
5. At the hearing, the appellant's counsel was asked to identify the amount in dispute, which was said to be $44,328.22. We are not aware how that sum was derived. In any event, for the reasons now discussed, it does not matter in our consideration of the issues in determining the question of the costs of the appeal.
6. The amount in dispute in the appeal is not the amount claimed in the order sought by the appellant of $23,693.95 because if allowed, that sum has to be set-off from the amount of $61,012.08 awarded by the Tribunal. The amount that was the subject of dispute in the appeal was the amount that would be payable by the appellant if we varied the Tribunal's decision by upholding the appellant's challenges to that decision. The amount that was in dispute in this appeal was the difference between the amount awarded by the Tribunal ($61,012.08) and the amount that the appellant asserted should have been awarded ($23,693.95), namely $37,318.13.
7. Therefore, we find that r 38(2)(b) of the NCAT Rules apply. Accordingly, for a party to obtain a costs order in these appeal proceedings, the party does not have to demonstrate "special circumstances" under s 60 (2) of the NCAT Act.

Parties' submissions

1. In accordance with our procedural directions, the respondent lodged submissions seeking his costs of the appeal on 10 February 2023. The appellant did not lodge submissions in accordance with our procedural directions seeking its costs of the appeal.
2. In its submissions in response to the respondent's submissions lodged on 2 March 2023, the appellant did then seek an order for its costs. The appellant essentially adopted the same arguments and authorities that had been relied on by the respondent in his submissions for costs. However, the appellant applied those same arguments and authorities to the circumstances of the appeal with the opposite outcome being claimed, being a cost award in its favour.
3. The parties' submissions, regrettably, did not have regard to the procedural directions made at [93] of our principal decision referred to above, that specifically requested the parties to address "whether the amount claimed or in dispute in the appeal exceeds $30,000".
4. Both parties mistakenly focussed on s 60 of the NCAT Act, being the general costs provision that applies to proceedings in the Tribunal but not to proceedings in the Consumer and Commercial Division where the amount claimed or in dispute on the appeal is more than $30,000: r 38(2)(b) and r 38A. Both parties set out the provisions of s 60 of the NCAT Act and r 38 of the NCAT Rules. Neither party mentioned r 38A nor explained why it did not apply. Both parties appear to have presumed that because the amount claimed or in dispute in the Tribunal proceedings (rather than the amount claimed or in dispute in the appeal) exceeded $30,000, that "special circumstances" under s 60 (2) of the NCAT Act did not have to be established for a costs order to be made.

Respondent's submissions

1. The respondent sought his costs on the "axiomatic" basis that costs follow the event, citing Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 (Oshlack). It is not in contention that the common law principles pertaining to costs is that a costs order is primarily to compensate a successful party and not punish an unsuccessful party, so that the "usual order" is that "costs follow the event": Oshlack per McHugh J at [67]. The "event" used in that sense, refers to the outcome of the proceedings in terms of who may be regarded as the successful party. However, as we have found above, r 38(2)(b) is the costs provision that applies to this appeal. Although r 38(2)(b) reflects to some extent the common law position, it is not the common law but r 38 and the relevant authorities having regard to the application of that rule that we must consider.
2. The respondent referred to the appellant's limited success on the appeal by only succeeding in having the percentage amounts for preliminaries, margin and contingencies varied. The respondent relied upon the Appeal Panel's decision in Smith v Giro Constructions Pty Ltd [2015] NSWCATAP 214 (Giro), to submit that where there are multiple issues and a party has not succeeded on certain dominant or severable issues, having regard to the significance of those issues to the outcome of the appeal and the time spent in hearing those issues, the appellant should not be allowed it costs.
3. The respondent contended that the appellant should be deprived of an order for its costs for its lack of success on certain issues, including the unsuccessful challenge in relation to (defect) Item 4. We take that submission to include "disentitling conduct" but without being described as such by the respondent, nor was it put in the context of the application of r 38(2)(b) of the NCAT Rules. The conduct relied upon also included the appellant's unsuccessful attempt to adduce new evidence, belatedly and unsuccessfully seeking to have the money order made by the Tribunal "converted" into a work order and departing in its oral submissions from the issues as they were put in the Notice of Appeal.

Appellant's submissions

1. The appellant relied upon disentitling conduct by the respondent (not described as "special circumstances") said to be relevant to the exercise of our discretion. Such conduct primarily concerned matters between the parties in the Local Court proceedings, before they were transferred to this Tribunal. The exercise of our discretion on costs would miscarry if we had regard to such matters as "disentitling conduct" and that are not within this Tribunal's jurisdiction; about which there is no evidence in support of the appellant's submissions; and that cannot be relevant to our consideration of the costs of this appeal. As stated by McHugh J in Latoudis v Casey [1990] HCA 59; 170 CLR 534 at 568: … even when the discretion [to award costs] is uncontrolled … the discretion to refuse to award costs should not be exercised against a successful party except for reasons connected with the case.
2. We regard those words of McHugh J that we have emphasised as being "connected" with the case under consideration by a court or Tribunal and not some extraneous proceedings such as the earlier proceedings between the parties in the Local Court.
3. Our focus is on circumstances relevant to the costs of the appeal proceedings, not to the earlier proceedings in the Local Court that led to the Tribunal proceedings. The Appeal Panel does not have jurisdiction to make a costs order in the original Tribunal proceedings unless there was a costs order made in the Tribunal proceedings and that costs order is subject to appeal (LMA Contractors Limited v Changizi [2017] NSWCATAP 145 at [18]-[20]). Some of the matters raised by the appellant may have been relevant to a costs application before the Tribunal, but any relevance to the costs of the appeal proceedings is peripheral, at best.
4. In reply to the respondent's reliance on Giro, the appellant also sought to argue that the appeal could be dissected to reflect its success on certain "dominant or severable issues."
5. The appellant submitted in the alternative, that if it was not to be awarded its cost of the appeal, then an order should made that each party pay their own costs.

Consideration

1. As we have set out above, there were only two substantive issues raised by the appeal, notwithstanding other ancillary and procedural matters argued at the hearing. A further matter (a work order being sought rather than an award of damages) was referred to in submissions by the appellant; but no application to amend the grounds of appeal was made or granted. Where, as in this case r 38(b)(c) applies and the appeal was upheld in part, we are of the view that each party should pay its own costs of the appeal. Such an order reflects the appellant's success in varying the Tribunal's findings on the percentages to be applied to preliminaries, margin and contingencies and the respondent's success in maintaining the Tribunal's finding in relation to the defect at Item 4 of the Schedule of Defects.
2. In Thompson v Chapman [2016] NSCATAP 6 (Thompson), when dealing with r 38(2)(b) of the NCAT Rules, the Appeal Panel said at [69] (omitting citations): 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.
3. In Bonita v Shen [2016] NSWCATAP 159 (Bonita) at [58], the Appeal Panel observed that r 38 (2)(b) provides that the Tribunal "may" award costs and held that this provision "confers upon the Tribunal a power which may be exercised at the discretion of the Tribunal": referring to s 9 of the Interpretation Act 1987 (NSW). Even where r 38(2)(b) applies, a departure from the usual order is permissible: Bonita at [64] (referring to Thompson).
4. As stated in Thompson, where there is a general discretion to award costs there is no absolute rule that the successful party must receive the costs. In Thompson, the Appeal Panel said at [71]-[72]: 71 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 be of the costs of an unsuccessful party: see Oshlack … per Gaudron and Gummow JJ at 88 and Kirby J at 121-123. 72 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 (N0 2) [2009] NSWCA 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 … per Gaudron and Gummow JJ at 41-44.
5. In Lam v Steve Jarvin Motors Pty Ltd [2016] NSWCATAP 186, the Appeal Panel said at [206]: In the circumstances set out in r 38(2)(b) of the Rules, the Tribunal does not apply s 60 but rather has an unfettered discretion in relation to costs, although that discretion must be exercised judicially.
6. In Golding v Vella (No 2) [2001] NSWSC 731, Barrett J (as his Honour then was), said at [8]: … it is unwise to be too technical about what is meant by "the event" or "issue" in this context … In particular one does not look at issues as if they were pleaders' issues, but approaches the matter with a broad brush.
7. The exercise of a discretion on costs will often depend upon matters of impression and evaluation: Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 at [11].
8. In this appeal, there was no clearly successful party in an overall sense or on multiple issues that were either dominant or severable. As we have stated above, there were only two issues for our determination raised by the Notice of Appeal and the parties succeeded on one issue each. The appeal was therefore upheld in part only. The principles in relation to the apportionment of a successful party's costs do not warrant the order for the issues on the appeal to be dissected in the way suggested by both parties: B&W Windows (Residential) Pty Ltd v Sibilia (No 2) [2002] NSWCATAP 7.
9. In Xiao v BCEG International (Australia) Pty Ltd (No 2) [2023] NSWCA 87 (Xiao), in reference to a mixed outcome of an appeal, the NSW Court of Appeal held that the question is whether "some other order should be made than the default position that costs follow the event: [6]. Although the Court was there also considering the provisions of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR r 42.1), for which there is no directly applicable provision in the NCAT Act or NCAT Rules, the general principles that guide the exercise of the discretion where there has been mixed success and summarised in Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 (Bostick) at [38] (Beazley, Ipp and Basten JJA), was referred to in Xiao with approval. As we have set out above, in Thompson the Appeal Panel also applied the principles of Bostick where there has been a mixed outcome in an appeal.
10. Both parties have had a measure of success in the appeal. Both parties were legally represented and have incurred legal costs. In those circumstances, it is within the discretion of the Tribunal to make no order as to costs, so that each party bears its own costs of the proceedings: Hogan v Trustee of the Roman Catholic Church (No 2) [2006] NSWSC 74 at [40]; Hans-Egon Bruno Bernard Metzner & Anor v Jacqueline Rita Metzner [2021] NSWSC 1565 at [17]. We do not regard it as appropriate that one party pay the other party's costs of the appeal; nor that an order be made that each party pay the opposing party's costs of the appeal; nor that there be a proportionate costs order.
11. Accordingly, we will make no order as to costs of the appeal.

Orders

1. We make the following orders: 1. Pursuant to s 50(2) of the Civil and Administrative Tribunal Act (2013) (NSW), dispense with a hearing on the costs of the appeal and determine the question of costs "on the papers". 2. Make no order as to costs, with the intention that each party pay its own costs of the appeal.

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: 31 May 2023