TJN Constructions Pty Ltd t/a Copperwood Construct v Karonen; Karonen v TJN... [2022] NSWCATCD 176 | Case summary

NCAT Consumer and Commercial|2022-12-07

Solicitors: TJN Constructions Pty Ltd t/a Copperwood Construct - Gavel and Page Heidi Karonen and Matthew Prenctice - Strand Lawyers File Number(s): HB 21/25024, HB 21/40311 Publication restriction: Nil

Outline

The builder commenced proceedings against the owner and her partner and was found to be entitled to recover $50,420.28 from the owner but, as against her partner, the application was dismissed.
The owner's cross-application resulted in a determination that she was entitled to $741.97 with the net result of the application and cross-application being a money order in favour of the builder for $49,678.31.
Documents submitted on the question of costs were: Exhibit 1 17 June 2022 email from the builder's solicitors Exhibit 2 21 March 2022 letter to the builder's solicitors MFI A Builder's submissions dated 7 November 2022 MFI B Owner's submissions dated 16 November 2022 MFI C Builder's submissions in reply dated 28 November 2022
Having considered the written submissions lodged in relation to costs, the Tribunal determined that the builder should be awarded 80% of it costs.

Relevant law

As was indicated in the reasons published on 24 October 2022, the costs of these applications are governed by cl 38 of the Civil and Administrative Tribunal Rules 2014 (the Rules): (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) … (b) the amount claimed or in dispute in the proceedings is more than $30,000.
When cl 38 applies there is a general discretion to award costs and decisions such as News v Cotes [2019] NSWCATAP 186, Bonita v Shen [2016] NSWCATAP 159 and Thompson v Chapman [2016] NSWCATAP 6, establish: (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.
When cl 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 (Oshlack).
Reference was made in the written submissions to a Calderbank letter, being a letter that follows the practice established in the UK by the decision in Calderbank v Calderbank [1975] 3 All ER 333 which revealed a strategy employed in Family Court proceedings, as an alternative to paying money into court, of conveying an offer of settlement in writing to the other party, indicating an intention to rely on that letter to seek an order for costs if a better outcome was not subsequently obtained at the hearing.
However, a Calderbank letter does not necessarily result in an indemnity costs order: Jones v Bradley (No 2) [2003] NSWCA 258, Old v McInnes and Hogkinson [2011] NSWCA 410. The relevant considerations, established by cases such as SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323, Miwa Siantan Properties Pty Ltd (No 2) [2011] NSWCA 344, and Nu Line Construction Group Pty Ltd v Fowler [2012] NSWSC 816, are: (1) There must have been a real and genuine element of compromise. (2) The refusal must have been unreasonable. (3) The reasonableness in rejecting an offer must be considered at the time the offer is made and not with the benefit of hindsight.
Matters relevant to whether rejection of the offer was reasonable include: (1) the stage of the proceedings when the offer was made, (2) the time that was allowed for the offer to be considered, (3) the extent of the compromise offered, (4) the recipient's prospects of success at that time, (5) the clarity of expression of the offer, and (6) whether the offer foreshadowed a request for indemnity costs.
Another topic raised in the submissions was a Sanderson order. More than a century ago, in Bullock v London General Omnibus Co [1907] 1 KB 264 and Sanderson v Blyth Theatre Co [1903] 2 KB 533, orders were made in cases where a plaintiff sued more than one defendant but was not successful against each defendant. The orders made in those cases have come to be known as a Bullock order and a Sanderson order, respectively. They seek to achieve the same outcome but in different ways. A Bullock order requires the plaintiff to pay the costs of the successful defendant(s) but permits those costs to be recovered against the unsuccessful defendant. On the other hand, a Sanderson order is more direct as it requires the unsuccessful defendant to pay the costs of both the plaintiff and the successful defendant(s).
The principles relating to Bullock and Sanderson orders were considered in ACQ v Cook (No 2) [2008] NSWCA 306 (ACQ) in which, at [32], a passage from the judgement of Gibbs CJ in Gould v Vaggelas [1985] HCA 85; 157 CLR 215 at 229-230 was quoted. Although a Bullock order that was under consideration in that case, the following paragraph is relevant to these proceedings: … the mere fact that the joinder of two defendants was reasonable does not mean that the unsuccessful defendant should be ordered to pay, directly or indirectly, the costs of the successful defendant. Obviously a judge should make a Bullock Order only if he considers it just that the costs of the successful defendant should be borne by the unsuccessful defendant, and, if nothing that the unsuccessful defendant has said or done has led the plaintiff to sue the other defendant, who ultimately was held not to be liable, it is difficult to see any reason why the unsuccessful defendant should be required to pay for the plaintiff's error or overcaution. (emphasis added)
In ACQ, at [36], it was noted that, in Stevedoring Industry Finance Committee v Gibson [2000] NSWCA 179 at [128], the following summary was quoted, taken from what was said in Lackersteen v Jones (No 2) (1988) 93 FLR 442 at 449: 1. It must be seen to have been reasonable and proper for the plaintiff to have sued the successful defendant. 2. The causes of action against two or more defendants need not be the same but they must be substantially connected or dependent the one on the other. 3. While it is essential to find that the plaintiff has acted reasonably and properly that alone is not sufficient. The court must find something in the conduct of the unsuccessful defendant which makes it a proper exercise of discretion. 4. Finally, in considering whether to make such an order, the court should, in the exercise of its discretion balance overall two considerations of policy: the first, that an unnecessary multiplicity of actions should not be forced on litigants, so that a plaintiff who acts reasonably in joining two or more defendants should not be penalised or lose the fruits of his victory in costs on the basis that he should have either elected or taken separate actions; secondly, that an unsuccessful defendant should not have to pay more than one set of costs merely because he is unsuccessful.
There is appellate authority for the proposition that any conduct which made it fair and reasonable for the successful party to be joined is relevant: Almeida v Universal Die Works Pty Ltd (No 2) [2001] NSWCA 156 at [8].

Builder's submissions

After referring to the outcome of the application and cross-application, the first contention for the builder was that the owner should be ordered to pay the costs of both proceedings.
Reference was then made to a 17 June 2022 letter, sent just under three months prior to the hearing, in which it was said the builder offered to accept the amount claimed in the application and 60% of its costs as to that time.
Based on that letter, a claim was made in the alternative for the owner to pay the costs of both proceedings, on the ordinary basis up to the date of that letter and on an indemnity basis thereafter.

Owner's submissions

The owner opposed the application for indemnity costs and sought an order for costs in favour of her partner, on the ordinary basis up to 21 March 2022 and on an indemnity basis thereafter.
Observations were made in relation to the builder's Calderbank letter, including (1) that a report from Mr Drexler in support of the owner's defects claim, suggesting a cost of rectification of $42,017, had been obtained and served by that time, (2) that there was no basis for the claim for interest, (3) there was no indication as to what the builder's costs were at that time, (4) the builder's then solicitors were the fourth firm it had retained with the contended result that any claim for costs included duplication of work, and (5) the builder had made two applications under the Building and Construction Industry Security of Payment Act 1999: one for the Caringbah property; the other for the subject property.
As to the involvement of the owner's partner, Mr Prentice, it was noted that he was joined as a party in the builder's application, filed on 9 June 2021, at a time when the builder appeared to be acting without the benefit of legal advice. Reliance was placed on a Calderbank letter dated 31 March 2022 in which an offer was made for the proceedings to be withdrawn as against him. It was contended that the maintenance of a claim against him after that date was unreasonable.

Submissions in reply

It was suggested that the role of Mr Prentice was integral to the proceedings, that the owner's defence to the application and her defects claim would have been no different had he not been a party, and that the owner's case was "heavily reliant on his evidence".
Based on findings the Tribunal made in relation to the evidence of Mr Prentice, it was submitted that no costs order should be made in his favour. In the alternative, it was submitted that a Sanderson order should be made, and reference was made to the decisions in Actol Pty Ltd v Pro9 Systems Pty Ltd [2022[ NSWCATAP 225 at [35] and Thomas v SMP (International) No 5 [2010] NSWSC 1263.
The builder's submissions maintained that Mr Prentice paid for some of the work done but withheld payment for other work and that, had the builder discontinued its claim against him, there was a potential finding that work was done for him and not the owner. Further, that the owner's conduct, in not paying for the work, was the sole reason for the involvement of Mr Prentice in the proceedings because if she had not persisted in refusing to pay for the work, he would never have been joined. It was on that basis that it was contended that if the costs or Mr Prentice were to be paid then they should be paid by the owner.

Consideration

The Tribunal does not consider the builder's Calderbank offer was unreasonably refused when (1) the owner was entitled to base her decision on the report obtained from her expert, (2) the claim for interest was flawed, (3) the amount claimed for costs was not indicated, and (4) the builder had changed solicitors three times with the result that its costs may reasonably be viewed as containing duplication.
It is understandable that the builder, without the benefit of legal representation, might commence proceedings against both the owner and her partner. However, there was no suggestion of any contract between the builder and the owner's partner and neither his making payments on her behalf or giving evidence in support of her case warranted him being retained as a respondent to the builder's application. Accordingly, the Calderbank letter sent to the builder served to provide notice that the proceedings should not be continued as against him.
However, the owner and her partner were jointly represented. It is clear, from the fact that Mr Prentice made payments on behalf of the owner, that theirs was and is a joint financial position. As this was a situation where two respondents are linked, both by joint representation and their finances, there was not the level of separation such as when two unrelated parties are sued by a plaintiff or applicant. Further, very little time was spent on the claim against Mr Prentice with the result that any costs order made against him would only involve a small proportion of the total costs.
The practical consequence of making a separate order for the costs of Mr Prentice would be that, if the parties are unable to agree on the amount payable in respect of costs, the assessment process would involve the need to distinguish between (1) costs which relate to the case against the owner and the owner's case against the builder, and (2) costs which relate to the builder's case against the owner's partner, Mr Prentice.
In relation to the question of a Sanderson order, the conduct of the builder in joining Mr Prentice and the conduct of the owner are both relevant considerations. It is not necessary to consider the former because, as to the latter, the builder's submissions did not point to any conduct on the part of the owner which would provide the necessary basis for such an order and the Tribunal is unable to discern any such conduct.
Bearing in mind the Tribunal's guiding principle is the just, quick, and cheap resolution of the real issues in the proceedings, set by s 36(1) of the Civil and Administrative Tribunal Act 2013, in the exercise of its discretion the Tribunal considers the preferable course is to make a percentage reduction to the costs recoverable by the builder in relation to both applications, reflecting three aspects of the proceedings: (1) the minimal success of the owner in her cross-application, which claimed $50,000 and only achieved an outcome of $741.97, (2) the small proportion of the total costs that relate to the builder's claim against Mr Prentice, (3) the practicalities of the assessment of costs.
In view of those matters, the Tribunal considers the costs order that should be made in favour of the builder is for 80% of its costs to be paid by the owner, with that order to apply to both the application and the cross-application.

Orders

No party contended that there should be a hearing on the question of costs and the Tribunal is satisfied there would be no utility in conducting such a hearing.
For the reasons set out above, the following orders are made: In HB 21/25024: 1. Pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW), the Tribunal dispenses with a hearing on the question of costs. 2. The first respondent is to pay 80% of the applicant's costs, on the ordinary basis, as agreed or assessed. In HB 21/40311: 1. Pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW), the Tribunal dispenses with a hearing on the question of costs. 2. The applicant is to pay 80% of the respondent's costs, on the ordinary basis, as agreed or assessed.

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 February 2023 - Amended numbering. 14 September 2023 - Formatting amendments. 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: 14 September 2023

TJN Constructions Pty Ltd t/a Copperwood Construct v Karonen; Karonen v TJN Constructions Pty Ltd t/a Copperwood Construct

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