Urban Constructions (NSW) Pty Ltd v Shearer

Background

1. The substantive proceedings (HB10/44316) concerned a claim by one of the appellants (the Builder) to recover money in connection with an agreement to carry out residential building work on the respondents' premises at 106 Stanmore Road, Stanmore (the agreement). On 1 June 2011 the respondents filed a cross claim (HB11/27833) seeking restitution of moneys paid under a mistake and damages for rectification of defects, damages for incomplete work against the Builder and damages for misleading and deceptive conduct under section 68 of the Fair Trading Act 1987 (NSW) against Mr Cosco, the director of the Builder.
2. It was common ground that the Builder had not taken out home owners' warranty insurance in compliance with section 92 of the Home Building Act 1989 (NSW) (the Home Building Act) and had not entered into a written agreement with the respondents, in breach of section 7 of the Home Building Act and thus could only succeed on its claim upon a quantum meruit and then only if the Tribunal found that it was 'just and equitable' for it to do so under section 94(1A) of the Home Building Act .
3. The matters were heard together over four days in June 2014. On 10 February 2015, the Tribunal delivered two decisions, one in respect of the Builder's claim and one in respect of the respondents' various claims for restitution and damages. The Tribunal ordered that the respondents pay to the Builder the sum of $170,220.03 and the Builder pay the respondents the sum of $540. The respondents were wholly unsuccessful against Mr Cosco.
4. Subsequent to the decision in the substantive proceedings, the Builder and Mr Cosco made an application in both proceedings that the respondents pay their costs: 1. as agreed or assessed up to either 22 November 2011 or 12 March 2013; and 2. on an indemnity basis from either 22 November 2011 or 12 March 2013.
5. The Tribunal determined that application on the papers and delivered the decision in relation to costs on 19 June 2015, in favour of the respondents (the decision on costs). This appeal relates solely to the decision on costs.

The costs proceedings at first instance

1. The costs application raised two primary issues for determination: first whether costs may be recovered by the Builder in circumstances where its claim was brought under section 94(1A) of the Home Building Act, and secondly whether the respondents' rejection of two Calderbank offers made by the Builder was not unreasonable in the circumstances.
2. The Tribunal analysed the general law on costs ([24]-[28]) and the principles to be applied in determining whether a Calderbank offer should result in an award of indemnity costs ([29]-[31]). The Tribunal then considered the operation of section 53 of the Consumer, Trader and Tenancy Tribunal Act 2001 (NSW) (CTTT Act) and cl 20(4) of the Consumer, Trader and Tenancy Tribunal Regulation 2009 (CTTT Regulation) and held that the starting position for a determination of costs is that a successful party has a reasonable expectation of being awarded costs against an unsuccessful party ([32]-[37]).
3. The Tribunal then considered the respondents' submission that the Builder's claim under section 94(1A) was an application for an indulgence from the Tribunal, analogous to an application for relief against forfeiture and that therefore the Builder and by association, Mr Cosco, ought not to receive their costs.
4. The Tribunal held (at [46]) that there was "no reason why the same principle should not be applied in connection with a builder seeking the Tribunal's indulgence or order under s 94(1A) of the Act", describing the application of the Builder as an "indulgence" at [46], [48], [50] and [52].
5. The Tribunal recorded the submission by the respondents that leave had been granted to the Builder under section 94(1A) of the Home Building Act and so the Builder was seeking an indulgence of the Tribunal (at [38], [46] and [48]). The Tribunal appears to have accepted the characterisation that "leave" had been granted (at [23(a)] the Tribunal referred to having granted leave).
6. The Tribunal then considered the authorities in relation to the so called "indulgence principle" and said at [50] "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. Accordingly, the Tribunal determined at [50]: the builder should bear its own costs of the builder's application and that in the owners' application the builder and the second cross respondent Anthony John Cosco should bear their own costs of such application.
8. It followed that the Tribunal considered that a Calderbank offer does not displace the principle that a party seeking an indulgence will be required to pay costs and not receive the costs of the application.
9. Nevertheless, the Tribunal held that, if the Calderbank offers displaced the so called "indulgence principle" the respondents did not unreasonably reject the Calderbank offers made by the Builder. This was so for the reason that: the owners were unable to assess the extent to which they might become liable to their neighbours in respect of the work carried out by the builder. Had they accepted the builder's offer they would have lost the opportunity to recover from it in connection with any liability they might later become exposed to due to the builder's work as it affected the neighbour's property. (at [61]).

Jurisdiction of the Appeal Panel

1. Section 80(1) of the Civil and Administrative Tribunal Act 2013 (NSW) (the Act) provides that an appeal against an internally appealable decision may be made to the Appeal Panel. The parties agreed that the decision on costs was an internally appealable decision. By section 80(2) of the Act, an appeal from an internally appealable decision lies, as of right, on any question of law or, with the leave of the Appeal Panel, on any other grounds. Leave is also necessary to appeal from an interlocutory decision. However, the costs decision is an ancillary decision as defined in s 4 of the Act which relevantly includes "a decision concerning the awarding of costs in proceedings".

Grounds of Appeal

1. The appellant contends that the Tribunal made the following errors of law: 1. The Tribunal erred in finding that the Builder's claim for relief pursuant to section 94(1A) of the Home Building Act was analogous to a party seeking an indulgence from a Court and that as a consequence, it was not entitled to receive its costs of the application; 2. The Tribunal erred in finding that the application of the indulgence principle in relation to applications for relief against forfeiture meant that a party would be required to pay costs and not receive the costs of the application; 3. That the Tribunal erred in taking into consideration extraneous or irrelevant matters raised by the respondents' submissions about the appellants' alleged costs of the proceedings. 4. That the Tribunal erred in finding that Mr Cosco should bear his own costs of the proceedings on the basis of the indulgence principle in circumstances where: 1. Mr Cosco was not an applicant in the proceedings, or a party to the Builder's claim; and 2. Mr Cosco was joined by the respondents as a cross-defendant to the Builder's claim; and 3. The cross-claim against Mr Cosco was dismissed. 1. The Tribunal failed to provide adequate or any reasons as to why Mr Cosco was not entitled to an order for costs; 2. The Tribunal erred in taking into consideration the existence of proceedings in the Supreme Court of NSW involving a related matter in declining to make an order for costs in favour of the appellants on the ordinary or on the indemnity basis after the appellants had significantly bettered the terms of two Calderbank offers made in the proceedings.

Questions of law

1. As noted, the appeal is by right on any question of law. The appellant contended that the appeal raised three questions of law: whether the Tribunal erred in construing section 94(1A) of the Home Building Act; whether the Tribunal erred in taking into account irrelevant considerations being the existence of proceedings in the Supreme Court of New South Wales on a related issue and the amount of the appellants' costs in the proceedings; and whether the Tribunal failed to provide adequate reasons for its decision as to why Mr Cosco was not entitled to his costs of the proceedings.
2. In Lombard Farms Pty Ltd v Chief Commissioner of State Revenue [2013] NSWADTAP 42, the Appeal Panel identified at [22]-[23] that questions of statutory construction raise questions of law. Further, whether a decision-maker had regard to irrelevant considerations in making the decision is also a question of law: Craig v South Australia [1995] HCA 58 at [14]; (1995) 184 CLR 163; Minister for Aboriginal Affairs v Peko-Wallsend Limited [1986] HCA 40; (1986) 162 CLR 24. Finally, a failure to give adequate reasons also raises a question of law: Pettit v Dunkley [1971] 1 NSWLR 376; Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 278-9 per McHugh JA; Mifsud v Campbell (1991) 21 NSWLR 725; Beale v Government Insurance Office of New South Wales (1997) 48 NSWLR 430. Additionally, the Tribunal is obliged under section 62 of the Act to give written reasons for its decisions when requested by a party.
3. Accordingly, the Grounds of Appeal raise questions of law and leave to appeal is not necessary.
4. The exercise of a statutory discretion such as that in CTTT Regulation cl 20(4) may only be overturned in limited circumstances: House v R [1936] HCA 40; (1936) 55 CLR 499 at 504-505. Those circumstances were summarised recently by the Court of Appeal in Hannaford v Commonwealth Bank of Australia [2014] NSWCA 297 at [14] by Beazley P, Emmett JA and Tobias AJA. The court held that any attack on a discretionary decision must fail unless it can be demonstrated that the decision maker: (a) made an error of legal principle, (b) made a material error of fact, (c) took into account some irrelevant matter, (d) failed to take into account, or gave insufficient weight to, some relevant matter, or (e) arrived at a result so unreasonable or unjust 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.
5. The Grounds of Appeal, if made out, would establish that an error of legal principle had been made or that an irrelevant consideration had been taken into account and thus fall into the limited circumstances described in House v R.

Legislation

1. The decision under appeal required the Tribunal to exercise its discretion to order costs under section 53 of the CTTT Act and cl 20(4) of the CTTT Regulation and to correctly construe section 94(1A) of the Home Building Act.
2. Section 53 of the CTTT Act stated: 53 Costs (1) Subject to this section and the regulations, the parties in any proceedings are to pay their own costs. (2) The Tribunal may, in accordance with the regulations, award costs in relation to any proceedings. (3) If costs are to be awarded by the Tribunal in accordance with the regulations, the Tribunal may: (a) determine by whom and to what extent costs are to be paid, and (b) order costs to be assessed on the basis set out in Division 11 of Part 3.2 of the Legal Profession Act 2004 or on any other basis. (4) In this section, costs includes the costs of, or incidental to, proceedings.
3. Clause 20(4) of the CTTT Regulation specifically provided that where the amount claimed or in dispute is more than $30,000 "the Tribunal may award costs in relation to the proceedings in such circumstances as it thinks fit." This power must be exercised in accordance with the general legal principles governing costs. So much is not controversial and is consistent with the reasoning of the Tribunal below.
4. At the relevant time section 92(2) of the Home Building Act provided: (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.
5. Subsections 94(1) and (1A) of the Home Building Act provide: (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.

Consideration

1. There was no dispute about the Tribunal's analysis (at [24]-[28] and [37]) of the principles which ought to apply to a determination of costs by the Tribunal. Similarly, the Tribunal's analysis (at [29]-[31]) of the power to award indemnity costs was uncontroversial.
2. The appellants submitted that the Tribunal erred in the way it perceived the nature of the remedy provided by section 94(1A) of the Home Building Act. It was submitted that rather than enabling an applicant to seek an indulgence from the Tribunal, the section creates an entitlement to relief, subject to satisfying the condition that the claim be 'just and equitable'. Accordingly, the analogy to the cases concerned with relief against forfeiture and the so called "indulgence principle" was inapposite.
3. The respondents submitted that the analogy was apposite and in any event this was simply a matter that went into the mix in the exercise of the Tribunal's unfettered discretion to award costs and no error is disclosed.

Entitlement or Indulgence

1. The operation of and intersection between sections 92(2) and 94(1A) of the Home Building Act was considered by Barrett J in Eddy Lau Constructions Pty Ltd v Transdevelopment Enterprise Pty Ltd [2004] NSWSC 754 (Eddy Lau No. 3) and Eddy Lau Constructions Pty Ltd v Transdevelopment Enterprise Pty Ltd [2004] NSWSC 273 (Eddy Lau No. 1).
2. In addressing the defendant's submission that the retrospective effect of s 94(1A) did not apply to its circumstances, his Honour set out the history of section 94(1) and (1A) of the Home Building Act (at [6]-[10] Eddy Lau No. 3). His Honour then turned to the operation of the section itself: an operation dictated by the use of the word "despite" as the opening word of the subsection. At [12] his Honour said: In Attorney General of the Commowealth v Oates (1999) 198 CLR 162, Gleeson CJ, McHugh J, Gummow J, Kirby J and Hayne J observed that, in modern legislative drafting, "despite" has the same meaning as "notwithstanding".
3. His Honour noted at [13]: The process of analysis to be followed in such cases was described by Irvine CJ, Cussen J and McArthur J in In re Bland Bros and the Council of the Borough of Inglewood (No 2) [1920] VLR 522: As to the introductory words, the section should first be construed without them, and then, if there is anything in the other provisions of the Act inconsistent with the interpretation so arrived at, these other provisions must yield. [the introductory words there being "notwithstanding anything in this Act"].
4. Noting these principles, Barrett J analysed the terms of section 94(1A) of the Home Building Act as follows: [16] In the present case, therefore, the first step is to apply the part of s 94(1A) of the Home Building Act that follows the introductory words beginning "Despite". When that is done, it is found that, even though required insurance was not in place at the relevant time, the section creates an entitlement to recover upon a quantum meruit if a court or tribunal considers this to be just and equitable. The second step is to ask whether s 92(2) or s 94(1) detracts from that entitlement. In the case of s 92(2), the answer is that, in its present form, it does not (because of its opening words "Except as provided by s 94(1A)"); but that, in the form it possessed from 30 July 1999 and before 10 August 2001, it does (or did). In the case of s 94(1), the answer is that there is a detraction from the s 94(1A) entitlement. The third step, however, is to obey the "Despite" directive by ignoring what would otherwise be any detraction from the s 94(1A) entitlement wrought by s 92(2) or s 94(1). [17] When matters are approached in this way, it is seen that the entitlement conferred by s 94(1A) subsists whether or not s 92(2) or s 94(1) would otherwise deny it. Where one of those sections would deny the entitlement, the "Despite" specification causes it to be preserved. Where neither of the other sections denies the entitlement, there is nothing for the "Despite" specification to do and the entitlement prevails in any event. [18] In the circumstances of the present case, s 94(1A), expressed by cl 66(2) of Pt 8 to Sch 4 of the Act to extend to a contract entered into before its commencement, has a retrospective operation causing it to confer upon the defendant an entitlement to a quantum meruit if the court considers a quantum meruit to be just and equitable; and this is so whether or not s 92(2) or s 94(1), as in force since 30 July 1999, would, in the absence of the "Despite" phrase in s 94(1A), deny the entitlement. On this basis, the plaintiff's right to a quantum meruit sum in accordance with my earlier reasons (which dealt with the just and equitable question, among others) cannot be regarded as precluded by the arguments as to the operation and effect of s 94(1A) on which the defendant later sought to rely by way of its further amended defence to summons filed pursuant to leave granted on 3 August 2004. [emphasis added]
5. His Honour, in clear language, describes section 94(1A) as conferring an entitlement to recover upon a quantum meruit, on the condition that the [Tribunal] considers it to be 'just and equitable'.
6. The respondents here submitted that his Honour was not, in terms, characterising s 94(1A) as conferring an entitlement. This, it was submitted, must be so, for the reason that Eddy Lau No. 3 must be read consistently with the earlier decision of Barrett J in the same proceedings: Eddy Lau No. 1. At [54] of Eddy Lau No. 1 his Honour said: Section 94(1A) empowers the court to award a remedy on a quantum meruit basis, despite the statutory directive that recovery may not be made. [emphasis added]
7. And at [62]: The policy behind s.94(1A) is, clearly enough, that the statutory disentitlement under s.94(1) to sue for damages under or otherwise enforce the contract made in contravention of s.92(1) may be offset by the court's allowing recovery on a quantum meruit basis, provided that it is satisfied, according to the "just and equitable" criteria, that the builder is deserving of such recovery. [emphasis added]
8. In the above extracted passages from Eddy Lau No. 1, his Honour is identifying that the Court (or Tribunal) is to approach the task under section 94(1A) without regard to the "statutory directive [in s 94(1A)] that recovery may not be made", if s 94(1A) is satisfied. His Honour thus puts the entitlement in s 94(1A) in its statutory context and considers what the court may do. The language employed, such as "empowers" and "the court's allowing" is consistent with the court's authority to award a remedy. This is not inconsistent with the clear language in his Honour's judgment in Eddy Lau No. 3, where the operation of s 94(1A) came under intense scrutiny. It is s 94(1A) itself that "empowers the court" and negates the "statutory disentitlement".
9. We pause to note that there is a slight difference between the legislation considered by Barrett J and the legislation here under consideration. As is apparent from [16] in Eddy Lau No 3 extracted above, the opening words of s 92(2) there read "Except as provided by s 94(1A)". Those words are not in the version that we are concerned with, but nothing turns on this. His Honour's analysis in relation to the interplay between s94(1A) and s 94(1) (which did not have those words) identifies that there is no difference in approach required.
10. Whilst the question of costs did not arise before Barrett J in Eddy Lau No. 1 or Eddy Lau No. 3, the operation of s 94(1A) was at issue. Given the clear conclusion of Barrett J, that section 94(1A) confers an entitlement on an applicant, it follows that there is no need for the Tribunal to grant leave or an indulgence and that accordingly the decisions with respect to relief against forfeiture are distinguishable.
11. We also note that s 94(1A) was considered by Hall J in Pender v Robwenphi Pty Limited [2008] NSWSC 1144 where an award of costs was made without any consideration of the indulgence principle. As there is no indication that the indulgence principle was argued before Hall J we do not treat that case as authority for the proposition that section 94(1A) is not an indulgence for the purposes of determining costs: Muldoon v Church of England Children's Homes Burwood (2011) 80 NSWLR 282 at 290.
12. In Fordham v Fordyce [2007] NSWCA 129 ('Fordham'), the Court of Appeal considered the application of the indulgence principle to costs orders made following a successful application for an access order under the Access to Neighbouring Land Act 2000 (NSW). Ipp JA (with whom Basten JA and Young CJ in Eq agreed) concluded that (at [24]): the right to access under the Access to Neighbouring Land Act is not an indulgence. The Act provides, rather, an entitlement to the person identified therein to access, under stipulated circumstances, to neighbouring land.
13. Where, as was the case in Fordham and is the case here, the remedy flows from the statute itself, the indulgence principle has no application.
14. In Dee-Tech Pty Limited v Neddam Holdings Pty Limited (No 2) [2012] NSWSC 517 (Dee-Tech) White J identified the indulgence principle as a relevant circumstance in relation to a relief against forfeiture. His Honour noted (at [68]): application for relief against forfeiture only arises because the plaintiff has lost the forfeited property owing to its breach and needs the court's order to restore its estate, there is good reason for the plaintiff's being required to pay the costs of the originating process and supporting affidavits, and the costs that would be occasioned by the defendant's considering its claim and appearing to indicate its consent or non-opposition.
15. As can be seen from this passage in Dee-Tech extracted above, a claim for relief against forfeiture arises because the delinquency of the applicant is the sole reason for the existence of the proceedings and the need for the remedy. In an application for recovery of moneys upon a quantum meruit, the need for the proceedings does not rest solely on the delinquency of the applicant in breaching section 92(2) of the Home Building Act. Rather, here, the pivotal default was the failure of the respondents to pay a sum to the Builder for work done, which it would be just and equitable to pay. Absent statutory intervention, there could be no dispute that recovery upon a quantum meruit may have been pursued, regardless of any failure by the Builder to obtain home warranty insurance: Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 at 227.
16. The respondents also drew an analogy to cases where the remedy of constructive trust is sought. It was not suggested that in such a case a successful plaintiff would be disentitled to her costs. The point of the analogy was to exemplify the absence of an antecedent right: i.e., to underscore the respondents' submission that prior to a just and equitable determination, there is no right to recover. The respondents contended that even if the operation of s 94(1A) could be aptly described as an entitlement, there was no antecedent right, or no entitlement unless and until the Tribunal exercised its powers to determine it was just and equitable for the contractor to recover and in that sense the analogy to relief against forfeiture cases was apt. Nevertheless, the clear direction provided to the Appeal Panel by Barrett J in Eddy Lau No. 3, indicates that this too is not an apt analogy. Section 94(1A) itself creates an entitlement which subsists in the face of s 92(2) and 94(1) where it is just and equitable.

Principle or Factor

1. In Dee-Tech, the fact that the claim only existed because of the default of the plaintiff was one of only several circumstances which were considered by White J in exercising the discretion to order that the costs of the proceedings be paid, in part, by the successful applicant for relief against forfeiture ([65], [69]-[74]). This approach is consistent with the decision of Young CJ in Eq in Fordham in which his Honour said (at [51]): 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 … 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.
2. What flows from this is that, even if there is room for the application of the indulgence principle, it would disclose appealable error if the Tribunal had treated it as an overarching consideration. Where the Tribunal gives undue weight to a consideration, this is a form of unreasonableness in decision making: Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 per Mason J at 41-42; Minister for Immigration and Citizenship v Li [2013] HCA 18 at [72] and [75]; House v R at 505 (we note the close analogy between review of administrative decision making and appellate review of a judicial discretion).
3. The respondents contended that the so called indulgence principle was not elevated by the Tribunal to a governing rule of law; it was simply a matter that had been considered by the Tribunal in the exercise of the Tribunal's wide discretion to award costs and that no error could be gleaned. The respondents highlighted that the Tribunal had identified the starting point in a manner favouring the appellant: i.e., that a successful party could anticipate a favourable costs order.
4. However, the Tribunal, after identifying the correct starting position, said (at [38]-[39]): 39. since the builder was seeking an order for leave under section 94(1A) of the Home Building Act 1989, it was in that regard seeking an indulgence from the Tribunal since without such leave it would have been prevented from pursuing its application. It follows in the owner's submission that the general rule is 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. 40. I regard this as an important submission. [emphasis added]
5. The Tribunal also referred to the decision of White J in the Dee-Tech and then said (at [45]-[48]): 45 The decision in Dee-Tech Limited & Anor v Neddam Holdings Pty Limited (No 2) and the authorities referred to establish that in a relief for forfeiture case it is open for the court to order the plaintiff or applicant to pay some or all of the costs of the proceedings, despite that party obtaining orders in its favour. 46 I can see no reason why the same principle should not be applied in connection with a builder seeking the Tribunal's indulgence or order under section 94(1A) of the Act. The same may be said in connection with such a builder as was stated in the passage cited above, namely that the application to rely upon section 94(1A) of the Act only arises because the builder failed to comply with section 92 of the Act with the consequence that pursuant to section 94(1)(a) of the Act such a builder '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' or further under section 94(1)(b) of the Act 'is not entitled to recover money in respect of that work under any other right of action (including quantum meruit)'. 47 In these proceedings the builder's case for a just and equitable finding under section 94(1A) of the Act opened the door to enable it to claim on a quantum meruit basis. As stated that door was previously closed because of section 94(1) of the Act and the builder's failure to comply with section 92(1) and (2) of the Act. 48 In the context of its position under section 94(1) of the Act the builder was truly seeking the indulgence of the Tribunal. [emphasis added]
6. It is apparent that the application of the indulgence principle was not merely a factor thrown into the mix that did not affect the outcome. The Tribunal proceeded on the basis that the indulgence principle, in effect, ruled the outcome of the exercise of discretion. The conclusion that the Tribunal elevated the concept to a governing rule of law is reinforced by the Tribunal's determination that the principle overcame any effect the Calderbank offers could have had on the exercise of discretion.

Conclusion on construction of section 94(1A) of the Home Building Act

1. For the reasons already expressed, it was an error to treat the cases concerning relief against forfeiture as analogous; and further it was an error to treat the so called "indulgence principle" as an overarching principle.
2. The foregoing is not meant to suggest that the manner in which the parties deal with proving or disputing the case, in light of the need for the appellants to demonstrate that it would be just and equitable to afford relief, is not capable of affecting the discretion to award costs. The fact that insurance has not been secured, affects the issues that must be proved in order to obtain relief. We note, however, that in order to succeed upon a quantum meruit, the Tribunal would, in any event, be considering issues such as whether the monetary amount is "just" compensation for the benefit accepted by the respondents. How closely the requirement, in section 94(1A), to demonstrate that it is "just and equitable", mirrors the considerations described in Pavey & Matthews Pty Ltd v Paul, is not a matter for this Appeal Panel, as we do not consider that the Tribunal approached the task on the basis that the issues arising in relation to "just and equitable" eclipsed the rest of the issues at the hearing.
3. We highlight the following extract from Pavey & Matthews Pty Ltd v Paul per Deane J [emphasis added] by way of example only: What the concept of monetary restitution involves is the payment of an amount which constitutes, in all the relevant circumstances, fair and just compensation for the benefit or "enrichment" actually or constructively accepted. Ordinarily, that will correspond to the fair value of the benefit provided (e.g. remuneration calculated at a reasonable rate for work actually done or the fair market value of materials supplied). In some categories of case, however, it would be to affront rather than satisfy the requirements of good conscience and justice which inspire the concept or principle of restitution or unjust enrichment to determine what constitutes fair and just compensation for a benefit accepted by reference only to what would represent a fair remuneration for the work involved or a fair market value of materials supplied. One such category of case is that in which unsolicited but subsequently accepted work is done in improving property in circumstances where remuneration for the unsolicited work calculated at what was a reasonable rate would far exceed the enhanced value of the property. More relevant for present purposes is the special category of case where restitution is sought by one party for work which he has executed under a contract which has become unenforceable by reason of his failure to comply with the requirements of a statutory provision which was enacted to protect the other party. In that category of case, it would be contrary to the general notions of restitution or unjust enrichment if what constituted fair and just compensation for the benefit accepted by the other party were to be ascertained without regard to any identifiable real detriment sustained by that other party by reason of the failure of the first party to ensure that the requirements of the statutory provision were satisfied.

Mr Cosco

1. In relation to the costs of Mr Cosco the Tribunal said (at [50]): That in the owner's application the builder and the second cross respondent Anthony John Cosco should bear their own costs.
2. The parties did not dispute the proposition that the Tribunal had a duty to provide reasons. The relevant principles can be briefly stated:
3. In Stoker v Adecco Gemvale Constructions Pty Ltd [2004] NSWCA 449 at [41] Santow JA observed: It is clear that the duty to give reasons is a necessary incident of the judicial process. Without adequate reasons, justice has not been seen to be done, so that failure to give adequate reasons may be an error of law: But the duty does not require the trial judge to spell out in minute detail every step in the reasoning process or refer to every single piece of evidence. It is sufficient if the reasons adequately reveal the basis of the decision, expressing the specific findings that are critical to the determination of the proceedings.
4. Similarly in Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430 at 442 Meagher JA said: A failure to provide sufficient reasons can, and often does, lead to a real sense of grievance that a party does not know or understand why the decision was made: Re Poyser and Mills' Arbitration [1964] 2 QB 467 at 478. This Court has previously accepted the proposition that a judge is bound to expose his reasoning in sufficient detail to enable a losing party to understand why it lost.
5. Beech-Jones J in Shepherd v Nestoriadis [2015] NSWSC 348 considered the obligation to give reasons and said (at [39]-[40]): In Daley at [96] Bellew J distilled from the judgment of Meagher JA in Beale the proposition that while statements of reasons need not be lengthy or elaborate, an adequate statement must at least refer to all relevant evidence and set out any material findings of fact, any conclusions reached and provide reasons for making the relevant findings of fact and reaching the relevant conclusions as well as providing reasons for applying the law to the facts as found. The observation of Meagher JA in Beale that the judicial officer must expose their reasoning in sufficient detail to enable a losing party to understand why they lost is significant. It must be distinguished from the circumstances in which a party vehemently disagrees with the reason(s) why they lost. Nevertheless, at its core, that requirement is one that obliges the judicial officer to engage with a case presented on behalf of a party so the reason(s) why that case was not successful can be ascertained.
6. Section 62 of the Act requires the Tribunal to give reasons upon the request of a party. Those reasons must include: s 62(3): (a) the findings on material questions of fact, referring to the evidence or other material on which those findings were based, (b) the Tribunal's understanding of the applicable law, (c) the reasoning processes that lead the Tribunal to the conclusions it made.
7. The Appeal Panel is satisfied from the paucity of the reasoning referring to Mr Cosco, that the Tribunal has not met its obligations to set out the reasoning process that led the Tribunal to the conclusion it made. By failing to afford adequate reasons the Tribunal erred.
8. Further, to the extent that any reasoning can be identified, it suffered from several flaws.
9. It can be inferred from the decision that the Tribunal did not consider the application for costs by Mr Cosco as separate or distinct from that of the Builder. However, their positions in relation to the claims in the proceedings were quite distinct. Mr Cosco was a party solely to the claims made by the respondents in their cross claim under the Fair Trading Act 1987. The Tribunal indicated that these claims did not occupy much time at the hearing, yet they were the subject of individual analysis and determination in the Tribunal's decision in HB11/27833. Further, Mr Cosco was wholly successful in his defence of the claims made against him by the respondents.
10. The absence of reasons has made it difficult to determine the nature of the error. However, as noted in Avon Downs Pty Ltd v Federal Commissioner of Taxation (1949) 78 CLR 353 at 360 per Dixon J; [1949] HCA 26: … the fact that he has not made known the reasons why he was not satisfied will not prevent the review of his decision.
11. See also Minister for Immigration and Citizenship v Li [2013] HCA 18 at [63]-[76].
12. The Tribunal commenced with the proposition set out in the Tribunal's decision at [24]-[28], that a successful party may anticipate his costs. In the absence of an explanation to justify departure from the starting position, it is apparent that there has been an error.

Calderbank letters

1. On 22 November 2011 the Builder made a Calderbank offer that the respondents pay the amount of $135,000 plus costs agreed or assessed in settlement of all claims between the parties. On 12 March 2013 a further Calderbank offer that the Builder would accept $100,000 plus costs as agreed or assessed in settlement of all claims between the parties. Both of these Calderbank offers were rejected by the respondents.
2. Ground 6 of the appellants Notice of Appeal asserts that: The Tribunal erred in taking into consideration the existence of proceedings in the Supreme Court of NSW involving a related matter in declining to make an order for costs in favour of the appellants on the ordinary or indemnity basis after the appellants had significantly bettered the terms of two Calderbank offers made in the proceedings.
3. The Tribunal set out at [29]-[31] the power of the Tribunal in respect of an award of indemnity costs and the principles to be applied in determining whether a Calderbank offer should result in an award of indemnity costs. So much is uncontroversial. The Tribunal at [52] held that the Calderbank offers did not displace the application of the indulgence principle earlier identified to the facts. It follows from our earlier reasons that the Tribunal erred in this conclusion.
4. The Tribunal (at [54]-[64]) considered whether the rejection of the Calderbank letters was not unreasonable by the respondents, in the event that the earlier conclusion was wrong. The Tribunal concluded that the rejection of the Calderbank offers was not unreasonable due to: …the connection between the work the builder carried out along the boundary of the owners' and their neighbours properties and the neighbours' claims and proceedings which arose out the work carried out by the builder …
5. The appellants submitted that the Supreme Court proceedings between the respondents and Llavero (Llavero proceedings) were an irrelevant consideration in determining whether the respondents had acted not unreasonably in rejecting the Builder's genuine offers of compromise.
6. This was so, it was submitted, because there was no overlap between the Llavero proceedings and the matters at issue in the Tribunal.
7. The appellants bear the onus of demonstrating that the Llavero proceedings were in fact an irrelevant consideration. In order to do so, it must be shown that there was no overlap or intersection of issues between the two proceedings such that the compromise of one proceedings could not affect rights or obligations in the other.
8. The Tribunal at first instance had before it the following documents relating to the Llavero proceedings and the claim in respect of the support of the retaining wall: 1. The Respondents' written submissions on costs, dated 25 March 2015; 2. The Amended Cross-claim; 3. The Second Further Amended First Cross-Claim (No 48549/12) in the Llavero proceedings, dated 10 March 2014; 4. The Stubbs Cruikshank Report of 20 May 2012; 5. The Geometra Consulting report of 26 February 2013; and 6. The Amended Statement of Claim in the Llaveros' proceedings, dated 29 July 2013.
9. The first Calderbank offer was made on 22 November 2011. The respondents filed their cross claim against the Builder and Mr Cosco on 11 June 2011. At item 149 of the table of defective work in paragraph [12] of the Cross Claim the respondents identified a potential parallel proceeding relating to the support of the retaining wall with their neighbour, although no proceedings had been commenced at that time.
10. The Llavero proceedings were commenced in the District Court on 14 February 2012. The Builder was joined as a party to those proceedings by way of cross claim.
11. On 28 June 2012 the respondents amended their Points of Cross Claim. At item 146 in the table of defective works in paragraph [14] of the Amended Points of Cross Claim, the Llavero proceedings is referred to.
12. The second Calderbank offer was not made until 12 March 2013.
13. By the time of the hearing in the Tribunal, in June 2014, a claim for defective work in respect of the retaining wall was no longer at issue between the respondents and the Builder in the Tribunal proceedings.
14. In order to demonstrate that the matter was an "irrelevant consideration" in the requisite sense, it is necessary for the appellants to demonstrate that it was impermissible for the Tribunal to have regard to the factor. As noted by Mason J in Peko-Wallsend at 40: In the context of judicial review on the ground of taking into account irrelevant considerations, this Court has held that, where a statute confers a discretion which in its terms is unconfined, the factors that may be taken into account in the exercise of the discretion are similarly unconfined, except in so far as there may be found in the subject matter, scope and purpose of the statute some implied limitation on the factors to which the decision-maker may legitimately have regard (see Reg. v. Australian Broadcasting Tribunal; Ex parte 2HD Pty Ltd (1979) 144 CLR 45, at pp 49-50, adopting the earlier formulations of Dixon J. in Swan Hill Corporation v. Bradbury (1937) 56 CLR 746, at pp 757-758, and Water Conservation and Irrigation Commission (N.S.W.) v. Browning (1947) 74 CLR 492, at p 505).
15. The Appeal Panel cannot be satisfied that at the relevant times (i.e., when the offers were made) there was no overlap between the proceedings in the Tribunal and Llavero proceeding (whether or not a formal proceeding had been commenced). In respect of the first Calderbank offer, some overlap of the two claims appears to have existed. This is not a matter that the Tribunal would have been precluded from taking into consideration. The existence of the overlapping claim may have informed the determination that it was not unreasonable that the respondents rejected the Calderbank offer. The Tribunal's reasons at [62] disclose no error and this ground of appeal must fail.
16. In respect of the second offer, the appellants have not met their burden of proof, in that, on the evidence to which our attention has been drawn, it has not been possible for the Appeal Panel to determine whether the Llavero proceedings were an irrelevant consideration at the time of the consideration of the second Calderbank offer by the respondents (as opposed to at the time of the commencement of the hearing). This ground too must fail.
17. The appellants also contended that the Tribunal's reference to the substantial costs of the appellants was an irrelevant consideration and that the Tribunal erred having regard to the quantum of costs. The Appeal Panel does not accept that the Tribunal placed any weight on this factor. Further, it was not necessary for the Tribunal to have regard to 'without prejudice' communications to know that the costs of a four day hearing with expert evidence would be substantial. To the extent that this ground was pressed, it too fails.

Conclusion

1. The Appeal Panel has concluded, as expressed above, that s 94(1A) does not require leave or the grant of the Tribunal's indulgence in order for a contractor to recover. The entitlement to relief subsists where the Tribunal holds it is just and equitable. Further, an applicant's delinquency with respect to securing insurance is not the sole reason for the existence of the proceedings.
2. The exercise of discretion to award costs is to be exercised in the usual manner unconstrained by analogies to cases concerned with relief from forfeiture and related cases. Nevertheless, it is acknowledged that there may be a matter that arises in relation to the determination of whether it is just and equitable, that may affect the exercise of the costs discretion.
3. The decision of the Tribunal disclosed errors of law. At the hearing of the appeal, the parties were invited to make submissions on whether, in the event error of law was disclosed, the matter should be remitted for reconsideration. Both parties accepted that as a sensible course, although views differed on whether it was convenient to send the matter back to the Tribunal as constituted at first instance. As the underlying proceedings were rather convoluted and complex, the Appeal Panel has determined that this would be efficient.
4. The matter is to be referred back to the Tribunal as constituted at first instance, for reconsideration in accordance with these reasons.

Orders 1. Appeal allowed. 2. Decision at first instance set aside. 3. Matter remitted to Tribunal as constituted at first instance.

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: 21 December 2015