Vella v Mir

Background

1. The background to the dispute between the parties is set out in the reasons for decision at first instance and, in summary form, in Vella v Mir. We do not propose to repeat the background in these reasons for decision, other than where relevant to the issue of costs.
2. As noted above, the appeal in Vella v Mir was allowed in part. The conclusion we reached in relation to Ground 8 was central to our decision. This ground concerned whether the jurisdictional time limit provisions concerning claims for breach of statutory warranty set out in s 48K(7) and s 18E of the HB Act constituted a threshold jurisdictional issue or, as found by the Tribunal at first instance, a limitation defence. We found that they constituted a threshold jurisdictional issue.
3. We made the following orders: (1) The appeal is allowed in part. (2) The orders made on 13 March 2018 and 10 May 2018 in proceedings HB 16/34141 are set aside. (3) John Vella is removed as a party to the Appeal and the Tribunal proceedings. (4) The matter will be listed for directions to set a timetable for any additional submissions and to determine the manner in which the appeal will be finally disposed. (5) Any application for costs of the appeal proceedings is to be filed and served within 14 days of publication of these orders, with any response to the costs application to be filed and served within 14 days thereafter. (6) If more than one party makes an application for costs, the parties are to file three copies of the costs submissions in indexed, tabbed and paginated bundles at the end of the submission period.
4. The parties wanted us to re-determine the disputed items. They did not want the matter remitted to the Consumer and Commercial Division. We agreed to undertake the re-determination as requested by the parties. We also agreed with the parties' proposal that determining costs would be deferred until after the disputed items had been re-determined and that we would determine both the costs of the Tribunal proceedings and the costs of the appeal proceedings.
5. The Scott Schedule prepared for the hearing before the Consumer and Commercial Division identified seven alleged building defects, referred to generally as Items 1 to 7. During the appeal hearing, the Mirs advised that if Ground 8 was allowed, they would not press their claim in respect of Items 1, 2 and 5. Ground 4, for which Cathayne had admitted liability, was not at issue in the appeal proceedings. Therefore, our decision in Vella v Mir left three issues in dispute between the parties: Item 3 (Missing glazed balustrade), Item 6 (Tiling and waterproofing of first floor balconies) and Item 7 (Bi-fold sliding glazed doors). In written submissions provided in accordance with directions made subsequent to the publication of Vella v Mir, the Mirs advised that they did not press Item 3.
6. In relation to Item 6, we found as follows at [32] to [34] of Vella v Mir (No 2): 32. We find that Item 6 is a major defect for which Mrs Vella is liable. The application was lodged within the six-year statutory warranty period that applies to major defects. 33. By the time of the hearing, the parties' experts were agreed that the reasonable cost of rectification of Item 6 was $34,829 with preliminaries of 10% and builder's margin of 25% plus GST, bringing the total to $52,678.86: Experts supplementary report, signed on the first day of hearing. 34. We award the sum of $52,678.86 in relation to Item 6, to be paid by Mrs Vella.
7. In relation to Item 7, it was not in dispute that Cathayne installed the doors during the period of their first contract with the Vellas, a costs plus building contract dated 1 August 2011. We found that a seven-year statutory warranty applied to the work, that there was no requirement for the problem with the doors to constitute a major defect and that the Mirs had brought the application concerning the doors within time: Vella v Mir (No 2) at [36] to [37]. At [51] we concluded that the Mirs had established a claim against Cathayne for breach of statutory warranty in respect of Item 7. In relation to method and cost of rectification, we found: 61. We are satisfied that the installation of new seals is an acceptable method of rectification. We note the Mirs objection to this on the basis that there is no evidence that replacement of the seals would not void the manufacturer's warranty on the doors. However, the Mirs did not lead evidence from which we conclude that the installation of new seals would void the warranty. 62. Moreover, we agree that replacement of the doors with doors of a different kind - that is, heavier, commercial doors rather than the semi-commercial doors currently in place - would give a betterment to the Mirs going beyond the principle of compensation that underlies the statutory warranty regime. 63. We award the Mirs $4,372.50 in respect of Item 7 to be paid by Cathayne. This sum is in addition to the sum Cathayne has already paid the Mirs in respect of Item 4.
8. We made the following orders in respect of the re-determination of the disputed items: (1) Joyce Vella is to pay Sidney and Marie Mir the sum of $52,678.86 within 14 days of the date of these orders. (2) Brownlow Hill Building Services Pty Ltd t/as Cathayne Constructions is to pay Sidney and Marie Mir the sum of $4,372.50 within 14 days of the date of these orders. (3) Any application for costs of the Tribunal and Appeal proceedings is to be filed and served within 21 days of publication of these orders, with any response to the costs application to be filed and served within 21 days thereafter. (4) If more than one party makes an application for costs, the parties are to file three copies of the costs submissions in indexed, tabbed and paginated bundles at the end of the submission period.

Costs applications

1. Each party in the proceedings has made a costs application in the Tribunal proceedings. Mrs Vella and Cathayne seek costs orders in respect of the appeal proceedings.
2. Mrs Vella seeks an order that the Mirs pay her the costs of the appeal, costs of the stay application made in connection with the appeal proceedings and most of the costs of the Tribunal proceedings. Mr Vella, who was a party in the proceedings before the Tribunal and on appeal until he was removed as a party without objection by the other parties, also seeks an order for costs of the appeal.
3. The Mirs seek an order for costs of the proceedings in the Tribunal and the costs of that part of the proceedings that was re-determined by the Appeal Panel. The Mirs do not seek an order in relation to the costs of the substantive appeal proceedings.
4. Cathayne seek the following costs orders: 1. That the Vellas pay 90% of its costs up until 17 August 2017, on a party/party basis as agreed or assessed and 50% of its costs on an indemnity basis from 18 August 2017 (the date of expiry of a Calderbank letter) until 13 March 2018 (when the Tribunal's decision at first instance was published. 2. The Mirs pay 50% of its costs on an indemnity basis from 18 August 2017 (the date of expiry of a Calderbank letter) until 13 March 2018 (when the Tribunal's decision at first instance was published. 3. The Vellas and the Mirs each pay 50% of the costs of the appeal on an indemnity basis.

Issues

1. The issues to be determined are: 1. Should a hearing on costs be dispensed with in accordance with s 50(2) of the Civil and Administrative Tribunal Act 2013 (the NCAT Act)? 2. Which legislative provisions and legal principles apply to the costs applications? 3. What costs order or orders should be made in respect of the appeal proceedings? 4. What costs order or orders should be made in respect of the Tribunal proceedings, taking into account the Appeal Panel's re-determination of Items 6 and 7? 5. On what basis should any costs order be made?

Should a hearing on costs be dispensed with in accordance with s 50(2) of the Civil and Administrative Tribunal Act 2013 (the NCAT Act)?

1. Section 50 of the NCAT Act relevantly provides: 50 When hearings are required (1) A hearing is required for proceedings in the Tribunal except: … (c) if the Tribunal makes an order under this section dispensing with a hearing, or … (2) The Tribunal may make an order dispensing with a hearing if it is satisfied that the issues for determination can be adequately determined in the absence of the parties by considering any written submissions or any other documents or material lodged with or provided to the Tribunal. (3) The Tribunal may not make an order dispensing with a hearing unless the Tribunal has first: (a) afforded the parties an opportunity to make submissions about the proposed order, and (b) taken any such submissions into account. (4) The Tribunal may determine proceedings in which a hearing is not required based on the written submissions or any other documents or material that have been lodged with or provided to the Tribunal in accordance with the requirements of this Act, enabling legislation and the procedural rules. …
2. The parties were given an opportunity to make submissions concerning whether costs could be determined on the papers. They did not seek a hearing on costs. We are satisfied that the issue of costs can be adequately determined in the absence of the parties by considering the parties' written submissions.
3. An order in accordance with s 50(2) of the NCAT Act has accordingly been made.

Which legislative provisions and legal principles apply to the costs applications?

1. The general rule in relation to costs in the Tribunal is that unless special circumstances are established, the parties pay their own costs: s 60(1) of the NCAT Act.
2. However, cl 38 of the Civil and Administrative Tribunal Rules 2014 (the Rules) modifies the application of s 60 in proceedings before the Consumer and Commercial Division of the Tribunal. Clause 38(2)(a) provides that in proceedings where the amount claimed or in dispute is more than $30,000, the Tribunal may award costs in the absence of special circumstances.
3. In this case, the amount claimed by the Mirs was more than $30,000. Clause 38 of the NCAT Rules therefore applies. By virtue of cl 38A of the Rules, cl 38 also applies to the appeal proceedings.
4. Clause 38 gives the Tribunal a wide discretion to make an order for costs. It does not specify the factors the Tribunal must take into account in exercising the discretion, although the discretion to make such an order must be exercised judicially: see, for example, Ruddock v Vadarlis [2001] FCA 1865 at [9].
5. Where an application has been heard and determined on the merits and Clause 38 applies, the appropriate starting point for the exercise of the discretion is not that the parties are to pay their own costs. Rather, it is the well-established position at common law; that is, that the purpose of making a costs order is to provide compensation to the party in whose favour the order is made for the expense the party has been put to in prosecuting or defending legal proceedings. In general terms, this means that a party who is successful is entitled to an order for costs in its favour, subject to exceptions generally involving misconduct on the part of that party: Latoudis v Casey [1990] 170 CLR 534; Oshlak v Richmond River Council [1998] HCA 11.
6. In BNT Constructions Pty Ltd v Allen [2017] NSWCATAP 186 the Appeal Panel, having set aside a costs order made in the Consumer and Commercial Division, decided to re-exercise the costs discretion. Clause 38 was the applicable costs provision in that case. At [67] the Appeal Panel noted the following principles relevant to the exercise of the discretion: (1) the starting point is that a successful party should be entitled to an order for costs in his favour; (2) an award of costs is by way of an indemnity and not as punishment; (3) there is no absolute rule that, absent disentitling conduct, a successful party is to be compensated by the unsuccessful party; (4) the factors to be considered are not to be confined as to do so would constrain the general discretion; (5) the relative success of the parties on different issues and the time taken to determine them may be relevant; (6) the nature of the proceedings is relevant; (7) the proper exercise of the discretion requires a decision maker to do justice between the parties and to exercise the discretion having regard to relevant considerations and in a manner which is not arbitrary and capricious.
7. Generally, costs are awarded in favour of the successful party based on the outcome of the proceedings as a whole, without differentiating between particular issues on which the party may not have been successful. That said, a different costs order may be made if the losing party succeeds on significant issues: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [31]-[36]; Sydney Ferries v Morton (No 2) [2010] NSWCA 238 at [10]-[12]. The dollar amount of a particular claim does not determine its dominance in the proceedings. Rather, regard must be had to all of the work involved in prosecuting and defending the parties' various claims, including but not limited to the time taken up at the hearing.
8. In Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) (2011) 288 ALR 385, Campbell JA (with Macfarlan JA and Young JA agreeing) held at [107] that an issue or group of issues is "clearly dominant" when it is clearly dominant in the proceedings as a whole. In that case, the approach by counsel to analysing the percentage of costs between the parties - counting the proportion of paragraphs and pages devoted to each factual topic - was held at [84] to be "a highly artificial way of proceeding" which gave "a false air of mathematical precision".
9. In relation to separable issues, a successful party's entitlement to the whole of the costs of the proceedings should not be discounted to allow for another party's success in a separate issue that played a very minor part in the proceedings as a whole: Macourt v Clark (No 2) [2012] NSWCA 411 at [7]. Further, in Hawkesbury District Health Service Ltd v Chaker (No 2) [2011] NSWCA 30 at [14], the Court of Appeal held that the severability of one issue on which the successful party failed is not, without more, sufficient to warrant departure from the general approach. The exercise of discretion will often depend upon matters of impression and evaluation: Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 at [11].
10. It is open to the Tribunal to consider the effect of a Calderbank letter in accordance with common law principles in determining the exercise of its discretion.
11. In Miwa Pty Ltd v Siantan Properties Pte Ltd (No. 2) [2011] NSWCA 344 Basten JA identified two questions which are relevant to a Calderbank offer. They are whether there was a genuine offer of compromise and whether it was unreasonable of the offeree not to accept it.
12. The determination of whether or not the rejection of an offer was reasonable is an evaluative judgment requiring a consideration of the facts and circumstances specific to the case: Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd (No 2) [2009] NSWCA 12 at [19]. Further, reasonableness is not to be determined with hindsight. Rather, the strength or otherwise of the applicants' claim should be considered as at the time of the offer: Gretton v Commonwealth of Australia [2007] NSWSC 149.
13. The mere fact that a genuine offer of compromise made in a Calderbank letter is not accepted does not automatically mean that the offeror is entitled to an order for costs on an indemnity basis. As stated by Giles J in SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37]: …. All the circumstances must be considered, and while the policy informing the regard had to a Calderbank letter is promotion of settlement of disputes an offeree can reasonably fail to accept an offer without suffering in costs. In the end the question is whether the offeree's failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs, and that the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure: see for example, John S Hayes & Associates Pty Ltd v Kimberley-Clarke Australia Pty Ltd (1994) 52 FLR 201; MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (1996) 70 FLR 235.
14. The onus of establishing that a different costs order should be made falls on the offeror

What costs order or orders should be made in respect of the Appeal Proceedings?

1. As noted above, Mrs Vella and Cathayne seek an order for costs of the appeal proceedings. Mrs Vella seeks an order for costs of the stay application made in conjunction with the appeal. Mr Vella also separately seeks an order for costs. We will deal with that issue first.

Mr Vella's application for costs

1. As noted above, Mr Vella was a party to the proceedings in the Consumer and Commercial Division and in the appeal proceedings, but was removed as a party to the proceedings on appeal. The order removing Mr Vella as a party was not opposed by the other parties. Mr Vella seeks an order for costs on the basis that he was the successful party.
2. While Mr Vella was removed as a party to the proceedings, we decline to make a costs order in his favour. First, an application to remove Mr Vella could have been made at any stage the proceedings were before the Tribunal at first instance. No such application was made by either Mr Vella or Mrs Vella. Had such an application been made, we are satisfied that it would not have been objected to. It should not have been necessary to make that application in the context of a ground of appeal. The only reason the application was made is because the Vellas did not make the application earlier. Second, there is no evidence that Mr Vella incurred costs separately to Mrs Vella. The naming of Mr Vella as a party in the proceedings did not, for practical purposes, impose any requirement on him to take any action additional to or separate from that taken by Mrs Vella. Third, while Mr Vella gave evidence in the Tribunal proceedings, we are not satisfied that Mr Vella is entitled to an order for those costs separately to Mrs Vella.
3. Mr Vella's separate application for costs is refused.

Mrs Vella's application for costs of the appeal.

1. We are satisfied that Mrs Vella is the successful party on the appeal. While she was not successful in relation to every ground of appeal, she was successful in respect of a significant ground (Ground 8) which, as noted above, concerned the Tribunal's jurisdiction in respect of statutory warranty claims. In their submissions in response to the submissions made on behalf of Mrs Vella, the Mirs do not dispute that Mrs Vella was the successful party on the appeal: Mirs' submissions in response to Vellas' submission on costs, at [23] page 48 of Costs Bundle.
2. However, the Mirs submit that Mrs Vella should not be awarded costs because of her disentitling behaviour and that the parties should be ordered to pay their costs of the appeal. Alternatively, the Mirs argue that a discount of in the vicinity of 50% should be applied to any award. The alleged disentitling behaviour is the failure in the Tribunal proceedings at first instance to address the jurisdictional issue concerning non-major defects until the issue was raised in closing submissions prepared by Counsel for the Vellas, who had played no role in the Tribunal hearing. The Mirs submit that if this issue had been properly addressed before the Tribunal, it is likely that there would have been a different result and the need for appeal would have been obviated. The Mirs submit that the appeal was decided on a point that was not properly taken or only belatedly raised in the Tribunal and this provides a basis for rejecting the application for costs of the appeal: The Great Gulf Company v Sutherland (1873) 4 AJR 164, 184; Armstrong v Boulton [1990] VicRp 215, 223; Rockcote Enterprises Pty Ltd v FS Architects Pty Ltd [2008] NSWCA 39 at [123].
3. We do not accept the Mirs' submission that the way in which the Vellas dealt with the jurisdictional issue concerning non-major defects is a basis for either depriving them of a costs order or a basis for discounting the award made in their favour. First, contrary to the Mirs' submission, the Tribunal's reasons for decision indicate that the jurisdictional issue was raised in opening, even if not developed during cross-examination: Vella v Mir at [41], citing the Tribunal's reasons for decision at [71]. Second, the onus of establishing that the Tribunal had jurisdiction to deal with the Mirs' claim fell on the Mirs. As we stated in Vella v Mir at [71]: …. We conclude that the Tribunal fell into error by characterising s 18E as a limitation defence not properly pleaded by the Vellas rather than as a threshold issue, central to the Tribunal's jurisdiction to deal with the application under s 48K(7), of which the onus of establishing fell on the Mirs…..
4. Overall, subject to the conclusion was have reached in respect to costs of the stay application, we conclude that as the successful party in the appeal proceedings, Mrs Vella should be awarded costs, consistent with the principle that costs follow the event. We are satisfied that the proper exercise of the costs discretion is to order the Mirs to pay Mrs Vella's costs of the appeal.
5. We do not propose to make a costs order in favour of Mrs Vella in respect of the stay application. First, we are not satisfied that a stay application was a necessary consequence of the Mirs being unwilling to defer enforcement action. It was always open to Mrs Vella to pay the sum awarded to the Mirs and recover any overpaid amount after the appeal was determined. Second, Mrs Vella did not comply with the condition imposed in the granting of the stay. We are not satisfied that it is a proper exercise of the costs discretion to make a costs order in favour of Mrs Vella in circumstances where she did not comply with the condition on which the stay order was granted.

Cathayne's application for costs of the appeal

1. As noted above, Cathayne seeks an order that the Mirs and the Vellas each pay 50% of Cathayne's costs of the appeal proceedings, on an indemnity basis.
2. In essence, Cathayne submits that its costs of the appeal should be paid by the Mirs and Vellas because Cathayne made a Calderbank offer to the Mirs on 10 August 2018, which was refused, and sent what it describes as "an important contemporaneous letter" to the Vellas on the same day.
3. The offer made by Cathayne to the Mirs is a five page letter described as an offer of compromise, which is Annexure C to Cathayne's submissions in chief on costs. In summary, Cathayne offered to: 1. Rectify any defects in the roof capping system to the lower roof (Item 4 in the joint expert report) at no cost to the Mirs. 2. Arrange for the rectification of any defects in the first floor sliding door units (Item 7 in the joint expert report); 3. Pay the Mirs $7,500 as a contribution towards their costs incurred in the proceedings.
4. Cathayne's offer was conditional on: 1. The filing by the Mirs of consent orders dismissing the proceedings against Cathayne, with no order as to costs, by 18 August 2017; 2. The parties' execution of a deed of mutual release; 3. The contribution to the Mirs' costs being paid within 7 days of the making of consent orders or execution of the deed, whichever occurred last in time; and 4. The parties bearing their own costs in connection with preparation of the deed.
5. The letter dated 10 August 2017 to the Vellas is at Annexure D of Cathayne's costs submissions in chief. In essence, the letter was a request that the Vellas make a "reasonable and effective offer of compromise" to the Mirs in order to facilitate informal settlement and to avoid the cost of preparing for and participating in the hearing on 30 and 31 August 2017. In the letter, the following points were relevantly made: 1. No more than two of the claimed defects (Items 4 and 7) were attributable to work carried out by Cathayne. 2. The balance of the claimed defects relate to work carried out under the Vellas' [Mrs Vella's] owner builder permit. 3. The credit of the Vellas will be easily impugned in cross-examination, particularly regarding "their obvious lack of disclosure" in the purchase agreement with the Mirs. 4. The lay evidence of Wayne Weatherburn and Cathy Heather (for Cathayne) would be preferred to that of the Vellas.
6. The letter states: If a reasonable offer of compromise is not forthcoming from the Vellas (as a matter of urgency) and which complements our clients reasonable offer, it is more than likely that the Proceedings will go to hearing on 30 and 31 August 2017. It is also far less likely that the Applicants will be inclined to accept our client's recent offer.
7. The letter goes on to state that if the matter proceeded to a hearing, Cathayne reserved the right to tender the letter in support of any submissions on costs, including submissions that the Vellas pay Cathayne's preparation and appearance costs in connection with the hearing on an indemnity basis.
8. We will further consider the settlement offer made by Cathayne to the Mirs and the correspondence went to the Vellas in the context of determining the costs of the Tribunal proceedings. However, we are not satisfied that the offer made to the Mirs, the Mirs' refusal of the offer or the letter sent to the Vellas justifies an order that the Mirs or Mrs Vella pay Cathayne's costs of the appeal proceedings.
9. First, Cathayne was a party to the appeal proceedings because it was a party to the proceedings before the Tribunal (see r 29(b) of the Rules) and not because either Mrs Vella or the Mirs appealed the Tribunal's decision insofar as it concerned Cathayne. However, as a result of the appeal, Cathayne was ultimately less successful in its defence of the Mirs claim than it had been as a result of the Tribunal's decision. On the other hand, Mrs Vella was clearly the successful party on appeal. We do not consider that the Mirs should pay Cathayne's costs of the appeal when the Mirs had taken no issue with the Tribunal's decision against Cathayne. We do not consider that Mrs Vella should pay Cathayne's costs of the appeal when she was the successful party.
10. Second, we are not satisfied that it was unreasonable of the Mirs to refuse the settlement offer made by Cathayne in the Calderbank letter. In relation to this, we accept that as successors in title the Mirs did not know who was responsible for which claimed defect. That was something peculiarly within the knowledge of Cathayne and the Vellas. In the absence of a settlement offer from Mrs Vella, there was nothing unreasonable about the Mirs refusing the offer made by Cathayne. Indeed, this is acknowledged in the letter sent to the Vellas on 10 August 2019, which states that in the absence of a settlement offer from the Vellas, it was likely that the proceedings would go to hearing and that it was less likely that the Mirs would accept Cathayne's offer: see extract at [53] above.
11. Third, while the conduct of the Tribunal proceedings by the Vellas is arguably relevant to the costs at first instance, we do not consider it is relevant to the costs of the appeal.
12. Overall, we conclude that the proper exercise of the discretion in respect of Cathayne's costs of the appeal is that Cathayne should pay its own costs.

What costs order or orders should be made in respect of the Tribunal proceedings, taking into account the Appeal Panel's re-determination of Items 6 and 7?

1. As noted above, both the Mirs and Cathayne have applied for costs of the Tribunal proceedings and the costs of re-determination of Items 6 and 7 by the Appeal Panel. Mr Vella also seeks costs of the Tribunal proceedings.

Mr Vella's application for costs

1. We decline to make a costs order in Mr Vella's favour in respect of the Tribunal proceedings for the same reason we declined to make an order in his favour in respect of costs of the appeal: see [41] above.

The Mirs' application for costs

1. We remain of the view expressed in Vella v Mir (No 2) at [68]; that is, that the Mirs are the successful party in the proceedings, albeit less successful after the re-determination of Items 6 and 7.
2. The Mirs' cause of action in the Tribunal proceedings was for breach of the statutory warranties set out in s 18B of the HB Act. As successors in title, this was the only cause of action they could maintain in relation to defective building work. The situation which confronted them was unusual: building works had originally been done under a contract between Cathayne and the Vellas. That contract came to an end and Mrs Vella undertook further works as an owner builder, with Cathayne as a sub-contractor.
3. Who was responsible for what work was a central issue in the proceedings and, apart from the concession made by Cathayne in respect of Item 4, was hotly contested during the hearing. Leaving aside Cathayne's settlement offer, the issue remained in contest until the proceedings were finalised by re-determination of Items 6 and 7. As noted above, the details of which party did what work were peculiarly within the knowledge of the Vellas and of Cathayne. It was not something that the Mirs could have known about. In such circumstances, it was reasonable for them to commence proceedings against both the Vellas and Cathayne. As noted above, while Mrs Vella and not Mr Vella was the owner builder, no application to remove Mr Vella as a party to the proceedings was made until the appeal.
4. Another issue relevant to the Mirs' cause of action was the s 18E jurisdictional issue in relation to major and non-major defects. However, this issue - even though it was raised at the beginning of the hearing - did not occupy any significant part of the proceedings until closing submissions. Expert witnesses were not cross-examined about the issue. The final issue was whether the claimed defects were major defects and, if so, the appropriate method and cost of rectification. In the re-determination of disputed items following the appeal, the Mirs were successful in establishing that Item 6, which had a significant economic value, was a major defect for which Mrs Vella was responsible. They were also successful in establishing that Item 7 was defective and that Cathayne was liable for the defective work. They did not press the other claimed defects.
5. In our view, the final outcome of the proceedings reflects success for the Mirs in establishing their breach of statutory warranty claim. Both Mrs Vella and Cathayne were found to have breached statutory warranties under the HB Act and were ordered to pay damages to the Mirs. While the Mirs were ultimately successful in respect of three out of the seven originally claimed defects, only one item of those three items (Item 4) was not in dispute since the original hearing. Mrs Vella and Cathayne continued to argue that they were not liable for Items 6 and 7 respectively after the Mirs had quite appropriately not pressed their claim in respect of the other claimed defects.
6. We do not consider that the Mirs' withdrawal of their claim in respect of non-major defects because that part of their claim was time-barred disentitles them to costs of the proceedings. Nor do we consider that the costs award should be discounted to allow for Mrs Vella's success on the s 18E issue. This is because that issue played a minor part in the proceedings before the Tribunal, as opposed to the appeal proceedings. The Mirs should be awarded costs of the Tribunal proceedings, including in respect of the re-determination of Items 6 and 7.
7. The Mirs seek an order that Mrs Vella pay 90% of their costs and that Cathayne pay 10% of their costs. Cathayne opposes paying any costs to the Mirs and Mrs Vella opposes paying a significant proportion of the Mirs' costs. We have therefore considered who should pay the Mirs' costs.
8. Given that an order was made against Cathayne in respect of Item 4 in the original Tribunal proceedings and in respect of Item 7 on re-determination of Items 6 and 7, we consider that an order should be made against Cathayne as well as against Mrs Vella. We are not satisfied that the settlement offer made to the Mirs on 10 August 2017 is a basis for depriving the Mirs of a costs order against Cathayne. This is because although Cathayne offered to rectify Item 4 (liability for which it conceded before the Tribunal at first instance) and Item 7, we are not satisfied that the outcome for the Mirs was worse than the offer, as the Mirs were awarded damages in respect of both items. Second, and more significantly, for the reasons set out in [57] above, we are not satisfied that it was unreasonable for the Mirs to refuse Cathayne's settlement offer.
9. Cathayne submits (at [57] to [58] of its submissions in chief on costs) that from three months prior to the hearing, the Mirs had Wayne Weatherburn's and Cathy Heather's evidence which set out which work had been done by Cathayne and which work had been done by Mrs Vella as owner builder. While we accept that the Mirs had that evidence, prior to the hearing the evidence was untested. In the absence of concessions by Mrs Vella, it was not unreasonable for the Mirs to proceed with a claim against both Mrs Vella and Cathayne. We are not satisfied that Cathayne's submission in this regard means that Cathayne should not be ordered to pay costs. Nor are we satisfied that there is any other basis for the Mirs to be deprived of a costs order against Cathayne.
10. The proportion of damages awarded against each party should not, in our view, determine the basis on which costs are awarded. The Vellas resisted the making of any orders against it all through the proceedings and in the context of the re-determination of the disputed items. Cathayne resisted the making of an order against it in respect of Item 7, both at first instance and in the context of the re-determination of the items in dispute: see Vella v Mir (No 2). The Mirs were put to the trouble and expense of prosecuting their successful claim against both respondents.
11. However, overall the claim against Mrs Vella was the more significant of the Mirs' claims, particularly in terms of outcome. Furthermore, unlike Cathayne, which at least conceded liability for one item of defective work, in the proceedings before the Tribunal the Vellas made no concessions in relation to the work undertaken under Mrs Vella's owner builder permit, when it is clear that she undertook most of the defective work, including those items of defective work that the Mirs ultimately did not press because of the s 18E issue. We are satisfied that Mrs Vella's conduct in this regard unnecessarily prolonged the proceedings. We conclude that it is reasonable to order Mrs Vella to pay 90% of the Mirs' costs at first instance and in respect of the re-determination of the Items 6 and 7.
12. We consider that in these circumstances, an order that Cathayne pay 10% of the Mirs' costs of at first instance, including the costs of re-determination of Items 6 and 7, is reasonable in all the circumstances. It follows that Cathayne's application that the Mirs pay 50% of their costs is refused.

Cathayne's application for costs against Mrs Vella

1. There remains to be determined Cathayne's application against Mrs Vella for 90% of its costs of the proceedings until 17 August 2017 and 50% of its costs on an indemnity basis thereafter.
2. Cathayne submits that for the entirety of the proceedings at first instance and on appeal the Vellas wrongfully attempted to escape liability for works Mrs Vella knew she had undertaken as owner builder and mistakenly continued to insist that Cathayne was liable to the Mirs for those defective works. Cathayne further submits that the Vellas refused to make any offers of compromise whatsoever to the Mirs for the claimed defects and that had they done so the cost of the proceedings at first instance and the appeal could have been entirely avoided.
3. Cathayne submits that as a consequence of the way in which the proceedings were conducted by the Mirs and the Vellas, Cathayne had no choice but to incur substantial costs. In relation to the conduct of the proceedings by the Vellas, Cathayne submits that the Vellas engaged in deceptive and misleading conduct in that they did not attach a home owners warranty insurance certificate for the work undertaken under the owner builder permit, did not disclose to the Mirs that a large part of the project had been done under their oversight and/or under their instructions or that repeated unsuccessful attempts had been made to do rectify the cause of water ingress.
4. Where an applicant succeeds against a respondent, but is unsuccessful against another respondent, a special costs order may be made: Gould v Vagelas (1985) 157 CLR 215 at [229] to [231]. A Bullock order requires the unsuccessful respondent to pay the applicant by way of reimbursement of any costs the applicant has paid to the successful respondent: Bullock v London General Omnibus Co [1907] 1 KB 264; [1904-7] All ER Rep 44. A Sanderson order requires an unsuccessful respondent to pay the costs of a successful respondent: Sanderson v Blyth Theatre Co [1903] 2 KB 533; (1903) 19 TLR 660.
5. Cathayne was not a successful party in the Tribunal proceedings. Both respondents were unsuccessful. In Cathayne's case, it conceded liability for Item 4 and on re-determination of Item 7 was found liable. In relation to that item, Cathayne's s 18F defence failed: Vella v Mir (No 2) at [43] to [51]. In such circumstances, we are not satisfied that the principles that apply to the making of Bullock and Sanderson orders apply in this case.
6. However, as we have a wide discretion when making a costs order and may, pursuant to s 60(4)(a) of the NCAT Act determine "by whom and to what extent costs are to be paid", we have considered whether there is some other basis on which Mrs Vella should be awarded to pay Cathayne's costs.
7. In relation to the Vellas' conduct of the proceedings, the Tribunal made no finding that the Vellas had engaged in deceptive and misleading conduct. While we agree that the Vellas' conduct of the proceedings was unsatisfactory, we made no finding of deceptive or misleading conduct in determining the appeal or in re-determining Items 6 and 7. The Vellas vigorously defended the claim made against them and sought to blame Cathayne for the defective work. However, Cathayne also sought to blame Mrs Vella for Item 7 and maintained that position throughout the proceedings, including in the context of the re-determination of Items 6 and 7. The failure of the parties to clearly acknowledge responsibility for work they undertook made the proceedings longer and more complex than they should have been. However, we are not satisfied that the conduct of the proceedings by the Vellas justifies an order that Mrs Vella pay Cathayne's costs in circumstances where Cathayne cannot be characterised as the successful party.
8. We have considered whether Cathayne's letter to the Vellas sent in conjunction with the 10 August 2017 offer to the Mirs justifies an order that Cathayne pay Mrs Vella's costs. We are not satisfied that it does. If Mrs Vella had made an offer to the Mirs, that may have settled the matter and avoided a hearing. However, we are not confident that this would have occurred. In relation to this, we note the settlement offer put by the Mirs after the second day of hearing, which is at Attachment E of Cathayne's costs submissions in chief (page 41 of the Costs Bundle). In that document, the Mirs offered to settle the proceedings against both respondents for $150,000 with no order as to costs. As it happens, this is significantly more than the Mirs were ultimately awarded in damages.
9. Overall, we are not satisfied that the fact that Mrs Vella did not make a settlement offer to the Mirs in consequence of the letter from Cathayne justifies an order that Mrs Vella pay Cathayne's costs.
10. Cathayne's application for costs against Mrs Vella is refused.

On what basis should any costs order be made?

1. We are not satisfied that that any basis has been established for costs orders to be made on an indemnity basis, either in respect of the appeal proceedings or in respect of the Tribunal proceedings. Costs are awarded on the ordinary basis, as agreed or assessed.

Orders 1. Sidney Mir and Marie Mir are to pay Joyce Vella's costs of and incidental to appeal proceedings AP 18/16818, other than costs of the stay application, on the ordinary basis, as agreed or assessed. 2. Joyce Vella is to pay 90% of Sidney Mir and Marie Mir's costs of and incidental to proceedings HB 16/34141, including costs of and incidental to the re-determination of Scott Schedule items 6 and 7, on the ordinary basis, as agreed or assessed. 3. Brownlow Hill Building Pty Ltd t/as Cathayne Constructions is to pay 10% of Sidney Mir and Marie Mir's costs of and incidental to proceedings HB 16/34141, including costs of and incidental to the re-determination of Scott Schedule items 6 and 7, on the ordinary basis, as agreed or assessed. 4. Brownlow Hill Building Pty Ltd t/as Cathayne Constructions is to pay its own costs of proceedings AP 18/16818 and proceedings HB 16/34141. 5. John Vella's application for a separate costs order is refused.

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 January 2020