Yu v Han

Procedural history

1. The substantive application was heard on 21 and 22 March 2022 and final orders and reasons were published to the parties on 30 March 2022. In the substantive application the landlord sought orders for termination of a residential tenancy agreement and possession of premises on the ground of the tenants' frequent failure to pay rent. The Tribunal determined that as at 23 March 2022 the tenants were in arrears of rent for 192 days in the amount of $56,083.00. The Tribunal made orders for termination and possession with final effect from 12 April 2022, and orders for the payment rent owed to the landlord up to the whole rental bond, which was $8,200.00, and otherwise to the prescribed limit of $15,000.00 imposed by s 187(4)(a) of the Residential Tenancies Act 2010 and Regulation 40(b) of the Residential Tenancies Regulation 2019.
2. At the conclusion of final hearing, the landlord's solicitors indicated an intention to apply for an order for costs in the event that the landlord was successful in her application. In my disposition of the application on 30 March 2022 I therefore issued directions for the filing of any costs application and reply and associated submissions. I also directed the parties to indicate in their submissions if they had any objection to the Tribunal determining the issue of costs on the papers without a formal hearing.

Costs application and reply

1. By an application with associated submissions filed with the Registrar on 14 April 2022 the landlord applied for an order that would require the tenants to pay her costs of the proceedings on an indemnity basis in the lump sum of $21,176.93. In her submissions the landlord states that she consents to the issue of costs being determined on the papers.
2. The tenants have made no response to the landlord's costs application. Nor have they indicated to the Tribunal any view on the issue of whether a hearing on the issue of costs could be dispensed with.

Dispensing with a hearing on the issue of costs

1. I have determined to dispense with an oral hearing in relation to this application for costs pursuant to s 50(2) of the NCAT Act. In this respect I am satisfied that the procedural directions I made on 30 March 2022 provided the parties with the opportunity to make submissions as to whether the Tribunal should dispense with a hearing as required by 50(3). I note that the landlord consents to a hearing on the issue of costs being dispensed with. The tenants have not made any submission objecting to a hearing being dispensed with. The issue of costs is of narrow compass and I am satisfied it can be adequately determined in the absence of the parties.

Applicable law

1. The primary provision regulating costs in proceedings before the Tribunal is found in section 60 of the Civil and Administrative Tribunal Act 2013, which is applicable in the circumstances of this case. It provides: 60 Costs (1) Each party to proceedings in the Tribunal is to pay the party's own costs. (2) The Tribunal may award costs in relation to proceedings before it only if it is satisfied that there are special circumstances warranting an award of costs. (3) in determining whether there are special circumstances warranting an award of costs, the Tribunal may have regard to the following - (a) whether a party has conducted the proceedings in an way that has unnecessarily disadvantaged another party to the proceedings, (b) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings, (c) the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law, (d) the nature and complexity of the proceedings, (e) whether the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance, (f) Whether a party has refused or failed to comply with the duty imposed by section 36(3), (g) any other matter that the Tribunal considers relevant. (4) If costs are to be awarded by the Tribunal, 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 the legal costs legislation (as defined in section 3A of the Legal Profession Uniform Law Application Act 2014) or on any other basis. (5) In this section "costs" includes - (a) the costs of, or incidental to, proceedings in the Tribunal, and (b) the costs of, or incidental to, the proceedings giving rise to the application or appeal, as well as the costs of or incidental to the application or appeal.
2. In Mergeditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120 at [11] an Appeal Panel of the Tribunal held that the expression "special circumstances" are circumstances that are out of the ordinary, but they do not have to be extraordinary or exceptional, applying Cripps v G & M Mawson [2006] NSWCA 82 at [60] per Santow J. A differently constituted Appeal Panel reached the same conclusion in CPD Holdings Pty Ltd t/a The Bathroom Exchange v Baguley [2015] NSWCATAP 21 [at 24], applying Phillips and Inspector-General in Bankruptcy [2012] AATA 788 at [442] and Groth v Secretary, Department of Social Security [1995] FCA 989.
3. The fundamental rationale for the awarding of costs is that such an award is compensatory, not punitive: Latoudis v Casey (1990) 170 CLR 534 at 543; Oshlack v Richmond River Council (1998) CLR 72 at 97.
4. Indemnity costs orders are only made in limited circumstances. The discretion to do so must be the subject of careful reasoning and caution should be exercised in making such an award: Mendonca v Tonna [2017] NSWCATAP 176 at [59]: applying Degnam Pty Ltd (in Liq) v Wright (No 2) [1983] 2 NSWLR 354, Leichhardt Municipal Council v Green [2004] NSWCA 341and Ng v Chong [2005] NSWSC 385.
5. One of the limited circumstances in which an indemnity costs order may be made is where a litigant defends and continues proceedings, in circumstances where the defence has no reasonable prospect of success: cf Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd (No. 2) [2009] NSWCA 12 at [4]. However this is a stringent test. The defence must be "without substance", "groundless", "fanciful or hopeless" or so weak as to be futile: Mendonca v Tonna [2017] NSWCATAP 176 at [60]. Mere weakness of a defence will not be sufficient to warrant an exercise of the discretion to award indemnity costs: Wentworth v Rogers (No.5) (1986) NSWLR 534.
6. There are a number of principles to be applied in determining if a lump sum costs order is the appropriate form of order if an entitlement to costs is established. First, the circumstances of the case must warrant the exercise of discretion to award costs in a lump sum. This will be particularly the case where the amount claimed is modest and the expense, delay and aggravation arising from a cost assessment is likely to extinguish the value of an order for costs: Beach Petroleum NL v Johnson (1995) 57 FCR 119 per von Doussa J. It will also be the case where the costs of the litigation will become even more disproportionate to its outcome if costs are referred for assessment: Becchara trading as Bechara and Company v Bates [2016] NSWCA 294 Beazley, P Meaher and Payne JJA at [18]. The power may also be exercised where a party's conduct has unnecessarily contributed to the costs of the proceedings, especially where the costs incurred have been disproportionate to the result of the proceedings: Becchara trading as Bechara and Company v Bates [2016] NSWCA 294 Beazley, P Meaher and Payne JJA at [13].
7. Second, the power to award lump-sum costs should only be exercised when the Court considers that it can do so fairly between the parties and where an appropriate sum can be determined from the available materials: Becchara trading as Bechara and Company v Bates [2016] NSWCA 294 Beazley, P Meaher and Payne JJA at [12].
8. Third, a "broad brush" approach is appropriate. To require the same or a similar level of details as in a formal costs assessment would defeat the purpose of the lump sum order: Becchara trading as Bechara and Company v Bates [2016] NSWCA 294 Beazley, P Meaher and Payne JJA at [14].
9. Fourth, it is usually appropriate to apply a discount in assessing costs on a lump sum basis: Becchara trading as Bechara and Company v Bates [2016] NSWCA 294 Beazley, P Meaher and Payne JJA at [15]. In both Simone Starr-Diamond v Talus Diamond (no.4) [2013] NSWSC 811 and Huang v Drumm [2017] NSWSC 1006 the Court determined it was appropriate to apply a discount of 20% in circumstances where there was nothing extravagant or disproportionate on face of a bill of costs.

Consideration

1. I am satisfied that there are special circumstances that warrant the exercise of discretion to award costs in the circumstances of this case for three reasons.
2. First, the tenants defence to the application had no tenable basis in fact or law. As set out in the substantive decision the tenants' case was, in the alternative, that they had no obligation to pay the landlord rent in return for possession of the premises because the residential tenancy agreement never commenced, or in the alternative, that they were entitled to withhold rent from the landlord due to an asserted state of disrepair of the premises. For the reasons I gave in the substantive decision both defences were completely without merit and were doomed to fail.
3. Second, the tenants' persistence with those defences unreasonably prolonged the time it took to finalise the proceedings. The landlord's substantive application had been made to the Tribunal on 5 November 2021. At that stage the rent owed by the tenants to the landlords was approximately $13,618.00. The application was first listed for Conciliation and Hearing on 23 November 2021. Most rent arrears termination applications are dealt with at the first listing of such an application because the issues to be determined are of narrow compass. It is rare that such an application set down for a Special Fixture hearing. It was in this case because the tenants insisted on pursuing the defences set out above. The Special Fixture Hearing was not listed until 22 March 2022, some 4 months after the first listing.
4. Third, the tenants' conduct of their hopeless case caused the landlord considerable disadvantage. Between the first listing of the application and the Special Fixture Hearing the tenants continued to fail to pay rent with the result that by the date of the Special Fixture hearing the rent arrears stood at $56,083.00. The elongation of the proceedings, and the necessity for the landlord to respond to the tenants' case, also increased her legal costs.
5. In this respect, both the landlord and tenants were represented by Australian Legal Practitioners in the proceedings. In the tenants' case, they have been represented by two different practitioners, the first of whom they disengaged with prior to the Special Fixture Hearing, and the second of whom they instructed just prior to the Special Fixture Hearing and disengaged with prior to determination of this costs application. The tenants thus had the benefit of legal advice as to their position. They cannot reasonably be heard to say that the stance they took in the proceedings arose from absence of sophistication with the law and legal process.
6. These special circumstances also justify an award of costs on an indemnity basis. The tenants' defences to the landlord's termination application were not merely weak, they were hopeless, and they pursued them in circumstances where they not only had the benefit of their own legal advice, but also where they were repeatedly put on notice by the landlord's solicitors that their defences were not tenable.
7. This is a case where the costs claimed by the landlord are relatively modest (as legal costs go) and where the costs of assessment will erode the benefit to be obtained from the costs order. This weighs in favour of a lump sum costs order being made.
8. However, the landlord has submitted no evidence whatsoever of her costs. I am thus unable to know how the figure of $21,176.93 has been arrived at. While I am permitted to take a "broad brush" approach to determining the amount of costs, I nevertheless must have some material before me to ensure that I can do so fairly as between the parties. Costs will therefore need to be agreed or assessed.

Orders

1. For the foregoing reasons, I make the following orders: 1. A hearing on the issue of costs is dispensed with pursuant to section 50(1)(c) of the Civil and Administrative Tribunal Act 2013. 2. Fanya Long, Feng Han and Angela Han must pay Xueyan Yu her costs of the proceedings as agreed or assessed on an indemnity basis in accordance with the legal costs legislation.

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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: 26 August 2022