Zucker v Burbank Montague Pty Ltd

Tribunal proceedings and decision

1. In giving the following background to the application, we have considered material on the Tribunal's case management system which relates to both the application which gave rise to this appeal and to other applications involving the same parties.
2. The appellant's substantive application was lodged on 24 January 2017. The appellant sought an order continuing the appointment of a compulsory strata manager to SP 85312. An order appointing a compulsory strata manager to the scheme was originally made by an adjudicator in adjudication proceedings SCS 15/58521, which were brought under the Strata Schemes Management Act 1996 (the 1996 SSM Act). The period of compulsory appointment was for 12 months commencing on 30 January 2016.
3. On 14 November 2016, prior to the commencement of the Strata Schemes Management Act 2015 (the 2015 SSM Act), the appellant also applied for adjudicator's orders seeking an extension of the period of compulsory appointment: SCS 16/49809. Although an adjudicator extended the appointment on an interim basis, on 9 February 2017 a different adjudicator dismissed the application. The adjudicator considered it inappropriate to use a power to vary orders to make orders dealing with the substantive rights of parties. The adjudicator noted the appellant's application for Tribunal orders, which had been lodged on 24 January 2017 and which was to come before the Tribunal on 22 February 2017, and stated that "[t]he matter should be progressed under that application".
4. When the appellant's substantive application came before the Tribunal for directions on 22 February 2017, the respondents to the appeal were joined as parties. The appellant and the respondent consented to the making of a number of interim orders, including an order that the compulsory strata manager (whose interim term of compulsory appointment ended with the dismissal of the adjudication proceedings on 9 February 2017) continue in that capacity on an interim basis.
5. The application was listed for hearing on 21 April 2017. The hearing on 21 April 2018 was adjourned on the application of the respondents, because of the non-appearance of the compulsory strata manager, who they had summonsed to appear. The matter was then listed on 2 June 2018. The Tribunal heard the matter on that day, reserved its decision and made directions for the filing and service of written submissions in respect of the effect on the application of s 106(4) of the 2015 SSM Act. The Tribunal published its reasons for dismissing the application on 29 September 2017.
6. Following dismissal of the appellant's application, the respondents made an application for costs. The Tribunal gave the appellant an opportunity to provide submissions in response to the application, which were received on 10 November 2017. The appellant opposed the costs application.
7. The respondent's submissions on costs raised three issues in support of the application: 1. The appellant's refusal of an offer contained in a Calderbank letter; 2. The failure of the appellant to provide evidence to satisfy the threshold imposed by the legislation; and 3. The appellant's alleged refusal to approach the substantive issues in "any other way than by filing constant applications" and his refusal "to engage in meaningful discussions" with the respondents.
8. The respondents sought an order for "costs on an ordinary basis (to be assessed or agreed)" and costs on an indemnity basis from 20 April 2017, being the date of expiry of the Calderbank offer. The respondents' alternative position was an order for costs on an indemnity basis from 20 April 2017.
9. In summary, the appellant opposed the costs order on the basis that: 1. The Calderbank offer was not a genuine attempt to resolve the dispute; 2. It was not unreasonable of him to refuse the settlement offer; 3. The refusal of the settlement offer was not the reason for the Tribunal's decision. 4. The appellant's other applications do not give rise to special circumstances warranting an order for costs. Each application subsequent to the first application for adjudicator's orders in which the appellant was successful was necessary to ensure that the appellant's rights would not be abrogated before a decision could be made regarding whether the term of compulsory appointment could be effectively extended by the making of a fresh order. 5. The appellant acted in good faith. He attempted to resolve the issues in dispute in the most expedient manner known to him. 6. The appellant denied that he unreasonably refused to engage in settlement negotiations.
10. The Tribunal determined the costs application on the basis of the parties' written submissions.
11. In the costs decision, the Tribunal identified that s 60 of the NCAT Act applied to the costs application; that is, that in order to award costs the Tribunal had to find that there were special circumstances warranting such an order.
12. In considering whether special circumstances existed, the Tribunal stated, at [11] of the reasons for decision: 11 In deciding whether special circumstances warranted the making of a costs order I took into account the matters set out in s.60(3) of the Act: (1) I find that neither party conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings. (2) I find that neither party has been responsible for prolonging unreasonably the time taken to complete the proceedings. I do not agree that the applicant did so by refusing the Calderbank offer. In hindsight, the applicant would have been better off accepting the offer. However his refusal to do so did not unreasonably prolong the proceedings. The Respondents were responsible for the matter not proceeding to hearing on 21 April 2017. (3) I find that the applicant's claim was not proved on the basis of probabilities (sic). Clearly I have found the claim was not tenable in fact or law. (4) I find, because of the change in applicable law, that the proceedings were more of some complexity. The 2015 Act had only been operable for a short time and the applicant may not have properly understood how his application would be dealt with under the new Act, rather than an extension application under the old Act. (5) I do not find that the proceedings were frivolous or vexatious or otherwise misconceived. They were lacking in substance but this alone is not sufficient to find special circumstances. (6) Neither party refused or failed to comply with the duty imposed by section 36 (3).
13. The Tribunal went on to consider whether the rejection of an offer put to the appellant in a Calderbank letter was unreasonable and found, at [13]: 13 I do not find that the applicant's refusal of the Calderbank offer was unreasonable. It may be regrettable in hindsight, but having read the letter I do not agree with all the arguments and positions stated therein. They were not the basis upon which the application was dismissed. I agree that the proposed resolution of the dispute was more favourable than my decision on 29 September 2017, but that does not make the refusal unreasonable. I do not find that the refusal was imprudent (see [12.3]) either.
14. The Tribunal found that special circumstances existed at [14], stating: 14 I do find that the fact that the claim had no tenable basis in fact or law, lacked substance and the applicant refused the Calderbank offer, together amounts to special circumstances.
15. The Tribunal found at [15] that the circumstances of the case did not warrant an award of costs on an indemnity basis and gave reasons for its finding in this regard at [16] to [18].
16. The Tribunal then made the following findings: 19. In the exercise of my discretion, I find that costs should follow the event and the applicants should pay the respondent's costs on the ordinary basis, that is, their party/ party costs, except their costs caused by the adjournment they caused on 21 April 2018. 20. I find costs on the ordinary basis are 80%, which is the standard percentage for party/ party costs. 21. I find that it is not in keeping with the quick, just or cheap resolution of these proceedings to "order costs to be assessed on the basis set out in the legal costs legislation" as is available in s.60(4)(b). I prefer to make an order determining by whom and to what extent costs are to be paid. This is in keeping with the principle in s.36. 22. Therefore I order the Respondents to submit their invoices for legal work connected to these proceedings alone (not any earlier, proposed or related proceedings) to the applicant and the applicant to pay 80% of those costs within 28 days. These costs are those incurred to prepare the second and third respondent's case for hearing, appearing at the final hearing on 2 June 2017, providing the submissions, but not the attendance and adjournment on 21 April 2017.
17. The Tribunal's order, as amended on 26 March 2018, is as follows: Applicant is to pay 80% of the second and third Respondent's costs of the application as per paragraph [22] of the Reasons for Decision.

Scope and nature of internal appeals

1. Internal appeals may be made as of right on a question of law, and otherwise with leave of the Appeal Panel: s 80(2) NCAT Act.
2. In Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 the Appeal Panel set out at [13] a non-exclusive list of questions of law: 1. Whether there has been a failure to provide proper reasons; 2. Whether the Tribunal identified the wrong issue or asked the wrong question; 3. Whether a wrong principle of law had been applied; 4. Whether there was a failure to afford procedural fairness; 5. Whether the Tribunal failed to take into account relevant (i.e., mandatory) considerations; 6. Whether the Tribunal took into account an irrelevant consideration; 7. Whether there was no evidence to support a finding of fact; and 8. Whether the decision is so unreasonable that no reasonable decision-maker would make it.
3. The circumstances in which the Appeal Panel may grant leave to appeal from decisions made in the Consumer and Commercial Division are limited to those set out in cl 12(1) of Schedule 4 of the NCAT Act. In such cases, the Appeal Panel must be satisfied that the appellant may have suffered a substantial miscarriage of justice on that basis that: 1. the decision of the Tribunal under appeal was not fair and equitable; or 2. the decision of the Tribunal under appeal was against the weight of evidence; or 3. significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with).
4. In Collins v Urban [2014] NSWCATAP 17 (Collins v Urban), the Appeal Panel stated at [76] that a substantial miscarriage of justice for the purposes of cl 12(1) of Schedule 4 may have been suffered where: … there was a "significant possibility" or a "chance which was fairly open" that a different and more favourable result would have been achieved for the appellant had the relevant circumstance in para (a) or (b) not occurred or if the fresh evidence under para (c) had been before the Tribunal at first instance.
5. Even if an appellant from a decision of the Consumer and Commercial Division has satisfied the requirements of cl 12(1) of Schedule 4, the Appeal Panel must still consider whether it should exercise its discretion to grant leave to appeal under s 80(2)(b).
6. In Collins v Urban, the Appeal Panel stated at [84] that ordinarily it is appropriate to grant leave to appeal only in matters that involve: (a) issues of principle; (b) questions of public importance or matters of administration or policy which might have general application; or (c) an injustice which is reasonably clear, in the sense of going beyond merely what is arguable, or an error that is plain and readily apparent which is central to the Tribunal's decision and not merely peripheral, so that it would be unjust to allow the finding to stand; (d) a factual error that was unreasonably arrived at and clearly mistaken; or (e) the Tribunal having gone about the fact finding process in such an unorthodox manner or in such a way that it was likely to produce an unfair result so that it would be in the interests of justice for it to be reviewed.

Submissions and evidence

1. In deciding the appeal, we have had regard to the following:

• The Notice of Appeal received on 19 March 2018;
• The Amended Grounds of Appeal received on 9 April 2018;
• The Reply to Appeal received on 13 April 2018;
• The appellant's submissions and the appellant's bundle of documents received on 20 April 2018, which include the costs submissions made to the Tribunal;
• The respondents' submissions received on 27 April 2018;
• The appellant's submissions in reply received on 2 May 2018;
• The Tribunal's reasons for decision in the appellant's substantive application, dated 29 September 2017;
• The Tribunal's reasons for decision in the respondents' costs application, as originally published on 20 February 2018 and as amended on 26 March 2018;
• The appellant's application to the Tribunal; and
• The orders made at call over on 3 April 2018.

Notice of Appeal

1. The Notice of Appeal was lodged on 19 March 2018, which is within the 28 day time period specified in cl 25(4) of the Rules.

Grounds of Appeal

1. The grounds of appeal as amended are that the Tribunal erred on a question of law in that it: 1. Failed to have proper regard to s 60 of the NCAT Act; 2. Failed to have proper regard to s 36 of the NCAT Act; 3. Failed to reasonably apply established legal principles with respect to the determination of the issue of costs; 4. Failed to exercise its discretion with respect to the proposed cost order judicially and/or reasonably; 5. Failed to determine the issue of costs on a reasonable view of the facts and the evidence and on the merits; 6. Made findings on the basis of no evidence, and in the alternative, the findings of the Tribunal were not supported by the evidence; 7. Made findings that the appellant's claim had no tenable basis in fact or law, lacked substance and the applicant refused the Calderbank offer, which together amounts to special circumstances in s 60 of the NCAT Act; 8. Determined without reason that the "standard percentage for party/party costs" is 80%; 9. Made an order requiring the appellant to pay 80% of the costs of the respondent without first: 1. Ordering the respondent to provide the appellant and the Tribunal with a bill of costs; 2. Providing the appellant an opportunity to view or otherwise make submissions on the quantum and reasonableness of those costs, or the percentage of those costs that should have been ordered to be paid; and otherwise denied the appellant procedural fairness.
2. The appellant also seeks leave to appeal on the basis that the decision was not fair and equitable and against the weight of evidence, effectively relying on the same arguments that are set out above.

Issues

1. The Tribunal found that there were special circumstances warranting an order for costs. The Tribunal also found that the appellant should pay 80% of costs invoiced to him. In effect, the Tribunal made a costs order in the nature of a gross sum costs order, although it did not specify a particular sum.
2. It is not in dispute in this appeal that the Tribunal had the power to award costs to the respondents if it was satisfied that there were special circumstances warranting an award of costs. It is also not in dispute that the Tribunal had the power to decide by whom and to what extent costs should be paid.
3. We conclude from the Notice of Appeal, the Amended Grounds of Appeal, the Reply to Appeal and the parties submissions that the issues in the appeal are in effect: 1. Did the Tribunal err in law in finding special circumstances existed warranting an order for costs? 2. Did the Tribunal's err in law in making a costs order in the nature of a gross sum costs order? 3. Has the appellant established he may have suffered a substantial miscarriage of justice because the decision was not fair and equitable and/or against the weight of evidence? 4. If so, should leave to appeal be granted? 5. If a question of law is established on the appeal and/or if leave to appeal should be granted, what orders should be made?

Did the Tribunal err in law in finding special circumstances existed warranting an order for costs?

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) and s 60 (2) of the NCAT Act.
2. Section 60(3) provides: (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 a way that 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.
3. "Special circumstances" are circumstances that are out of the ordinary. They do not have to be extraordinary or exceptional: Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120 at [11], citing Santow JA in Cripps v G & M Mawson [2006] NSWCA 84 at [60].

Appellant's submissions

1. The appellant submits that the Tribunal "made four principal errors" in concluding that special circumstances applied: 1. A claim with no tenable basis in fact or law is different from a claim where the evidence is simply not considered persuasive. 2. There was no apparent or logical basis for the Tribunal to characterise the appellant's claim as "having no tenable basis" or "lacking substance". The Tribunal considered that the application was made under s 237 of the SSM Act, there was evidence of dysfunction (at [17] of the reasons) and the Tribunal found that the Owners Corporation had failed to perform a duty (at [18] of the reasons). It cannot be correct for the Tribunal to find that the application had "no tenable basis in fact or law" in circumstances where it found as a matter of fact, exactly such instance as described by s 237(3)(c) of the SSM Act as providing the legal and factual basis for the application. 3. The express basis for the Tribunal's decision (at [19] of the reasons) was not the operation of law or the failure of any proof, but rather the refusal to exercise a discretion to appoint a particular strata manager. In such circumstances, it is unwarranted to characterise the application has having no tenable basis in fact or law or to say that the application failed on the basis of incomplete proof. 4. As the Tribunal considered that the refusal of the Calderbank offer was neither unreasonable nor imprudent, there is no apparent reason or logical justification for finding that the refusal could then form the basis for the existence of special circumstances. If the appellant's refusal of the offer was not unreasonable or imprudent, it could have no bearing upon the existence of special circumstances.

Respondent's submissions

1. The respondents relevantly submitted that: 1. The Tribunal found at [13] of the reasons for decision that the appellant had provided no evidence to prove there was dysfunction in the strata scheme. The Tribunal found that the past conduct of the respondent was an irrelevant consideration in determining the application and that it could not act on the appellant's "bare assertions" that the Owners Corporation would resume acting in a dysfunctional manner. 2. The Tribunal found "no proof" supporting the appellant's assertions and it as "not satisfied on the balance of probabilities" that the situation would have returned to as it was prior to compulsory strata management. 3. The refusal of the Calderbank offer, even if not capable of justifying by itself an order for costs, was relevant as a contributory factor which in combination with other circumstances, was capable of reaching the threshold for special circumstances. 4. The appellant's claim had no tenable basis in law because under s 237(3) of the 2015 SSM Act there were no grounds for an order based on future conduct of the Owners Corporation. The claim had no tenable basis in fact because it was not supported by evidence of probable future conduct of the Owners Corporation but merely based on assertions. 5. The test of "manifestly groundless" referred to in General Steel Industries Inc v Commissioner for Railway (NSW) 1964 112 CLR 125 at 128-129 applies in the context of summary disposals or as a higher threshold in vexatious proceedings, which are clearly not the circumstances of an assessment for costs where the matter has already been heard. 6. The Tribunal considered that the proceedings were complex, that they were lacking in substance and that the alleged future dysfunction the appellant was seeking to assert was not proved by any evidence. 7. Special circumstances under s 60(3) do not restrain the Tribunal's discretion in making an order for costs. 8. There is no prescribed procedure for costs assessments in the NCAT Act, the NCAT Regulation of the Rules. The Tribunal may determine is own procedures in relation to any matter for which the NCAT Act or the Rules do not make provision. 9. The appellant has not established that he may have suffered a substantial miscarriage of justice or that leave to appeal should be granted.

Conclusion on finding of special circumstances

1. As the costs order involved the exercise of a discretion given to the Tribunal under s 60 of the NCAT Act, the appellant needs to demonstrate an error in the House v The King sense. Such an error may be demonstrated if the Tribunal acted on a wrong principle, made a material error of fact, failed to have regard to material considerations or reached a conclusion which was, on the facts, "unreasonable or plainly unjust": House v The King [1936] HCA 40; 55 CLR 499 at 505; Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274 at [45] (Heydon JA; Sheller JA and Studdert AJA agreeing).
2. In deciding the costs application in favour of the respondents, the Tribunal concluded that three factors, considered together, amounted to special circumstances. These factors were: 1. The appellant's claim had no tenable basis in fact or law; 2. The appellant's claim lacked substance; and 3. The appellant had refused a Calderbank offer.
3. We have considered whether the Tribunal's conclusions in this regard were open to it.

The appellant's claim had no tenable basis in fact or law

1. In relation to the finding that the appellant's claim had no tenable basis in fact or law, as noted above, the Tribunal stated at [11]: (3) I find that the applicant's claim was not proved on the basis of probabilities (sic). Clearly I have found the claim was not tenable in fact or law.
2. A finding that a claim is "not proved on the balance of probabilities" is not the same as a finding that a claim is "not tenable in fact or law". They are different concepts. The expression "no tenable basis in fact or law" relates to the common law tests developed and applied in Dey v Victorian Railways Commissioners (1949) 78 CLR 62 and General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125. For a claim to have no tenable basis in fact or law it must be so obviously untenable that it cannot possibly succeed: General Steel at 130. "Manifestly groundless" or "clearly untenable" are equivalent expressions. In our view, for the purpose of s 60(3)(c), it matters not whether a conclusion that a claim has no tenable basis in fact or law is reached in connection with an application for summary dismissal or after a full hearing on the merits.
3. The application before the Tribunal was for the appointment of a compulsory strata managing agent. The appellant sought the appointment of the same strata manager who had previously been appointed by an adjudicator. The Tribunal had the power to make such an order under s 237(1) of the 2015 SSM Act, as long as it was satisfied that one or more of the criteria set out in s 237(3) were established. These criteria are that: 1. the management of the strata scheme was not functioning or was not functioning satisfactorily; or 2. the Owners Corporation had failed to comply with a requirement imposed on it by an order made under the 2015 SSM Act; or 3. the Owners Corporation had failed to perform one or more of its duties, or 4. the Owners Corporation owed a judgment debt.
4. The Tribunal concluded that the appellant had not provided proof of his assertion that the management of the strata scheme would be dysfunctional if the scheme returned to self-management (at [15] of the substantive decision), although it stated that the respondents had provided evidence upon which a finding of dysfunctionality could be made (at [17] of the substantive decision). The Tribunal further found, as an agreed fact, that the Owners Corporation had failed to perform one or more of its duties, being the duty to repair common property under s 106 of the 2015 SSM Act: [18] of the substantive decision.
5. The Tribunal ultimately decided not to appoint a compulsory managing agent because the functions of the Owners Corporation had been performed by the compulsory strata manager the appellant was seeking to have reappointed. The Tribunal stated at [19] of the substantive decision: … I do not exercise my discretion to appoint that very agent who has failed to perform the OC's duties while it was exercising all of the OC's functions.
6. The Tribunal's decision was therefore based on the exercise of its discretion under s 237(1) of the 2015 SSM Act. Given the basis for the Tribunal's decision, it cannot be said that the appellant's claim was "obviously untenable", either in law or in fact. The Tribunal's conclusion that the appellant's claim had no tenable basis in fact or law is inconsistent with the findings it made in the substantive proceedings and the basis on which the Tribunal expressly decided those proceedings. The Tribunal's finding in that regard was an incorrect application of a legal principle and should not be maintained.

The appellant's claim lacked substance

1. In The Owners Corporation of Strata Plan 4521 v Zouk & Anor [2007] NSWCA 23I (Zouk), Ipp JA considered the meaning of the phrase "lacking in substance" in the context of s 192 of the 1996 SSM Act. The proceedings in the Court of Appeal concerned the Consumer, Trader and Tenancy Tribunal's power to make an order for costs following the dismissal of an appeal against adjudicator's orders. Section 192 provided: The Tribunal may not make any order for the payment of costs except as specifically authorised by this Act or in relation to an order dismissing an application or appeal because: (a) the application or appeal is frivolous, vexatious, misconceived or lacking in substance, or (b) a decision in favour of the applicant or appellant is not within the jurisdiction of the Tribunal.
2. Ipp JA stated, at [45]: …. It would be inappropriate, given the extraordinary powers triggered by a finding that an application is lacking in substance, to attribute to the phrase a meaning other than "not reasonably arguable". That is, a meaning not dissimilar to "frivolous, vexatious, misconceived", the words which precede the phrase.
3. As was the case in Zouk, when determining the substantive application, the Tribunal in this case did not find that the application was lacking in substance. However, Ipp JA stated that the Tribunal could make an order for costs under s 192 even though it had not expressly stated that the appeal was dismissed for this reason. Ipp JA stated, at [38]: 38 In determining whether to make an order for the payment of costs, the Tribunal must consider (and make a finding) whether the appeal was frivolous, vexatious, misconceived or lacking in substance, or whether a decision in favour of the appellant was not within its jurisdiction. On general principle, that finding cannot be inconsistent with the reasons given by the Tribunal for the dismissal of the appeal. The law would not tolerate inconsistent findings by the same tribunal relating to the same subject matter in dispute.
4. We are satisfied that the same reasoning applies in determining a costs application under s 60 of the NCAT Act: that is, special circumstances may be established because a claim is lacking in substance, even if such a finding was not expressly made in determining the substantive application. However, such a finding cannot be inconsistent with the reasons given for dismissing the application.
5. In the substantive decision, the Tribunal was not satisfied that the appellant had proved that the management of the strata scheme was not functioning satisfactorily or that it would not function satisfactorily if it returned to self-management. However the Tribunal found that the Owners Corporation was in breach of its statutory obligations under s 106 of the 2015 SSM Act. Therefore one of the criteria for appointment of a compulsory strata manager listed under s 237(2) of the 2015 SSM Act had been met. As noted above, the reasons for decision make it clear that although the Tribunal could have appointed a compulsory strata manager, it exercised its discretion not to do so at least in part because the appellant was proposing the re-appointment of "that very agent who has failed to perform the OC's duties while it was exercising all of the OC's functions": at [19].
6. In our view, the fact that the Tribunal: 1. found that the appellant had not proven on the balance of probabilities that the management structure of strata scheme would not function satisfactorily if not under compulsory management; and 2. decided not to exercise the discretion to appoint a compulsory strata manager even though one of the criteria for compulsory management had been met does not mean that the appellant's claim was not reasonably arguable. Rather, it means that the appellant had not proved one aspect of his case and the Tribunal exercised its discretion not to make the order sought even though another aspect of the appellant's case was an agreed fact.
7. The Tribunal's finding that the appellant's claim lacked substance is inconsistent with the reasons for decision in the substantive application and with the meaning of phrase "lacking in substance". In such circumstances, a finding that the appellant's claim lacked substance was an incorrect application of a legal principle and cannot be maintained.

The appellant had refused a Calderbank offer

1. A central aspect of the respondents' case on the costs application was that the refusal of an offer put in the form of a Calderbank letter was unreasonable and had unreasonably prolonged the proceedings. The respondents argued that this constituted special circumstances and warranted an order for costs on an indemnity basis: Respondents' costs submissions filed on 11 October 2017.
2. The Tribunal found that the refusal of the Calderbank offer had not unreasonably prolonged the time taken to complete the proceedings and noted that the respondents were responsible for the matter not proceeding to hearing on 21 April 2017: at [11(2)] of the reasons.
3. The Tribunal made the following findings in relation to whether the appellant's rejection of the offer was unreasonable: 13 I do not find that the applicant's refusal of the Calderbank offer was unreasonable. It may be regrettable in hindsight, but having read the letter I do not agree with all the arguments and positions stated therein. They were not the basis upon which the application was dismissed. I agree that the proposed resolution of the dispute was more favourable than my decision on 29 September 2017, but that does not make the refusal unreasonable. I do not find that the refusal was imprudent (see [12.3]) either.
4. The reference to "[12.3]" is a reference to the respondents' costs submission in which, at [12.4] rather than [12.3], the respondents cited Colgate Palmolive Company v Cussons Pty Ltd [1993] FCA 801 as authority for the proposition that an "imprudent refusal" of an offer of compromise can warrant an order for costs to be paid on an indemnity basis. The Tribunal went on to find at [19] that the appellant should be ordered to pay the respondents' costs on the ordinary basis.
5. Despite finding that the refusal of the Calderbank offer was not unreasonable or imprudent, the Tribunal went on to find that, the refusal of the Calderbank letter, together with the claim having no tenable basis in fact or law and lacking substance, constituted special circumstances.
6. The respondents submit that as the Tribunal found that "in hindsight" the appellant "would have been better off accepting the offer", the refusal of the offer could be considered a contributory factor, which in combination with other special circumstances, was capable of reaching the threshold for special circumstances.
7. The Tribunal's rejection of the respondents' submission that the failure to accept the Calderbank offer constituted special circumstances at [11.2] of the decision seems logically inconsistent with its reliance on rejection of the offer as part of what constitutes special circumstances at [14] of the decision. That said, we agree with the submission that the refusal of a Calderbank offer, even if it does not amount to special circumstances on its own, could amount to special circumstances when considered in conjunction with other factors.
8. However, in this case the other factors considered by the Tribunal to amount to special circumstances were that the appellant's claim had no tenable basis in fact or law and lacked substance. As noted above, we have concluded that these findings were inconsistent with the findings made in the substantive proceedings and constitute an incorrect application of relevant legal principles.
9. In these circumstances, we are not satisfied that the Tribunal's finding in relation to the Calderbank offer forming part of the special circumstances warranting a costs order can be maintained.

Conclusion

1. We conclude that the Tribunal's finding that special circumstances were established was an incorrect application of relevant legal principles. It constitutes an error in the House v The King sense.

Does the Tribunal's decision to make a costs order in the nature of a gross sum costs order give rise to a question of law?

1. As noted above, the respondents sought "costs on an ordinary basis (to be assessed or agreed)" and costs on an indemnity basis from 20 April 2017, being the date of expiry of the Calderbank letter. Alternatively, the respondents sought costs on an indemnity basis from 20 April 2017. The respondents did not seek a gross sum costs order.
2. Having determined that special circumstances applied and that an order for indemnity costs was not warranted, rather than order costs to be paid on the ordinary basis as agreed or assessed, the Tribunal ordered the appellant to pay 80% of the respondents' costs of the proceedings, in accordance with [2] of the costs decision, in which the Tribunal states: 22 Therefore I order the Respondents to submit their invoices for legal work connected to these proceedings alone (not any earlier, proposed or related proceedings) to the applicant and the applicant to pay 80% of those costs within 28 days. These costs are those incurred to prepare the second and third respondent's case for hearing, appearing at the final hearing on 2 June 2017, providing the submissions, but not the attendance and adjournment on 21 April 2017.
3. The Tribunal's order is in the nature of a gross sum costs order because it requires the appellant to pay a fixed sum in respect of costs, albeit a sum unknown to the Tribunal at the time the order was made.
4. The circumstances in which a gross sum costs order can be made have been extensively considered judicially. In Hamod v State of New South Wales (No 13) [2009] NSWSC 756 (5 August 2009), Harrison J cited Einstein J's summary of the relevant principles in Idoport Pty Limited v Donald Robert Argus [2007] NSWSC 23, at [9]: [9] For present purposes it seems convenient to commence with a recitation of the principles which inform the exercise of the discretion: i. the purpose of the rule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation: Beach Petroleum NL v Johnson (1995) 57 FCR 119, Von Doussa J page 265: [following Purchase J in Leary v Leary [1987] 1 All ER 261 who described the purpose of the rule allowing the fixing of a gross sum as 'the avoidance of expense, delay and aggravation involved in protracted litigation arising out of taxation' (All ER page 265)]; ii. the touchstone requires that the Court be confident that the approach taken to estimate costs is logical, fair and reasonable: Beach Petroleum at [16]; iii. the fairness parameter includes the Court having sufficient confidence in arriving at an appropriate sum on the materials available: Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738, per Giles JA at para [22]; [following (Wentworth v Wentworth (CA, 21 February 1996, unreported, per Clarke JA) and adopted in Sony Entertainment v Smith (2005) 215 ALR 788; [2005] FCA 228; BC200500963 at para [199]; iv. a gross sum assessment, by its very nature, does not envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place: Harrison v Schipp at para [22]; v. the gross sum 'can only be fixed broadly having regard to the information before the Court': Beach Petroleum at 124; [In Hadid v Lenfest Communications Inc [2000] FCA 628 at [35] it was said that the evidence enabled fixing a gross sum 'only if I apply a much broader brush than would be applied on taxation, but that ... is what the rule contemplates'.] vi. nevertheless the power to award a gross sum must be exercised judicially, and after giving the parties an adequate opportunity to make submissions on the matter: Leary v Leary [1987] 1 WLR 72 at 76, and Beach Petroleum NL v Johnson (No.2) (1995) 57 FCR 119 at 120'; vii. In terms of the necessity for the approach taken to be logical, fair and reasonable, Von Doussa J in Beach Petroleum NL & Anor v Johnson & Ors (No 2) (1995) 57 FCR 119, put the matter as follows, at paras [16]: 'On the one hand the Court must be astute to prevent prejudice to the respondents by overestimating the costs, and on the other hand must be astute not to cause an injustice to the successful party by an arbitrary 'fail safe' discount on the cost estimates submitted to the Court: Leary v Leary at 265.' ...
5. These principles were referred to by the NSW Court of Appeal in Bechara trading as Bechara and Company v Bates [2016] NSWCA 294, which stated, at [12] to [14]: 12. The power to award a lump-sum 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: Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 at 742-723 [21]-[22]; Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 123. 13. 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: Hamod v New South Wales [2011] NSWCA 375 at [818] per Beazley JA (Giles and Whealy JJA agreeing). 14. A "broad brush" approach is appropriate. To require the same or similar level of detail as in a formal costs assessment would defeat the purpose of the lump sum order: Auspine Ltd v Australian Newsprint Mills Ltd (1999) 93 FCR 1; [1999] FCA 673 at 5 [16]; Penson v Titan National Pty Ltd (No 3) [2015] NSWCA 121 at [7]. 15. The courts have typically applied a discount in assessing costs on a gross sum basis: Hamod v New South Wales at [814].
6. As noted by an Appeal Panel in Bonita v Shen [2016] NSWCATAP 159 at [80], [T]here is no general obligation upon the Tribunal to obtain evidence of costs for the purpose of making a ruling as to which party should pay costs and what order should be made. Such an obligation would only arise in circumstances where the Tribunal proposed to fix the amount of costs and/or make a money order for the amount. (Emphasis added)
7. In this case, there was no evidence before the Tribunal concerning the respondent's costs. Given that the respondents did not seek a gross sum costs order, it is not surprising that they did not provide evidence of the costs incurred or submissions regarding the principles that are relevant to the making of such an order.
8. In addition, there was no evidence before the Tribunal to support a conclusion that, as found by the Tribunal, "80% … is the standard percentage for party/party costs". As submitted by the appellant: ….[T]he Tribunal's "standard" assessment of 80% was applied in an evidentiary vacuum - the Tribunal had no indication or evidence of what the actual costs in issue were when it applied that assessment. It had no evidence to suggest that the respondent's costs were "standard" - indeed, it had no idea whether it was ordering the appellant to pay 80% of $10,000 or 80% of $100,000.
9. The Tribunal's justified its decision to make a costs order in the nature of a gross sum costs order as follows: 21 I find that it is not in keeping with the quick, just or cheap resolution of these proceedings to "order costs to be assessed on the basis set out in the legal costs legislation" as is available in s.60(4)(b). I prefer to make an order determining by whom and to what extent costs are to be paid. This is in keeping with the principle in s.36.
10. Although the guiding principle set out in s 36(1) of the NCAT Act - that is, the facilitation of the just, quick and cheap resolution of the real issues in the proceedings - is central to the Tribunal's practice and procedure, it generally does not of itself explain why the Tribunal makes a particular decision or exercises its discretion in a particular way. Reiteration of the guiding principle is not a substitute for making findings of fact based on evidence. Nor is it a substitute for applying correct legal principles to the facts as found.
11. If the Tribunal considered that it was appropriate to make an order akin to a gross sum costs order in the circumstances of the case, it should have: 1. directed the respondents to provide evidence of the legal costs they incurred and the appropriate discount, if any, to be applied; 2. directed the appellant to provide evidence in response to the respondent's evidence; 3. invited the parties to make submissions in relation to the proposed order; 4. made findings of fact in respect of the claimed costs; and 5. applied the legal principles relevant to the making of a gross sum costs order to its findings of fact.
12. We conclude that in making a costs order in the nature of a gross sum costs order the Tribunal failed to have regard to material considerations relevant to the making of such an order. This was an error in the House v The King sense.
13. Overall, we find that the Tribunal's discretion miscarried, both in respect of its finding concerning special circumstances and in the making of a costs order in the nature of a gross sum costs order. We have therefore allowed the appeal. As we have allowed the appeal on a question of law, it is not necessary for us to consider whether to grant leave to appeal.

What orders should be made?

1. Having allowed the appeal, we are satisfied that we should substitute a decision for the decision under appeal. We have the power to do so under s 81(2) of the NCAT Act. In exercising the discretion in relation to costs, we have considered: 1. The substantive decision; 2. The parties' submissions on costs to the Tribunal (which include a Calderbank offer dated 10 April 2017 and the response to the offer dated 19 April 2018); and 3. The parties' submissions on the appeal.
2. As noted above, in their submissions on costs to the Tribunal, the respondents put three arguments in support of the costs application: 1. The refusal of the Calderbank offer meant that the appellant had unreasonably prolonged the time taken to complete the proceedings. 2. The weakness of the appellant's claim and in particular that the appellant had not provided evidence to satisfy the threshold imposed by the legislation. 3. The refusal of the appellant to approach the substantive issues in any way other than filing applications and his refusal to engage in meaningful discussions with the respondents.
3. We have therefore considered whether these factors constitute special circumstances warranting an order for costs.

Refusal of the Calderbank offer

1. As noted above, the refusal of a Calderbank offer can amount to special circumstances.
2. The principles in relation to Calderbank offers that have been developed in the context of whether a refusal of such an offer gives rise to an order for indemnity costs are also relevant to whether the refusal of such an offer constitutes special circumstances.
3. The first principle to note is that the refusal of a Calderbank offer in more favourable terms than the outcome of proceedings does not of itself entitle the offeror to an order for indemnity costs: Jones v Bradley (No. 2) [2003] NSWCA 258. We are of the view that this is also true in respect of whether the refusal of a Calderbank offer amounts to special circumstances. Therefore, even accepting that the offer put to the appellant was more favourable than the ultimate outcome of his application, this does not of itself mean that special circumstances are established.
4. 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 and a claim for indemnity costs. They are whether there was a genuine offer of compromise and whether it was unreasonable for the offeree not to accept it.
5. Basten JA (with whom McColl and Campbell JJA agreed) adopted the non-exclusive list of factors identified by the Victorian Court of Appeal in Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435 at [25]: 1. the stage of the proceeding at which the offer was received; 2. the time allowed to the offeree to consider the offer; 3. the extent of the compromise offered; 4. the offeree's prospects of success, assessed as at the date of the offer; 5. the clarity with which the terms of the offer were expressed; 6. whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejecting it.
6. As noted above, the Calderbank offer was made to the appellant on 10 April 2017. It was expressed as an offer made in accordance with Calderbank principles and was open for acceptance for a period of ten days; which means that is was open until the day before the hearing listed on 21 April 2017.
7. The offer, in summary, was that:

• The parties file consent orders dismissing the proceedings with a right of reinstatement.
• The strata manager convene an Extraordinary General Meeting within three weeks to pass resolutions regarding the appointment of a strata manager to be nominated by the President of Strata Community Australia (NSW) or the President of the Law Society of NSW, with all past and present management companies excluded from consideration; to file proceedings against TNT Building Services Pty Ltd and Merhis Constructions Pty Limited and to take all necessary steps to prosecute those proceedings; to elect a strata committee of three owners including the appellant; to resolve that the strata managing agent obtain quotes to repair water ingress into lot 2; to appoint a strata lawyer with expertise in claims against builders to provide an opinion if the Fair Trading rectification order proceedings were not successful; alternatively, the strata manager would organise new quotations to carry out repairs or if claims against builders were not commercially feasible; and to call a further EGM to approve quotes and appoint a builder to carry out defect rectification works and to raise a special levy taking into account a staged works program.
• There would be "no issue as to costs".

1. We are not satisfied that the appellant's refusal of the Calderbank offer unreasonably prolonged the proceedings. As noted above, the Calderbank offer was made on 10 April 2017 and was refused on 19 April 2017. The hearing listed on 21 April 2017 was adjourned on the application of the respondents. The matter was then apparently listed on the first available date (2 June 2017), was heard on that date and the decision was reserved. Any delay in the proceedings can be attributed to a delay by the Tribunal in making the decision and not to the refusal of the Calderbank offer.
2. In addition, we are not satisfied in this case that the Calderbank offer otherwise gives rise to special circumstances warranting an order for costs. This is because we are not satisfied that the appellant's refusal of the offer was unreasonable. We accept that the offer was reasonably clear, was made a reasonable amount of time prior to the hearing and gave the appellant sufficient time in which to consider the offer. However, we are not satisfied that at the time the offer was rejected, the appellant's chances of success in the application were poor. At that time, the period of compulsory management had been extended twice; once by interim adjudicator's orders and once by Tribunal orders made by consent. Further, it was an agreed fact that the Owners Corporation was in breach of its statutory obligation under s 106(5) of the SSM Act and, as noted above, the Tribunal ultimately dismissed the application in the exercise of its discretion, not because it was not open to the Tribunal to make an order under s 237.
3. In these circumstances, we agree with the Tribunal below that refusal of the Calderbank offer was neither unreasonable nor imprudent. The refusal of the Calderbank offer does not amount to special circumstances warranting an order for costs.

Strength of parties' claims

1. We are not satisfied that the relative strengths of the parties claims amounts to special circumstances. For the reasons set out above, the appellant's case cannot be characterised as having no tenable basis in fact or law. Nor can it be characterised as lacking in substance. Nor are we satisfied that the relative strength of the parties' claims otherwise amounts to special circumstances. Rather, one aspect of the appellant's claim was not proved on the balance of probabilities and central to the dismissal of the application was the Tribunal's decision not to exercise its discretion to appoint a compulsory strata manager. The Tribunal's decision to exercise its discretion against making the order sought and the failure to prove an aspect of the claim on the balance of probabilities do not of themselves amount to special circumstances warranting an order for costs.

Appellant's approach

1. We are not satisfied that the respondents have established that the appellant refused to approach the substantive matter in any way other than filing constant applications or that the appellant refused to engage in meaningful communication with the respondents.
2. In relation to this, the appellant's original application for adjudicator's orders was successful and led to the appointment of a compulsory strata manager. An adjudicator granted an extension of the appointment on an interim basis. The Tribunal then, by consent, appointed a compulsory strata manager on an interim basis. There is nothing in the material provided in the costs submissions to suggest that the applications made by the appellant were ill-advised or imprudent. Further, there is nothing in the respondents' submissions to suggest that they had made any offer to settle the dispute prior to 10 April 2017, even though the issues raised by the appellant in his original application for adjudicator's orders apparently go back to 2015.

Conclusion

1. Section 60(3) of the NCAT Act does not provide an exhaustive list of factors that may give rise to special circumstances warranting an order for costs. Section 60(3)(g) allows us to have regard to "any other matter that the Tribunal considers relevant". On the material before us, we are not satisfied that there are other matters that give rise to special circumstances warranting an order for costs in favour of the respondent.
2. Overall, we are not satisfied that the respondents have demonstrated that special circumstances warrant an order for costs. The proper exercise of the discretion is to order the parties to pay their own costs of the Tribunal proceedings.

Costs of the appeal

1. The parties did not make submissions in relation to the costs of the appeal. In a letter dated 7 May 2018, the respondents have sought to be heard on this point.
2. Section 60 of the NCAT Act applies to costs of the appeal. On the material before us, there is nothing to suggest that special circumstances warrant an order for costs. However, we have made orders in the event that a party wishes to make a costs application.

Orders 1. The appeal is allowed. 2. The order made by the Tribunal on 20 February 2018 (as amended on 26 March 2018) in proceedings SC 17/03762 is set aside. 3. In substitution for that order the following order is made: "The parties are to pay their own costs of proceedings SC 17/03762". 1. In the event that either party seeks costs of the appeal, the following directions apply: 1. The applicant for costs (costs applicant) must file and serve any application within 7 days after these orders. 2. The respondent to the costs application must file and serve evidence and submissions in reply 14 days from the date of these orders. 3. The costs applicant must file and serve any submissions in response within 21 days from the date of these orders. 4. Submissions must address whether an order should be made dispensing with a hearing under s 50(2) of the Civil and Administrative Tribunal Act, 2013.

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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: 31 May 2018