FITZGERALD and MERCEDES GROUP PTY LTD

[2024] WASAT 33 (S)

JURISDICTION     :   STATE ADMINISTRATIVE TRIBUNAL

ACT: BUILDING SERVICES (COMPLAINT RESOLUTION AND ADMINISTRATION) ACT 2011 (WA)

CITATION:   FITZGERALD and MERCEDES GROUP PTY LTD [2024] WASAT 33 (S)

MEMBER:   MR E CADE, MEMBER

HEARD:   DETERMINED ON THE DOCUMENTS

DELIVERED          :   31 OCTOBER 2024

FILE NO/S:   CC 1398 of 2022

BETWEEN:   MATTHEW FITZGERALD

First Applicant

VICTORIA FITZGERALD

Second Applicant

AND

MERCEDES GROUP PTY LTD

Respondent

Catchwords:

Building services complaint - Costs - Whether proposal constitutes an offer - Application to dispense with compliance with a requirement of a rule

Legislation:

Building Services (Complaint Resolution and Administration) Act 2011 (WA), s 11(1)(d), s 36(1)(c), s 43, s 49
Legal Profession (State Administrative Tribunal) Determination 2022 (WA)
State Administrative Tribunal Act 2004 (WA), s 9, s 60(2), s 78, s 87, s 87(2), s 87(3)
State Administrative Tribunal Rules 2004 (WA), r 10, r 40, r 41, r 42, r 42A, r 46

Result:

First and Second Applicants Application dismissed
Respondent's Application allowed in part

Category:    B

Representation:

Counsel:

First Applicant	:	N/A
Second Applicant	:	N/A
Respondent	:	N/A

Solicitors:

First Applicant	:	N/A
Second Applicant	:	N/A
Respondent	:	Lang Litigation and Construction Law

Case(s) referred to in decision(s):

Barnett and Barrier Reef Pools (WA) Pty Ltd [2016] WASAT 50

Carter and J-Corp Pty Ltd [2019] WASAT 77 (S)

Chew and Director General of the Department of Education and Training [2006] WASAT 248

Danni and Town of Cambridge [2023] WASAT 123

Deshmukh and Distinctive Building Services Pty Ltd [2024] WASAT 62

Fitzgerald and Mercedes Group Pty Ltd [2024] WASAT 33

GB [2020] WASAT 61 (S)

Lee and Pharmacy Board of Australia [2021] WASAT 132

Lynch and Commissioner of Police [2016] WASAT 8

Pearce & Anor and Germain [2007] WASAT 291 (S)

Saint and Law Complaints Officer as The Delegate of The Legal Profession Complaints Committee [2023] WASAT 104

Springmist Pty Ltd and Shire of Augusta Margaret River [2005] WASAT 143 (S)

Walsh and Shire of Peppermint Grove [2009] WASAT 46 (S)

Western Australia Planning Commission v Questdale Holdings Pty Ltd [2016] WASCA 32

Wood and Law Complaints Officer as Delegate of the Legal Profession Complaints Committee [2024] WASAT 35

REASONS FOR DECISION OF THE TRIBUNAL:

Introduction

1. On 9 November 2021 the first and second applicants (the owners) made a building service complaint to the Building Commissioner against the respondent (the builder).

2. On 30 September 2022 the Building Commissioner referred the complaint, consisting of sixteen complaint items, to the Tribunal under s 11(1)(d) of the Building Services (Complaint Resolution and Administration Act 2011 (WA) (BSCRA Act).

3. During the course of the proceedings before the Tribunal, the Tribunal made orders by consent which resolved eight of the sixteen complaint items.  This left eight complaint items to be determined by the Tribunal at a final hearing on 18 and 19 March 2024 (the final hearing).  These complaint items are:

   (1)item 1 (timber flooring);

   (2)item 3 (stone cladding);

   (3)item 4 (garage door);

   (4)item 5 (windows);

   (5)item 6 (ensuite window);

   (6)item 7 (bench to island);

   (7)item 10 (front planter face brick); and

   (8)item 16 (shed stone cladding).

4. The final hearing was held before a panel composed of Member King (a legally qualified member) and Sessional Member Woodforde (a sessional member with building expertise). 

5. On 22 March 2024 the panel gave oral reasons and made orders, including building remedy orders under s 43 of the BSCRA Act (the original decision).

6. The relevant orders made by the Tribunal in the original decision were:

   The Tribunal orders:

   1.…

   2.Complaint items 3, 4, 5, 6, 7 and 16 are dismissed.

   3.The respondent shall remedy complaint item 1 by resurfacing the entire thoroughfare in which the varnish blob is located, and any adjoining flat timber floor surfaces.  The works are to be completed in a proficient and workmanlike manner within 90 days of the date of this order.

   4.The respondent shall remedy complaint item 10 by re-grouting entire walls of the plantar box on which any repairs have been undertaken.  The works are to be completed in a proficient and workmanlike manner within 90 days of this order[.]

7. On 24 April 2024, following a request by the owners under s 78 of the State Administrative Tribunal Act2004 (WA) (SAT Act), the panel published its reasons:  Fitzgerald and Mercedes Group Pty Ltd [2024] WASAT 33 (the published original decision).

8. The owners represented themselves at all times during this proceeding.  Until May 2023 the builder was represented by a director, after which it was legally represented.

The applications

1. There are now two applications before the Tribunal in respect of the original decision. 

2. The first is the owners' application lodged on 27 June 2024 that the builder reimburse them for their 'work order costs' (the owners' application), and the second is the builder's application lodged on 2 May 2024 that the owners pay the builder its legal costs and related expenses (the builder's application).

3. The builder objects to the owners' application as it contends that work order costs are not costs that the Tribunal under s 87 of the SAT Act may require another party to pay.

4. The owners object to the builder's application for two reasons. The first is they contend the builder's application is made outside of the time allowed by r 42A of State Administrative Tribunal Rules2004 (WA) (the rules) for making such an application. The second is that they contend there are no circumstances that should persuade the Tribunal to exercise its discretion under s 87 of the SAT Act to make an order requiring the owners to pay the builder its legal costs and related expenses.

5. As Member King is no longer a member of the Tribunal it now falls to a different member to determine these applications. 

6. In reaching its decision on the applications the Tribunal relied on documents lodged by the parties prior to the final hearing, the transcript of the final hearing, the transcript of the oral reasons, the published original decision, recordings of several directions hearings at which both parties participated and written submissions filed by the parties in accordance with orders of the Tribunal dated 4 July 2024 and 15 August 2024. 

7. In accordance with order 3 of the orders dated 15 August 2024 both applications have been determined under s 60(2) of the SAT Act entirely 'on the documents'.

8. The Tribunal determined the applications by giving reasons and making orders to the effect that:

   (a)the Tribunal, at this point in the proceedings, has no power to order the builder pay the owners for their work order costs.  Consequently, the owners' application is dismissed; and

   (b)the owners maintained to final hearing three complaint items which were not supported by evidence and they are to pay the builder for that portion of the builder's legal costs that were incurred due to the owners maintaining these three complaint items.

The owners' application

1. On 27 June 2024 the owners lodged their application with the Tribunal.

2. The application is a 'request that the Tribunal order direct costs incurred by the Applicants in the amount of $1,892.88 as a result of the Respondent's requirement that the Applicants vacate the residence during the period of the Tribunal ordered flooring rectification works (Complaint Item 1 - Timber Flooring, as ordered 22 March 2024)'.

3. The owners did not expressly refer to any provision of the SAT Act or the BSCRA Act in their application.

4. In their submissions dated 13 August 2024 the owners said that on 11 June 2024 the builder told them that 'the solvent based floor product is potentially hazardous and the house needs to be vacated for a period of 7 days.  It would not be safe to occupy the house during this time'.  The owners contend the builder said it would not commence remedial works on the timber floor until the owners had vacated their residence. 

5. Attached to the application are two invoices.  The first is from Quest South Perth Foreshore in the amount of $1,125 for a one-bedroom apartment occupied by two adults between 14 and 17 June 2024.  The second is from Sandra's Dog Retreat & Training in the amount of $760 for boarding for two dogs, Lulu and Teddy, from 12 June 2024 to 19 June 2024.

6. The first issue the Tribunal has considered is what provisions of the SAT Act or the BSCRA Act confer on the Tribunal a power to grant the owners' application.

7. In considering this issue the Tribunal reviewed the history of the orders sought by the owners in respect of complaint item 1 in this proceeding.

8. After reviewing the materials referred to above the Tribunal finds the first time the owners sought orders that the builder reimburse them for any costs they may incur due to remedial works ordered by the Tribunal was on 27 June 2024.  That is, the owners did not seek orders from the Tribunal in either their notice of complaint to the builder or in their complaint lodged with the Building Commissioner for the builder to compensate them for any costs they may incur during any remedial works performed by the builder. [1] The Tribunal observes that such orders might have been sought under s 36(1)(c) of the BSCRA Act. Nor were any such orders sought during the course of the proceedings or in either their opening or closing submissions at the final hearing.

   [1] The materials lodged by the parties show that the owners were aware they may have to vacate their residence during works to remedy the timber floor, even before their complaint was referred to this Tribunal.

9. The implications of the timing of the owners' application is a matter that was raised by Member King with the parties at directions hearing held on 4 July 2024.  Member King there questioned whether the application dated 27 June 2024 could be 'properly characterised as a costs application' or whether it was 'the costs of the remedial works that could have been argued at the time of the hearing'.  Member King invited the owners, if they wished, to 'couch their application in different terms'.  The owners did not, however, do this.

10. With respect to complaint item 1, the Tribunal determined this item by making building remedy orders in respect of the item, in the presence of the parties, on 22 March 2024.  The Tribunal is consequently functus officio as from the making of the order:  Saint and Law Complaints Officer as The Delegate of The Legal Profession Complaints Committee [2023] WASAT 104 (8 November 2023).

11. As a consequence, the Tribunal finds it has no power at this point in the proceedings to make an order under s 36(1)(c) of the BSCRA Act (or any other provision which provides a remedy with respect to the complaint item).

12. Consequentially, the only power available to the Tribunal at this point in the proceedings to award the owners the costs incurred by them to vacate their residence is under s 87 of the SAT Act and s 49 of the BSCRA Act.[2]  Accordingly, when the Tribunal further considers the owners' application it will do so pursuant to those two provisions.

    [2] The Tribunal has not separately considered s 49 of the BSCRA Act in this decision for the reasons given in Carter and J-Corp Pty Ltd [2019]WASAT 77 (S) at [281] - [283].

13. The second issue the Tribunal has considered is whether the Tribunal has power under s 87 of the SAT Act and s 49 of the BSCRA Act to order the builder reimburse the owners for their work order costs.

14. The builder contends that the Tribunal is not empowered by s 87 of the SAT Act or s 49 of the BSCRA Act in respect of the owners' work order costs. This is because it says work order costs are not, as required by s 87(2) of the SAT Act, the 'costs of another party'.

15. The owners, however, contend that the Tribunal has the power to order the builder compensate them for these costs as under s 87(3) of the SAT Act the 'costs of another party' includes costs 'to compensate the other party for any expenses, loss, inconvenience, or embarrassment resulting from the proceeding or the matter because of which the proceeding was brought'.

16. In determining this issue, the Tribunal has considered and adopted the reasoning in Springmist Pty Ltd and Shire of Augusta Margaret River [2005] WASAT 143 (S) (Springmist) .

    63The words "or the matter because of which the proceeding was brought" do expand the range of the conduct that might be examined for the purposes of an order under s 87. That is not to say, however, that the addition of those words expands the nature of the "expenses, loss, inconvenience or embarrassment" which are properly the subject of an order. Section 87(1) establishes the general position of the Tribunal, namely that the parties bear their own "costs in a proceeding of the Tribunal". Section 87(2) then provides for a discretion for the Tribunal to make an order departing from that general rule. In empowering the Tribunal to make an order for the payment by a party "of all or any of the costs of another party" the costs being referred to are the "costs in a proceeding of the Tribunal" which would otherwise be the subject of the general rule prescribed by s 87(1). Section 87(3) extends the range of expenses that may be encompassed in an order for costs. As in s 87(2), the words "an order for the payment by a party of the costs of another party" found in s 87(3) are a reference to the other party's "costs in a proceeding of the Tribunal".

    64The effect of s 87(3) is that the expenses that may be recovered are not limited to the traditional notion of legal costs, but can include other expenses and loss in connection with the conduct of the proceedings before the Tribunal. For example, the costs may include the costs of a non lawyer advocate, the expenses of a party having to travel to a hearing or some amount which compensates a party for the inconvenience or expense of its participation in the proceedings.

    65Section 87(3) does not provide a basis upon which compensation, in the nature of damages, can be awarded …

17. The Tribunal notes that this construction of s 87(3) of the SAT Act is approved in Walsh and Shire of Peppermint Grove [2009] WASAT 46 (S) and Danni and Town of Cambridge [2023] WASAT 123.

18. The Tribunal finds, based on the reasoning in Springmist, that the owners' application is not related to costs due to 'the conduct of the proceedings before the Tribunal' but is a claim for damages which, if it is to be made, should have been made prior to the Tribunal making orders on 22 March 2024.  Consequently, for the reasons set out above, the Tribunal cannot now consider the owners' application as it is in fact an application for damages.

19. The Tribunal therefore must dismiss the owners' application for the builder to reimburse them for their work order costs.

The builder's application

1. On 2 May 2024 the builder lodged with the Tribunal an application under s 87 of the SAT Act and s 49 of the BSCRA Act that the owners pay the builder its legal costs and expenses in the amount of $34,317.94.

2. The builder claims its legal costs at the scale under the Legal Profession (State Administrative Tribunal) Determination 2022 (WA) for the period 12 May 2023 to 22 July 2023 in the amount of $33,900.90.  The builder says its actual costs are in fact higher.  The builder also claims a disbursement item (printing the hearing book) in the amount of $417.04.  The total claimed by the builder is $34,317.94.

3. The builder contends its application is justified because:

   (1)It was reasonable for the builder to be represented during this proceeding, having regard to the 'complexity of the issues (both legal and factual) and the number of lay and expert witnesses';

   (2)The application is within time, and if it is not, then the builder applies for the time in which to make its application be extended;

   (3)The result at the final hearing was 'substantially less favourable' to the owners than a without prejudice offer made by the builder on 24 April 2023, which was rejected by the owners on 29 April 2023, albeit the builder accepts their offer does not fully comply with r 42; and

   (4)The owners' case substantially failed because it included various complaints that were 'weak, being incredible or implausible and unmeritorious with the result the [owners] conducted themselves in an unreasonable manner'.

4. The Tribunal considered each of the builder's contentions in turn.

Was it reasonable for the builder to be represented during this proceeding?

1. From the date the owners gave the builder their notice of intended complaint on 24 October 2021 to May 2023 the builder was represented by a director.  While the builder is a luxury home builder with considerable resources and sophistication, so too were the owners' people of considerable resources and sophistication as evidenced by the many well written submissions they lodged with the Tribunal during the course of the proceedings. 

2. Notably, during this 20-month period the parties were not able to resolve any of the 16 complaint items.  The Tribunal accepts that after such a lengthy period of time without the resolution of even a single complaint item it was reasonable for the builder to be legally represented.

Is the builder's application within time?

1. The builder accepts it lodged its application for costs on 2 May 2024, which is more than 21 days after the Tribunal made the relevant orders on 22 March 2024. However, the builder contends that time for the purposes of r 42A began to run when the Tribunal published its written reasons on 24 April 2024, not when the Tribunal made its orders on 22 March 2024.

2. The Tribunal does not accept the construction of r 42A advanced by the builder, as it is contrary to the clear meaning of the rule that time begins to run when the relevant orders are made, which was on 22 March 2024. The Tribunal, therefore, finds the builder's application was made outside of the time permitted by the rules.

3. The Tribunal must now consider the builder's application, made in its submissions dated 29 August 2024, for an extension of time. 

4. As a preliminary matter, the Tribunal observes the builder's application for an extension of time is made under r 10 which relates to applications to extend time to commence review proceedings. An application with respect to r 42A is, however, to be made under r 46.

5. Rule 46 confers on the Tribunal a discretion to 'dispense with compliance with a requirement of a rule, either before or after the time for compliance with the requirement arises'.

6. The Tribunal has considered whether the builder's failure to make its application under r 46 is fatal to the builder's application for an extension of time, and it has decided that it is not fatal.

7. In reaching this decision the Tribunal is mindful of s 9 of the SAT Act which requires the Tribunal to 'achieve the resolution of questions, complaints or disputes … fairly and according to the substantial merits of the case'. The builder's application is clearly intended to be an application that the Tribunal dispense with compliance with the time period in r 42A and is proper in all respects except that it refers to r 10 rather than r 46. For reasons given below, the Tribunal also finds that the considerations relevant to an application under r 46 are substantially similar to the considerations relevant to an application under r 10. In these circumstances, for the Tribunal to refuse to consider the merits of the builder's application due only to it referring in its application to a different (but substantially equivalent) rule would mean the Tribunal is acting inconsistently with s 9 of the SAT Act.

8. The Tribunal will now consider whether in the exercise of the discretion conferred on it by r 46 it should grant the builder's application to dispense with compliance with the time period in r 42A.

1. Rule 46 has been considered in many prior decisions of the Tribunal such as Lynch and Commissioner of Police [2016] WASAT 8, GB [2020] WASAT 61 (S) and Lee and Pharmacy Board of Australia [2021] WASAT 132.

2. The thrust of these decisions is that the discretion conferred by r 46 to dispense with compliance with the time period in r 42A is substantially the same as that conferred on the Tribunal under r 10 to extend time for the commencement of a proceeding.

3. As a preliminary point, the Tribunal adopts what is said in Wood and Law Complaints Officer as Delegate of the Legal Profession Complaints Committee [2024] WASAT 35 at [57] that 'the discretion to extend time is given for the sole purpose of enabling the Tribunal to do justice between the parties' and 'an extension of time is not automatic, and that an applicant must identify some material upon which the Tribunal can exercise its discretion'.

4. In considering these principles this Tribunal adopts the comprehensive explanation in Lovegrove Investments Pty Ltd and Shire of Waroona [2023] WASAT 99 (Lovegrove) at [11] to [19] as to the matters relevant to an application under r 10, which in summary is that the Tribunal should consider:

   (a)the length of the delay;

   (b)the reasons for the delay;

   (c)whether there is an arguable case; and

   (d)the extent of any prejudice to the [owners].

5. When considering these matters, the Tribunal has relied on the following chronology:

   (a)the builder put the owners on notice at the conclusion of the final hearing on 19 March 2024 that, if successful, it may apply for its costs;[3]

   (b)the builder confirmed to the owners at a directions hearing on 22 March 2024 that it intended to apply for its costs;[4]

   (c)the builder lodged its application for costs on 2 May 2024;

   (d)the owners engaged with the merits of the builder's application in its submissions lodged on 7 August 2024 and 13 August 2024; and

   (d)the builder applied for an extension of time to make its application for costs on 29 August 2024.

The length of delay

[3] ts 344, 19 March 2024.

[4] ts 31, 22 March 2024.

1. As stated above, the Tribunal finds that time began to run under r 42A on 22 March 2024 with the consequence that the builder should have lodged its application by 12 April 2024. However, it lodged its application on 2 May 2024, which is 20 days outside of the permitted period of time.

2. While the builder's delay is nearly twice the permitted period this is not a significant amount of time in the context of these proceedings.  This is because the builder gave the owners notice it intended to apply for its costs on both 19 March 2024 and on 22 March 2024, and the proceedings also actively continued during this period.  There was, for example, the application made by the owners for written reasons followed by the owners' application (out of time) for their costs on 27 June 2024, and further the builder and the owner were engaged at this time in discussions about the remedial works ordered by the Tribunal.

3. The Tribunal therefore finds that the builders delay in the context of these proceedings is not such that justice requires the Tribunal to dismiss the application. 

The reasons for the delay

1. The Tribunal accepts the builder lodged its application for its costs believing (mistakenly) that it was within time.  While this is unfortunate, it does not indicate in the context of the notice given by the builder on 19 March 2024 and 22 March 2024 that the builder neglected the issue until the time period had expired, or otherwise only formed an intention to apply for its costs after the time period had expired.

2. The Tribunal therefore finds that the reason for the builder's delay is not such that justice requires the Tribunal to dismiss the application. 

Whether there is an arguable case

1. The Tribunal will later give its reasons why it decided to allow, in part, the builder's application.  These reasons show that the builder does have an arguable case with respect to at least part of its application.

2. As the builder's application is arguable in part, the Tribunal finds that justice requires it consider the application.

The extent of any prejudice to the owners

1. The owners in their submissions did not contend that they would suffer any prejudice by the Tribunal granting the builder an extension of time.  Nonetheless, the Tribunal has itself considered whether they would suffer any such prejudice.

2. The Tribunal decided that granting the application would not cause the owners any prejudice.  This is because, firstly, the builder placed them on notice on 19 March 2024 and 22 March 2024 that it intended to apply for its costs, so to that extent the owners were not surprised by the application.  Secondly, for the reasons just given, the builder's application was made on a date which, while out of time, was not significantly out of time in the context of the proceedings.  Finally, by making submissions on the merits of the application the owners demonstrated they had in fact suffered no prejudice with respect to their ability to make arguments about the application.

3. After considering each of the issues referred to in Lovegrove, both individually and in combination, the Tribunal is satisfied that it would be just in all the circumstances to dispense with compliance with the time period in r 42A with the consequence the Tribunal will accept and will consider the builder's application lodged on 2 May 2024.

Was the result at the final hearing 'substantially less favourable' to the owners than a without prejudice offer made by the builder on 24 April 2023?

1. The builder in its submissions dated 24 July 2024 contends that:

   21.On 24 April 2023, almost 12 months prior to the matter proceeding to a final hearing, the [builder] made a generous offer in writing (by email) to the [owners] which was rejected.  The Tribunal's final orders were not more favourable than the Offer.

   …

   24.If the Offer had been accepted then all of the items would have been addressed in either a consent order or in a deed of settlement and the final hearing and all of the required preparation could have been avoided.

   …

   28.The [builder] accepts that the Offer was not strictly compliant with the SAT Rules, as it was not open for a minimum period of 14 days.  However, the authorities provide that the Tribunal may nonetheless still have regard to the rejection of the Offer by the Applicants in considering the question of costs.

2. The owners contend the Tribunal should have no regard to the builder's proposal on 24 April 2023 as it did not comply with r 42. This is because it did not give the owners 14 days in which to accept the proposal. They also contend that the entirety of the Tribunal's orders, consisting of consent orders made by the Tribunal on 10 July 2023, 29 November 2023 and 13 March 2023 and the final orders of the Tribunal on 22 March 2024, were not less favourable to them than the proposal communicated to them on 24 April 2023.

3. The Tribunal began with considering whether the builder's proposal is an offer or whether it is an invitation to treat. 

4. For this purpose, the Tribunal considered the builder's email of 24 April 2023.  The relevant features of this email are:

   (a)it was sent at 5.34 pm on Monday, 24 April 2023, by a director;

   (b)it was headed 'without prejudice';

   (c)it contained a proposal with respect to each complaint item; and

   (d)it opened with the statement 'We offer the following for your consideration and comment' and ended with the statement 'We are open to discussion regarding the above and welcome your written and/or verbal response within 5 working days.  We confirm that any verbal discussion or written correspondence between us shall remain on a 'without prejudice' basis until such time as a formal agreement is reached'.

5. The owners gave a detailed response to the builder on Saturday 29 April 2024, that is, they did engage in the requested discussion within the time period set out in the builder's offer.

6. The relevant features of the owners' email dated 29 April 2023 are:

   (a)It was sent at 11.08 am on Saturday, 29 April 2023, by the first applicant;

   (b)It was headed 'without prejudice save as to costs';

   (c)It contained an offer with respect to each complaint item; and

   (d)It stated '[W]e look forward to your acceptance of the above within 5 working days …'.

7. The owner's response was to substantially accept the builder's proposal in respect of  13 complaint items:  items 1, 2, 4, 6, 8, 9, 10, 11, 12, 13, 14, 15 and 16.  The Tribunal also observes that of the remaining three items, items 3 and 7 are relatively minor items and that while the builder's proposal in respect of item 5 was not accepted by the owners on 29 April 2023, it did meet the remedy sought by the owners in their notice of proposed complaint to the builder.

8. In considering this issue the Tribunal has paid particular attention to the commitment by the builder that it was 'open to discussion', that it requested the owners give their 'response' rather than to state whether they accept or reject the proposal and that the proposal concluded with confirmation that the parties 'discussion' would remain on a 'without prejudice' basis until such time as agreement was reached. The Tribunal also notes these statements were not accompanied by any declaration that the proposal is an offer made under r 42 or that a failure to accept it would have costs implications for the owners.

9. After considering these matters the Tribunal finds that the builder's email of 24 April 2023 did not constitute an offer but rather was an invitation to treat.  The Tribunal therefore finds it should not take the builder's email dated 24 April 2023 into account when considering the builder's application for its costs.

Did the owners' case substantially fail because it included various complaints that were weak, being incredible or implausible and unmeritorious with the result the owners conducted themselves in an unreasonable manner?

1. The principles relevant to the Tribunal's consideration of an application by a party for its costs under s 87 of the SAT Act and s 49 of the BSCRA Act are carefully summarised in the decision Barnett and Barrier Reef Pools (WA) Pty Ltd [2016] WASAT 50 at [12] to [15]. The Tribunal adopts this summary, which is:

   12The Tribunal stated in Chew and Director General of the Department of Education and Training [2006] WASAT 248 (Chew) at [85] that in exercising the discretion conferred on the Tribunal by s 87(2) of the SAT Act:

   [T]he Tribunal should not generally make an award for costs unless a party has conducted itself in such a way as to unnecessarily prolong the hearing; has acted unreasonably or inappropriately in its conduct of the proceedings, has been capricious; or the proceedings in some other way constitute an abuse of process.  The Tribunal might also make an order as to costs where a matter has been brought vexatiously or for improper purposes.

   13Further in Pearce & Anor and Germain [2007] WASAT 291 (S) (Pearce) at [24] the Tribunal stated:

   [W]here, however, there is a genuine dispute between the parties … their respective rights are unclear and one or both seek determination of their rights in the Tribunal, the starting point remains that each party should expect to pay their own costs, unless there are circumstances of the type identified in Chew.

   14The Tribunal's statements in Hoskins, Chew and Pearce are consistent with Western Australia Planning Commission v Questdale Holdings Pty Ltd[2016] WASCA 32 (Questdale) where the Court of Appeal gave consideration to the operation of s 87(1) of the SAT Act and the exercise of the discretion conferred upon the Tribunal by s 87(2) of the SAT Act, albeit in relation to a different enabling Act. The following principles apply to the resolution of the costs dispute:

   1.In its original jurisdiction, by reason of s 87(5) of the SAT Act and r 42(2) of the State Administrative Tribunal Rules 2004 (WA), the Tribunal is bound to take into account the fact (if found) that:

   a)a party made a written offer of settlement that was made in compliance with r 40 and r 41 of the SAT Rules;

   b)the offer was not accepted; and

   c)in the Tribunal's opinion, the Tribunal's final orders were not more favourable than the offer.

   2.Beyond s 87(4) and s 87(5) of the SAT Act and r 42(2) of the SAT Rules, the facts which the Tribunal is bound to consider and is precluded from considering are to be determined by implication from the subject matter, scope and purpose of the SAT Act properly construed (Questdale per Murphy JA (with whom Martin CJ and Corboy J agreed) at [48]).

   3.The discretionary power is to be exercised judicially.  That is, not arbitrarily, capriciously or so as to frustrate the legislative intent (Questdale per Murphy JA (with whom Martin CJ and Corboy J agreed) at [48]).

   4.Although not expressed in s 87(2) of the SAT Act or elsewhere that the power is to be exercised if it is fair and reasonable in all the circumstances of the case to do so. The 'judicial nature' of the exercise of the scheme of the SAT Act indicates that legislative intention (Questdale per Murphy JA (with whom Martin CJ and Corboy J agreed) at [49]).

   5.The presumptions as to costs orders that operate in curial litigation have no application, given the provisions of s 87(1) of the SAT Act and the directive contained therein (Questdale per Murphy JA (with whom Martin CJ and Corboy J agreed) at [50]).

   6.The onus is on the party seeking an order in its favour to establish that a favourable order should be made (Questdale per Murphy JA (with whom Martin CJ and Corboy J agreed) at [51]).

   7.The nature of the dispute is a relevant consideration in any application for costs (Questdale per Murphy JA (with whom Martin CJ and Corboy J agreed) at [58]).

   8.Every party to proceedings before the Tribunal is taken to be cognisant of the objectives of the Tribunal as expressly provided for in s 9 of the SAT Act (Questdale per Murphy JA (with whom Martin CJ and Corboy J agreed) at [54]).

   9.It will be relevant to the Tribunal to consider whether and to what extent the party who bears the onus on costs, can establish that the other party's conduct in connection with the proceedings has impaired the attainment of the Tribunal's statutory objectives  to have the proceedings determined fairly and in accordance with the substantial merits of the matter, with as little formality and technicality as possible and in a way which minimises the costs of the parties (Questdale per Murphy JA (with whom Martin CJ and Corboy J agreed) at [54]).

   10.The mere fact that a party fails on some contentions advanced does not of itself signify that that party has acted 'inconsistently with the objectives in s 9 [of the SAT Act]' (Questdale per Murphy JA (with whom Martin CJ and Corboy J agreed) at [55]).

   11.Unmeritorious claims or claims made or pursued involving misconduct or which are vexatious or grossly exaggerated or presented in a way that is unduly burdensome may justify an exercise of the discretion conferred by s 87(2) of the SAT Act.

   12.The relevance of a compliant offer and the weight to be attributed thereto 'is influenced by the evident legislative intent, that where possible, parties to proceeding should endeavour to consider settlement' (Questdale per Murphy JA (with whom Martin CJ and Corboy J agreed) at [59]).

   13.The weight to be given to the mandatory consideration of a complaint offer is a matter for the Tribunal in each individual case (Questdale per Murphy JA (with whom Martin CJ and Corboy J agreed) at [59]).

   15The Tribunal concludes that the discretion conferred by s 87(2) of the SAT Act is informed by the overarching obligation to exercise the discretion judicially and where it is fair and reasonable in all of the circumstances including a consideration of the nature of the jurisdiction exercised by the Tribunal 'but starting from the position that no order for costs will be made' (Questdale per Martin CJ at [9]). Further, the provisions of s 49(1) of the BSCRA Act do not alter the nature of the discretion to be exercised by the Tribunal in awarding costs to a party pursuant to s 87(1) and s 87(2) of the SAT Act and do not direct the Tribunal to make orders that are not consistent with the s 9 objectives of the Tribunal.

2. The builder submits that its application is justified as the owners' case at the final hearing 'substantially failed and included various complaints that were weak, being incredible or implausible and unmeritorious and further the owners conducted themselves to some degree in an unreasonable manner'.

3. The builder contends that the owners were unreasonable because they failed entirely in six of the eight complaint items that went to final hearing and they were only partially successful in the remaining two items, but also that many of the items on which the owners failed were unsupported by proper evidence or expert evidence and should not have been pursued to final hearing. 

4. The owners dispute the builder's contentions.  They contend that if the entirety of the Tribunal's orders are considered then they substantially succeeded.

5. The Tribunal has considered this issue starting from the position that each party should bear its own costs in this proceeding.  The Tribunal has also borne in mind that a lack of success in respect of a complaint item at the final hearing does not necessarily indicate that the owners in maintaining the complaint item acted inconsistently with the Tribunal's statutory objectives.

6. Finally, it has also considered whether the builder, who in this application bears the onus in its application, can establish that the owners' conduct in maintaining complaint items on which it was not successful at the final hearing, 'impaired the attainment of the Tribunal's statutory objectives …'.

7. The Tribunal began its consideration of these issues by determining whether the builder was substantially successful at the final hearing, and it found that it was.  The Tribunal finds the builder's contention the owners 'failed entirely in six of the eight complaint items that went to final hearing and they were only partially successful in the remaining two items' is a correct description of the effect of the Tribunal's orders dated 22 March 2024.

8. However, the Tribunal's finding on this point does not determine the issue. This is because the 'mere fact that a party fails on some contentions advanced does not of itself signify that that party has acted 'inconsistently with the objectives in s 9' of the SAT Act.

9. Consequently, the Tribunal then considered whether the owners did act inconsistently with the objectives in s 9 of the SAT Act by considering when certain evidence became available to the parties during this proceeding.

10. As previously discussed, the recommendations and findings of the Building and Energy Investigator (BEI Investigator) from the Building and Energy - Department of Energy, Mines, Industry Regulation and Safety became available to the parties on or around 18 March 2022, 13 May 2022 and 13 September 2022.  This BEI Investigator was called as a witness at the final hearing by the builder. 

11. Mr Schultz's report (a registered builder engaged by the owners) dated 15 June 2023 was lodged with the Tribunal on 28 June 2023.  With respect only to the complaint items which went to final hearing, Mr Schultz's report can be summarised as supporting the owners,  for items 1, 3, 4, 7, 10 and 16 while it made no findings with respect to complaint items 5 and 6.  While Mr Schultz did not give any reasons as to why he made no findings with respect to these items, the Tribunal finds that the most probable explanation is that they appeared to him to relate to contractual and not to building issues.

1. Prior to the final hearing the builder lodged the following witness statements with the Tribunal: 

   (1)Nicola D'Ercole, Director and registered builder, Mercedes Group Pty Ltd, lodged 29 February 2024;

   (2)Robert Massara, Director, Bernini Stone & Tiles Pty Ltd (the contractor who installed the stonework) lodged 29 February 2024;

   (3)Giuseppe Stillitano, Director, International Cabinets Pty Ltd (the contractor who installed the cabinets but not the stonework) lodged 29 February 2024;

   (4)Ian Pettersson, Director, Westec Doors and Windows Pty Ltd (the contractor who inspected and then replaced seven windows) lodged 28 February 2024;

   (5)Rod Holm of Access Timber Flooring (the contractor who completed the installation of the timber floor) lodged 27 February 2024.  Mr Holm also provided a report on the timber flooring on 25 February 2020.

2. The Tribunal notes two matters of significance with respect to the builder's witnesses.  The first is that, with the exception of Mr Holm's 2020 report, the builder made its witness statements available to the owners between 27 and 29 February 2024, which is only 18 to 20 days before the final hearing commenced.  The second is that the builder's witnesses are not independent experts. 

3. There is no need to summarise the evidence of the witnesses in the witness statements lodged by the builder.  It is sufficient to say that the witnesses support the position of the builder with respect to all the complaint items which went to final hearing, being complaint items 1, 3, 4, 5, 6, 7, 10 and 16. 

4. Mr D'Ercole, Mr Berlingeri and Mr Holm along with the BEI Investigator were called as witnesses by the builder at the final hearing.  Mr Schultz, Mr Massara and Mr Pettersson were called as witnesses by the owners.

5. During the final hearing the witnesses relevant to each complaint item gave their evidence concurrently.  Mr Schultz, therefore, both heard the evidence of the other witnesses relevant to each complaint item and was cross-examined by counsel for the builder on each complaint item.  Towards the end of cross examination on each complaint item counsel for the builder asked Mr Schultz to make concessions with respect to the opinions he gave in his report, and on many occasions he did make concessions.

6. The Tribunal considers that when assessing whether the owners by maintaining the eight complaint items to final hearing acted consistently with the Tribunal's statutory objective, that it must consider the following matters:

   (a)the owners had only a short amount of time before the final hearing to consider the majority of the evidence to be given by the builder's witnesses;

   (b)the owners were justified when assessing the evidence to be given by the builder's witnesses, to consider that they were not independent expert witnesses;

   (c)while Mr Schultz at the final hearing made concessions which effectively undercut many of the findings in his report, this was not something that could have been known to the owners before the final hearing; and

   (d)there was never any real evidence available to the owners which supported their position with respect to complaint items 5, 6 and 7.

7. The Tribunal, after considering these matters, finds that the owners did act consistently with the Tribunal's statutory objectives in maintaining complaint items 1, 3, 4, 10 and 16 to final hearing.  This is because it was reasonable, in the context of the matters set out above, for them to rely on Mr Schultz's opinions in his expert report with respect to those complaint items. 

8. The Tribunal finds otherwise, however, with respect to complaint items 5, 6 and 7. There was clearly never sufficient evidence available to the owners to support the claims advanced by them with respect to these complaint items. That is, the Tribunal finds the owners did not act consistently with the Tribunal's statutory objectives in s 9 of the SAT Act when it maintained these complaint items to final hearing.

9. The Tribunal therefore considers the builder should be compensated for that portion of the costs it incurred due to the owners maintaining complaint items 5, 6 and 7 to final hearing.

10. In determining what portion of the builder's costs is represented by these complaint items the Tribunal firstly notes that item 5 potentially involved a significant cost to remedy and so would have been taken seriously by the builder and its legal advisers.  Secondly, item 5 involved a legal issue which required consideration and research.  Thirdly, item 5 took up a reasonably substantial period of time during the final hearing.  Fourthly, items 6 and 7 involved much lesser potential remedial costs than most other items and also took up substantially less time than most other items at the final hearing.  Finally, the Tribunal finds that the complaint items resolved by way of consent orders prior to the final hearing were substantially agreed by the parties in around April 2023, with the result the builder and its legal advisers would have spent proportionally less time on these complaint items than on the complaint items which went to final hearing.

11. After considering all these matters and taking a 'broad brush' approach[5] to its task, the Tribunal finds that the builder should be compensated for around one quarter of its costs and the entirety of its disbursements.  These amounts are $8,475.22 for the builder's legal costs and $417.04 for its disbursements for a total of $8,892.26, which the Tribunals rounds down to $8,890.  The Tribunal considers that this amount is reasonable and not excessive.  The Tribunal also considers a reasonable period for the owners to pay this amount to the builder is 21 days.

    [5] See Deshmukh and Distinctive Building Services Pty Ltd [2024] WASAT 62 (1 July 2024) at [41].

Orders

The Tribunal orders:

1.The first and second applicants costs application is dismissed.

2.The first and second applicants shall within 21 days of this order pay the respondent a contribution to its legal costs fixed in the sum of $8,890.

I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.

MR E Cade, MEMBER

31 OCTOBER 2024