GILENO and RIVIERA HOMES (WA) PTY LTD - [2018] WASAT 48 (S)

JURISDICTION     :   STATE ADMINISTRATIVE TRIBUNAL
ACT: BUILDING SERVICES (COMPLAINT RESOLUTION AND ADMINISTRATION) ACT 2011 (WA)
CITATION:   GILENO and RIVIERA HOMES (WA) PTY LTD [2018] WASAT 48 (S)
MEMBER:   MS D QUINLAN (MEMBER)
MS S CHURN (SESSIONAL MEMBER)

HEARD:   DETERMINED ON THE DOCUMENTS
DELIVERED:   3 AUGUST 2018
FILE NO/S:   CC 1857 of 2017
BETWEEN:   DOMENICO GILENO
First Applicant
SANDRA GILENO
Second Applicant
AND
RIVIERA HOMES (WA) PTY LTD
Respondent

Catchwords:

Costs - Building dispute - Exercise of discretion - Many complaint items dismissed as frivolous, vexatious, lacking in substance, improper purpose or otherwise an abuse of process - Unreasonable conduct of applicants - Applicants' successful items derived largely from respondent's concessions and evidence

Legislation:

Building Services (Complaint Resolution and Administration) Act 2011 (WA), s 36(1)(b), s 38(1)(b), s 49(1), s 49(7), s 49
State Administrative Tribunal Act 2004 (WA), s 5, s 9, s 46, s 47, s 60(2), s 87, s 87(1), s 87(2), s, 87(3), Pt 4, Div 3

Result:

Respondent's costs application allowed

Representation:

Counsel:

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

Solicitors:

First Applicant	:	Arns & Associates
Second Applicant	:	Arns & Associates
Respondent	:	Williams + Hughes

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

Gileno and Riviera Homes (WA) Pty Ltd [2018] WASAT 48
Hoskins and Daniel Vinci t/as D'Vinci Contracting [2011] WASAT 188
J & P Metals Pty Ltd and Shire of Dardanup [2006] WASAT 282 (S)
Perth Central Holdings Pty Ltd and Doric Constructions Pty Ltd [No 2] [2008] WASAT 302
Rainbow Pty Ltd and Hawkins & Anor [2007] WASAT 216 (S)
Sanders and Gemmill Homes [2017] WASAT 41 (S)
Springmist Pty Ltd and Shire of Augusta-Margaret River (2005) 41 SR (WA) 207; [2005] WASAT 143 (S)
WA Country Builders Pty Ltd and Hathersage Nominees Pty Ltd [2016] WASAT 70
Western Australian Planning Commission v Questdale Holdings Pty Ltd [2016] WASCA 32
Wright and 3B Build Pty Ltd [2016] WASAT 68

REASONS FOR DECISION OF THE TRIBUNAL:

Introduction

Following a three day hearing on 12-14 March 2018, on 22 June 2018 the Tribunal delivered its reasons in Gileno and Riviera Homes (WA) Pty Ltd [2018] WASAT 48.
The proceedings concerned what is commonly known as a 'workmanship complaint' made under the provisions of the Building Services (Complaint Resolution and Administration) Act 2011 (WA) (BS(CRA) Act).
The complaint included 433 items as referred to the Tribunal by the Building Commissioner with 238 of those items being pressed by the applicants in their Scott Schedule filed with the Tribunal.
Whilst the applicants were successful in relation to a number of complaint items by obtaining monetary remedy orders, the applicants were not substantially successful in terms of what was being sought by them. There were significant adverse findings made by the Tribunal regarding the conduct of the applicants' case. Therefore, the Tribunal in making final orders, included programming orders in relation to either party's election to make a costs application. The Tribunal also determined that, subject to further order, any costs application would be determined entirely on the documents pursuant to s 60(2) of the State Administrative Tribunal Act 2004 (WA) (SAT Act).
Only the respondent elected to make a costs application, which it did so on 12 July 2018. The application included submissions in support and an affidavit of Mr John Italiano, a director of the respondent well known to the Tribunal as he gave evidence in the substantive proceedings where positive findings were made concerning his credibility as a witness of fact. On 26 July 2018, a notice of representation was filed by solicitors on behalf of the applicants as well as submissions opposing the respondent's application for costs. Both parties provided the Tribunal with further information on 1 August 2018 which has been taken into account by the Tribunal. Despite the offer of the respondent to file further submissions, the Tribunal has determined that no further submissions will be accepted from the parties.
For the background facts to this costs application, these reasons should be read in conjunction with the earlier substantive decision of the Tribunal in these proceedings.
However, it is worth highlighting that, with the exception of the seven complaint items relating to the stairway issue and smoke detectors (though noting it was $13,692.46 in total), where the applicants were successful in the proceedings this was due to considerable concessions made by the respondent in reliance on its experts.
There were 433 items of complaint referred to the Tribunal by the Building Commission and 238 of those were pressed by the applicants in the Scott Schedule. The way that the Tribunal dealt with the complaint items can be grouped as follows:
•All items allowed under s 36(1)(b) of the BS(CRA) Act totalling $37,881.41 88 items of complaint (typographical error in substantive decision, should be 87 items of complaint).
•Not allowed, insufficient evidence (the plumbing and acoustic complaint items as well as one balustrade item) 36 items of complaint.
•Withdrawn by the applicants just prior to hearing under s 46 of the SAT Act 34 items of complaint.
•Dismissed under s 47 of the SAT Act 82 items of complaint (typographical error in substantive decision, should be 81 items of complaint).
•Not allowed under s 38(1)(b) of the BS(CRA) Act as not pursued by the applicant nonetheless it was before the Tribunal as part of the original referral by the Building Commission 195 items of complaint.
If the total items of complaint are added up as per the final orders of the Tribunal in the substantive decision, the number of items incorrectly equals 435. This is because there is a duplication of complaint items 151 (ensuite exhaust) and 173 (blind) in orders 1(a) and 4 of the Tribunal in the substantive decision. Item 151 was incorrectly included in Order 1(a) as a conceded item and item 173 was incorrectly included in Order 3 as an item to be dismissed.
Some figures and percentages may assist in indicating the level of success that the applicants experienced in the proceedings as a whole due to the concessions of the respondent and reliance on the respondent's experts.
The figure for the total number of items where the applicants were successful was 87 items of complaint, although 81 items of those were conceded by the respondent and also reliant upon the respondent's expert evidence. It could then be extrapolated that, of the 87 items where the applicants were successful, that 93% of the items were due to the respondent's concessions and the respondent's experts.
The figure for the total number of items where the applicants were unsuccessful was 151 items (of the 238 they pressed in their Scott Schedule). It could be extrapolated therefore, of the items included in the applicants Scott Schedule, that the applicants were 37% successful and 63% unsuccessful. If that approach was extended out to the 433 items that were referred to the Tribunal by the Building Commission and needed to be dealt with, the applicants were 20% successful. It should be noted however, that when questioned by the Tribunal at the commencement of the hearing the applicants conceded that they did not press the items outside of the 238 and they also sought to withdraw a further 34 items.

Legal principles

Section 87(1) of the SAT Act provides that each party bear their own costs unless the Tribunal orders otherwise. However, relevant to these proceedings, the principle in s 87(1) of the SAT Act commences with the proviso, unless specified in the enabling Act. The enabling Act in these proceedings is the BS(CRA) Act which has a specific provision allowing for a costs application.
Relevant to these proceedings, s 49(1) of the BS(CRA) Act provides that the Tribunal may make such orders for costs as the Tribunal thinks fit arising from a building service complaint. This is a broad discretion to award costs conferred on the Tribunal. Section 49(7) of the BS(CRA) Act provides that s 49 does not limit the powers of the Tribunal under Pt 4 Div 5 of the SAT Act, the part of the SAT Act which provides for costs applications.
The legal principles applicable to costs applications in the Tribunal in matters determined under the BS(CRA) Act and the SAT Act have been considered in a number of published decisions of the Tribunal. In particular we refer, and respectfully follow with one exception to be identified shortly, the principles enunciated in the decisions of the Tribunal in the following decisions: Wright and 3B Build Pty Ltd [2016] WASAT 68 at [7]-[10]; WA Country Builders Pty Ltd and Hathersage Nominees Pty Ltd [2016] WASAT 70 at [10]-[15]; Sanders and Gemmill Homes [2017] WASAT 41 (S) at [8]-[9].
The one exception where we respectfully do not follow those Tribunal costs decisions identified above, is in relation to the use of the phrase 'neutral in effect' as to the operation of s 49 of the BS(CRA) Act. That phrase was coined by the Tribunal in Hoskins and Daniel Vinci t/as D'Vinci Contracting [2011] WASAT 188 at [19]. In our view, s 49(1) is not 'neutral in effect'. To conclude that a provision is 'neutral in effect', in our view, does not accord with ordinary principles of statutory interpretation. In our view, s 49 of the BS(CRA) Act operates so as to create a broad discretion as to costs in these type of proceedings, that is, the discretion is not limited to the starting position that each party bear their own costs as stated in s 87(1) of the SAT Act (and this principle is stated in those Tribunal decisions). Section 49 of the BS(CRA) Act operates so as not to limit the application of s 87 of the SAT Act, however the converse cannot be said in that s 87(1) of the SAT Act cannot operate so as to limit the operation of the broad discretion found in s 49(1) of the BS(CRA) Act. This interpretation is consistent with the proviso in s 87(1) as well as s 5 of the SAT Act which provides that the enabling Act prevails. However, having made that observation, we otherwise agree with, and respectfully follow, the principles identified in those Tribunal decisions as a guide in the exercise of the Tribunal's discretion to award costs under s 49 of the BS(CRA) Act and s 87 of the SAT Act.
Relevant to the present proceedings, in particular we note two principles from those Tribunal decisions cited above with which we have said we concur, albeit with one exception. Firstly, it is that costs applications made in the Tribunal under s 49(1) of BS(CRA) Act do not start from the oft quoted proposition in court proceedings, that costs 'follow the event', in short, meaning the party who can be found to have been largely successful is generally entitled to their costs.
Secondly, we note the principle that costs may be allowed by the Tribunal in the exercise of its discretion where a party has conducted itself unreasonably and where that conduct leads to unnecessary costs to the other party. Unreasonable conduct can include pursuing obviously weak or unmeritorious claims, grossly exaggerated claims or claims presented in a way that are unduly burdensome or oppressive.
Pursuant to s 87(2) of the SAT Act, the Tribunal may exercise its discretion and make an order for the payment by a party of all or any of the costs of another party. In the recent decision of the Court of Appeal in Western Australian Planning Commission v Questdale Holdings Pty Ltd [2016] WASCA 32 (Questdale), Murphy JA (Martin CJ and Corboy J agreeing), found at [51]:
Section 87(2) is to be construed in the context that the legal rationale for an order for costs is not to punish the person against whom the order is made, but to compensate or reimburse the person in whose favour it is made. That rationale is evident in s 87(3) of the SAT Act. Accordingly, even in a statutory context where the presumptive position is that no costs will be ordered, generally speaking, the question is whether, in the particular circumstances of the case, it is fair and reasonable that a party should be reimbursed for the costs it incurred. The onus is on the party seeking an order in its favour.
(Citations omitted)
The power to make a costs order includes the power under s 87(3) of the SAT Act to make an order for the payment of an amount to compensate a party for any expenses resulting from the proceeding. The 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: Springmist Pty Ltd and Shire of Augusta-Margaret River (2005) 41 SR (WA) 207; [2005] WASAT 143 (S) at [64].
Pursuant to s 89 of the SAT Act, where the Tribunal makes a costs order it may fix the amount of costs.
The procedures of the Tribunal are designed to achieve the objectives prescribed by s 9 of the SAT Act. Where an order for costs is made by the Tribunal, the Tribunal's obligation to minimise the costs to parties will be reflected in the costs assessed by the Tribunal as recoverable. That approach reflects an expectation that parties will approach proceedings in a way that minimises costs to their clients: J & P Metals Pty Ltd and Shire of Dardanup [2006] WASAT 282 (S) at [38].
The Court of Appeal in Questdale also found at [55]:
Nevertheless, the mere fact that a landowner ultimately fails on some contention or contentions advanced at trial would not, in itself, signify that it has acted inconsistently with the objectives in s 9. That is particularly so in the context that under s 46, s 47 and s 48 of the SAT Act, plainly unmeritorious claims, or claims made or pursued in circumstances which, broadly speaking, may be characterised as involving misconduct, may be screened out before final hearing. The Tribunal in such circumstances may act on its own volition or on the application of a party.
(Citations omitted)
An award of costs is not intended to be a full indemnity for the actual expenses incurred by a party. Generally speaking, an order for an amount of costs should be approached in a broad fashion and should not have to descend into any inquiry into small items of expenditure: Perth Central Holdings Pty Ltd and Doric Constructions Pty Ltd [No 2] [2008] WASAT 302 at [67].
The Tribunal will give consideration to 'the nature of the matter, its complexity, its importance, urgency, and the amount of time and effort required to properly prepare and present the case': Rainbow Pty Ltd and Hawkins& Anor [2007] WASAT 216 (S).

The respondent's submissions

The respondent seeks an order for all its legal costs and disbursements in relation to these proceedings in the amount of $37,944.96 (inclusive of GST). Those costs are detailed in the annexures to the affidavit of Mr Italiano filed in support of the costs application.
The respondent requests the Tribunal exercise its discretion to award the respondent its costs of the proceedings and submits in support of that request summarised as follows:
(a)The applicants conducted themselves unreasonably during proceedings to the point where the Tribunal concluded that Mrs Gileno was neither honest nor credible and propounded a testimony that was incredulous.
(b)The applicants' conduct of their case amounted to a deliberate attack on the reputation of Mr Italiano and his business through the sheer volume of oppressive and vexatious items.
(c)The Tribunal found that the applicants had colluded with 'quote' witnesses in order to exaggerate or inflate their claim in order to cause significant harm to the respondent.
(d)The Tribunal found that the applicants had detailed their complaint items in a pedantic and oppressive manner with significant duplication of description and that this amount to an abuse of process.
The respondent submits that the quantum of the respondent's claim for costs is modest and does not compensate the respondent for the loss of revenue from lost productivity and lost business opportunities arising from the proceedings. This submission is supported by only a general statement in the affidavit of Mr Italiano regarding lost revenue and opportunities. Further, this submission is made without any corresponding claim for compensation under s 87(3) of the SAT Act. Therefore, the Tribunal is disregarding this submission and statement by Mr Italiano as irrelevant to the respondent’s application for costs.
The respondent also seeks an order that the Tribunal suspend the obligation of the respondent to pay the applicants the amount of $37,881.41 which the Tribunal ordered the respondent to pay in the substantive proceedings.

The applicants' submissions

The applicants oppose any costs being awarded in favour of the respondent in the amounts as sought by the respondent. The applicants' submissions concede that a limited costs order is open for the Tribunal to make in the total amount of $4,220.00.
The applicants' submissions for specific costs component items can be summarised as follows:
(a)That the usual order be made that each party should bear their own costs for the acoustic and plumbing complaint items, in circumstances where the applicants concede the Tribunal rightly found they had done no destructive testing to contradict the plumbers' evidence, and the Tribunal concluded there was insufficient evidence to make a building remedy order.
(b)That the usual order be made that each party should bear their own costs for the successful stairway complaint.
(c)That the usual order be made that each party bear their own costs for the complaint items where no evidence or submissions were made even though the Tribunal also dismissed those items under s 47 of the SAT Act.
(d)The applicants concede, in light of its findings in the substantive decision, that it is open for the Tribunal to make a limited costs order concerning the evidence of Mr Todoro and Mr Dinardo as well the 'not conceded painting complaint items'.
The applicants' otherwise submit, taking into account the Tribunal's approach to costs in these matters, that the circumstances of this case do not warrant making a costs order in favour of the respondent.
The applicants' submit that the respondent:
(a)was an experienced builder who engaged appropriate experts to assist its case;
(b)elected to engage a lawyer where they did not need to do so; and
(c)would not have been disadvantaged had it elected for Mr Italiano to advocate for the respondent.
Conversely, the applicants submit that they demonstrated in the proceedings they did not have any sophisticated knowledge of the practice and procedure of the Tribunal and they were entirely out of their depth.
Despite making a number of criticisms of Mr Italiano's affidavit, the applicants' submissions include a number of comments from the applicants by way of explanation as to their conduct in the proceedings and the adverse findings made by the Tribunal in the substantive matter. Whilst it was not required, these comments were not included in affidavit form as was Mr Italiano's evidence in support of the respondent's application. The applicants also object to the filing of the affidavit of Mr Italiano submitting that leave was required. We consider that leave was not required as we take the view that the orders of the Tribunal allowed for the filing of any application for costs and any supporting documentation which can include an affidavit.
In any event, we have formed our impression of the applicants conduct in these proceedings, we have made our factual and legal findings in the substantive decision and this exercise of discretion as to costs will rely on those findings in the substantive decision. However, having said that, we accept that Mr Italiano has included matters in his affidavit that are not relevant to an application for costs and for that reason we will disregard paragraph 15.

Consideration

Where this costs application differs somewhat from many other costs applications under the BS(CRA) Act, is not only that it is not an application by a successful applicant, it is not just about a respondent having spent wasted time and expense on a weak claim, it is in circumstances where the Tribunal has made findings in relation to a significant number of complaint items that they were either frivolous, vexatious, lacking in substance, being used for an improper purpose or otherwise an abuse of process.
In this instance the plainly unmeritorious or, as the Court of Appeal in Questdale characterised as 'misconduct' claims, were dealt with at final hearing under s 47 of the SAT Act.
We find that the items of complaint dismissed under s 47 of the SAT Act do readily indicate, particularly in the circumstances of this case, unreasonable conduct that should attract the exercise of our discretion in favour of the respondent.
However, it is not only the s 47 items that attracts the exercise of the Tribunal's discretion in this matter, it is that in multiple instances the applicants simply had no cogent evidence to support their claim and where they were successful it was due to the respondent's expert evidence in 93% of their successful items. We find that, without those reasonable concessions, the applicants would have experienced negligible success in these proceedings.
In order for the applicant to be successful in obtaining a remedy order for many of its items of complaint, expert evidence was required. The applicants did not provide their own experts on many of the items of complaint where they were successful, their case had to rely upon the respondent's concessions brought about by the respondent's experts. The applicants did provide some expert evidence, particularly in relation to acoustics where they were unsuccessful, but the applicants' efforts in this regard were, at best, entirely misconceived. The other areas where the applicants provided their own experts was the stairway issue and we relied upon the applicants' expert Mr Machell in this regard.
In the exercise of the Tribunal's discretion in all of the circumstances we consider it is fair and reasonable that the applicants should be ordered to pay a substantial proportion of the respondent's expert fees.
Whilst we acknowledge that the applicants were unrepresented litigants, we do not accept, particularly in relation to Mrs Gileno, that the applicants were unsophisticated in their approach to the proceedings. As is clear from our substantive findings under s 47 of the SAT Act, we consider that those actions of the applicants were deliberate and calculated. We also do not accept the applicants' submission which sought to contrast their apparent naivety with a respondent who was capable of representing itself in the Tribunal and elected to retain legal assistance (therefore should bear that cost). Our substantive findings were that the respondent was unfairly burdened by the oppressive approach to the proceedings by the applicants, an approach that we found was designed to cause maximum harm to the respondent.
It is a relevant consideration in determining a discretion to award costs (whilst assessing unreasonable conduct on the part of the applicants) that it was apparent from the hearing, as well as the affidavit of Mr Italiano filed in this application which we accept, there has been a long history of conflict arising from the contentious and unreasonable behaviour of the applicants.
The applicants' submissions seek to distil the costs down to component areas of where the applicants were found to be successful or unsuccessful and whether there is anything unreasonable in their approach to those component parts of the proceedings. However, we find that the approach of the applicants to the proceedings, with an intention we found to be to exaggerate or inflate the claim wherever possible in order to cause significant harm to the respondent, was an approach that managed to affect the entire proceedings in a way that was oppressive and therefore amounted to unreasonable conduct which justifies the exercise of our discretion to award costs.
A further relevant consideration is the offer to settle for $35,000.00 a few days just prior to hearing that was detailed by Mr Italiano in his affidavit, which we find was not far short of being commensurate with the ultimate outcome of $37,881.41.
The Tribunal finds that the respondent required the assistance of a lawyer in order to reduce the ambit and untenable components of the applicant's claim which served to further the main objectives of the Tribunal as stated in s 9 of the SAT Act. The Tribunal was assisted in reaching its decision by counsel's efforts in distilling the items of claim into broad categories and with cross referencing to the evidence.
The Tribunal finds that the applicants' conduct throughout the proceedings constituted unreasonable conduct such that legal costs and expenses were unnecessarily incurred by the respondent. Therefore, the Tribunal has determined to exercise its discretion in the facts and circumstances of this case to award the respondent a significant contribution to their legal costs.

Quantum of costs sought

In the submissions filed by the respondent, as well as the affidavit of Mr Italiano attaching the paid invoices, a summary of the breakdown of the costs sought of $37,944.96 (inclusive of GST) is as follows:
(a)expert - building consultants (site assessments and reports) - total of $2,482.50;
(b)expert - acoustics - $3,960.00;
(c)expert painting - total of $2,345.09;
(d)disbursements - total of $513.00; and
(e)legal costs - total of $28,644.37.
The Tribunal is mindful at this juncture to again refer to the comments of the Court of Appeal in Questdale at [51] that:
… the legal rationale for an order for costs is not to punish the person against whom the order is made, but to compensate or reimburse the person in whose favour it is made.
The Tribunal considers it fair and reasonable in the circumstances of these proceedings to allow a significant contribution to the respondent's expert fees. Those fees total $9,300.59 and we will allow $7,000.00. We also consider it fair and reasonable to also allow a significant contribution to the respondent's legal fees in the amount of $20,000.00 recognising, in particular, where the respondent was unsuccessful at hearing concerning the stairs.
The respondent has not cited any authority for its request for the Tribunal to suspend payment of the amount the respondent was ordered to pay in the substantive proceedings. We know of no such authority to do so. However, this does not prevent the parties from setting-off any amounts due to each other, or the relevant jurisdiction from doing so if required.

Orders

Accordingly, the Tribunal will order as follows:
1.Within 21 days of the date of these orders, the applicants are to pay a contribution to the respondent's costs of the proceedings fixed in the amount of $27,000.00.

I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.
MS D QUINLAN, MEMBER
3 AUGUST 2018