Red Roo Homes (WA) Pty Ltd and Formby - [2006] WASAT 302

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: VOCATIONAL REGULATION

ACT: BUILDERS' REGISTRATION ACT 1939 (WA)

CITATION: RED ROO HOMES (WA) PTY LTD and FORMBY [2006] WASAT 302

MEMBER: MR C RAYMOND (SENIOR MEMBER)

HEARD: 11 JULY 2006

DELIVERED : 29 SEPTEMBER 2006

FILE NO/S: VR 186 of 2005

BETWEEN: RED ROO HOMES (WA) PTY LTD
Applicant
AND
VAL FORMBY
Respondent

Catchwords:

Application to review decision of Building Disputes Tribunal on costs - Whether decision plainly wrong or attended with sufficient doubt - Whether substantial injustice would result if decision were to be left unreversed

Legislation:

Builders' Registration Act 1939 (WA), s 38, s 38(4), s 38(4)(d), s 41, s 45A(2)(c)(ii)

State Administrative Tribunal Act 2004 (WA), s 31

Result:

Application granted

Category: B

Representation:

Counsel:

Applicant: Ms P Cahill
Respondent: Mr R Shaw

Solicitors:

Applicant: Jackson MacDonald
Respondent: Lavan Legal

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

Attwell v Chlody Investments Pty Ltd BDT Complaint No 4096 and reported decision dated 19 January 2004
Palm Bridge Pty Ltd v Miles [2001] WASCA 334
Red Roo Homes WA Pty Ltd and V Formby [2005] WASAT 65
Tangent Nominees Pty Ltd and Edwards [2005] WASAT 119

Case(s) also cited:

Hunter v West Coast Building Service Pty ltd (2003) 31 SR (WA) 219
Kelly v Norrish (2003) 31 SR (WA) 379
Palm Bridge Pty Ltd v Miles [2001] WASCA 334

REASONS FOR DECISION OF THE TRIBUNAL:

Summary of Tribunal's decision

The applicant applied for leave to review a decision of the Building Disputes Tribunal in relation to an order for costs and an order granting liberty to the respondent to apply for assessment of compensation based on diminution in value of the applicant's property.
As it was readily apparent that the Disputes Tribunal had applied the wrong section of the Builders' Registration Act 1939 (WA) in exercising its discretion to award costs. The State Administrative Tribunal issued an order under s 31 of the State Administrative Tribunal Act 2004 (WA) inviting the Disputes Tribunal to reconsider its decision.
The Disputes Tribunal reconsidered the matter and issued further reasons for decision. In the revised decision the Disputes Tribunal acknowledged that it was wrong in concluding that it could determine a claim relating to the garage being constructed not in accordance with the original contract, plans and specification as a breach of contract. Notwithstanding the Disputes Tribunal found that the garage had been constructed to the incorrect dimensions it concluded that there was nothing wrong with the building works and that the only remedy available to the applicant was for breach of contract, which it did not have jurisdiction to exercise. The second proposed ground of review therefore fell away.
The Tribunal accepted the applicant's argument that the Disputes Tribunal had erred in its application of the s 38(4) of the Builders' Registration Act 1939 by failing to determine whether or not it was fair to award costs in favour of the respondent. The Disputes Tribunal should have considered the submissions made by the applicant as to why it was not fair to make such an order, particularly having regard to the proportion of time taken on the garage issue, on which its claim for remedial work to be carried out, had failed.
The Tribunal concluded that the Disputes Tribunal had erred and that a substantial injustice would result if leave was not granted to review the decision and it ordered accordingly.

History of application and the decision under proposed review

On 8 February 2005, the Building Disputes Tribunal (Disputes Tribunal) issued Order to Pay no 114/2004-05 and on the same date issued two separate orders determining that the builder, by the introduction of a pier internal to the carport, is not liable for any structural alterations but could be liable for any diminution in value of the property by reason that the carport (which is also referred to on occasions as the garage) is 240 millimetres less in length than that specified in the original contract, and granting the parties liberty to apply in relation to diminution in value. On 24 February 2005, the Disputes Tribunal published written reasons for its decision as reflected in the above orders.
On 8 March 2005, the applicant lodged an application pursuant to s 41 of the Builders' Registration Act 1939 (WA) (BR Act) seeking leave to "appeal" in respect of the order to pay, insofar as it directed the applicant to pay legal costs on the Local Court scale, to be taxed if not agreed. The applicant sought a substituted order that there be no order as to costs and further that there be no order as to the carport. The grounds for the proposed review were that in relation to costs, the applicant had been denied an opportunity to be heard, and that there had not been a due regard to the jurisdiction of the Disputes Tribunal to award costs under s 38(4) of the BR Act. In relation to the carport order the applicant asserted that the Disputes Tribunal had found there to be a breach of contract, but had not specified the nature of the breach which it had found; that the applicant contended there had been no breach of contract and that the Disputes Tribunal had no jurisdiction, in any event, to decide the contractual dispute.
The applicant also applied for an interim order staying the operation of the above orders.
In considering an interim application for a stay, it became readily apparent that the Disputes Tribunal had applied a wrong section of the BR Act in considering costs and had failed to have regard to the specific matters, which it was directed to have regard to, pursuant to s 38(4) of the BR Act. The State Administrative Tribunal (Tribunal) determined to exercise its powers pursuant to s 31 of the State Administrative Tribunal Act 2004 (WA) (the SAT Act) so as to invite the Disputes Tribunal to reconsider its decision. The Tribunal's reasons for doing so are set out in Red Roo Homes WA Pty Ltd and V Formby [2005] WASAT 65. During the interim application hearing the Tribunal was informed that the respondent had in turn filed an application for leave to review the Disputes Tribunal's decision in matter no VR 207 of 2005. The Tribunal also invited the Disputes Tribunal to reconsider that decision, so that all relevant matters were before the Disputes Tribunal.
On 16 March 2006, the Disputes Tribunal published its further reasons for decision, pursuant to the invitation extended to it by the Tribunal, as set out above. In those further reasons for decision, the Disputes Tribunal acknowledged that it did not have jurisdiction to deal with any contractual dispute and consequently, although not expressly stated to be in substitution for the order granting liberty to apply in respect of a diminution of value claim, the Disputes Tribunal issued an order dismissing the claim of the owner in relation to the extension of the garage. In relation to costs, the Disputes Tribunal directed itself to the express provisions of s 38 of the BR Act, but having done so, came to the same conclusion as previously and issued an order that the:
"Orders of the Tribunal under order no 4 as to costs made on 7 February 2005 are upheld and both parties are to advise the Tribunal of a suitable date for the costs to be taxed, unless otherwise agreed."
Pursuant to s 31(3) of the SAT Act, if the decision‑maker varies the decision or sets it aside and substitutes a new decision, unless the proceeding for a review is withdrawn, it is taken to be for the review of the decision as varied or the substituted decision. Although the applicant has not formally withdrawn the application for leave to review the order relating to the garage, it has not persisted in the proposed review of the decision in that regard. To do so cannot be necessary, in circumstances in which, as here, the substituted decision of the Disputes Tribunal achieves the result sought by the proposed review. The applicant does, however, persist with the review in relation to costs, and in respect of that, the decision of 16 March 2006 is the decision under review. That notwithstanding, counsel for both parties found it necessary in making their submissions, to have regard to the decision of 24 February 2005. The Tribunal considers that it was appropriate to do so, as part of the history of the proceedings, and in order better to appreciate the approach taken by the Disputes Tribunal and the criticisms still levelled by the applicant.
In the first decision, the Disputes Tribunal stated, as acknowledged to be incorrect, that pursuant to s 45A(2)(c)(ii) costs could be awarded if a party cannot conduct the proceedings properly herself. The Disputes Tribunal considered that to be the case as the respondent is elderly and needed help with a large number of complaints. It was on that limited premise that it proceeded to award costs on the Local Court scale to be taxed, if not agreed. The Disputes Tribunal noted that the respondent had objected to not being given an opportunity to argue against the award of costs "notwithstanding that it has lost the case" and went on to state as follows:
"At no stage in the evidence has any aspect been advanced upon which it (the respondent/applicant herein) could rely to somehow absolve itself from paying costs, especially as the Respondent (applicant herein) had itself employed lawyers. Nonetheless the Respondent will, however, be able to argue against the bill put in by the Complainant at the taxation."
In the second decision, the Disputes Tribunal put the question of costs more fully. The Disputes Tribunal noted that it had listened to the arguments by counsel for the respondent and proceeded to summarise the essence of counsel's submissions.
(a)The matter was not complex. The only issue was the length of the carport and that had been decided in favour of the applicant herein.
(b)The owner had made a claim for $38 000 and had only received $13 000.
(c)The builder had offered to have the work done by another builder, which had been refused unreasonably.
(d)The Disputes Tribunal was a no cost jurisdiction and costs should not be awarded in a simple case such as this one.
The Disputes Tribunal went on to note that the builder (applicant) had already consulted lawyers over the claims when the complainant did so to preserve her position. Further, that the matter originally involved a considerable number of claims, which had been reduced to 32 items by the time of the hearing before the Disputes Tribunal, but still involved several witnesses. Of the 32 items of claim, six were withdrawn or dismissed. The amount awarded on the remaining 26 items was $13 310. Both sides had lawyers appearing for them. As distinct from the usual complaint, there were a variety of claims not least being the issue of the garage. While the owner lost that issue, she had won most of the other issues.
"The builder submitted that another builder had been recommended to complete the works, but that would have raised a contractual issue had it been taken up. It was not taken up and does not affect the issue of costs."
The Disputes Tribunal then went on to consider s 38 of the BR Act. It stated that the Disputes Tribunal was not a "no‑costs at all jurisdiction" but one that is limited and leaves the issue to the Disputes Tribunal under the provisions of s 38. The Disputes Tribunal considered that sub‑sections 38 (d) and 38 (e) were applicable. The matter was not straight‑forward and simple. The claimant had a number of legitimate claims against the builder for poor finish to the works and needed assistance to help her put forward her case on all the matters concerned, not just the garage.
"We were uncertain whether the builder did or did not think the only issue involved was the length of the garage, but in fact, as stated above some 32 items were an issue."
The Disputes Tribunal went on to conclude that the number of issues involved justified the complainant seeking assistance, particularly as the builder had himself sought legal advice. Costs would be awarded on the Local Court scale: "under the circumstances of this particular case, and in particular because of the complexity of the proceedings, for a person unfamiliar with building practices when arguing with a builder who was familiar with those processes".

The parties submissions

The applicant filed written submissions in relation to costs for consideration by the Disputes Tribunal pursuant to the invitation extended under s 31 of the SAT Act. There was also an opportunity to make oral submissions.
Before this Tribunal the applicant submits, by way of a summary, as follows:
(1)That the Disputes Tribunal is essentially a "no cost jurisdiction".
(2)There appears to have been an assumption that "the burden of proof lies with the builder to show why costs should not be awarded".
(3)The discretion to award costs is not unfettered. Costs may only be awarded when in the Disputes Tribunal it is "fair" to do so, having regard to specific matters set out in s 38(4) of the BR Act.
(4)The Disputes Tribunal, in considering whether the nature and complexity of the matter warranted an award of costs, was required to analyse the matter itself: Attwell v Chlody Investments Pty Ltd BDT Complaint No 4096 an reported decision dated 19 January 2004.
(5)Instead of having regard to the nature and complexity of the matter itself, the Disputes Tribunal had regard to the way in which the matter progressed through the processes of the Disputes Tribunal. The Disputes Tribunal erred in simply assuming that Mrs Formby was unfamiliar with building practices and that the builder was familiar with them, and using this assumption as a primary basis for awarding costs in the owner's favour.
(6)In considering s 38 (4) (the BR Act), the Disputes Tribunal had wrongly confused its discretion to allow a party to be legally represented with its discretion to award costs – as evidenced by the reasons for decision 24 February 2005 at 4.4 which reflects "at no stage has any evidence been advanced upon which it (the applicant herein) could rely to somehow absolve itself from paying costs, especially as the respondent (applicant herein) had itself employed lawyers."
(7)Finally, the Disputes Tribunal had failed to determine whether, in its opinion, it was "fair" to award costs to the owner, which was a pre-requisite at s 38 of the BR Act.
The applicant's written submissions proceed at some length to motivate why the applicant considers it was not fair to award costs to the owner. The following points are included:
Firstly, there were originally 81 complaints and no action was required from the applicant by the Disputes Tribunal in relation to some 33 of them. It is said that the owner's claims were inflated. Emphasis is placed on the proposal to have another builder carry out the necessary work. Seventy‑five percent of the hearing on 26 and 27 August 2005 and all of the hearing on 8 July 2005 as well as a proportion of the hearing on 17 February 2006 related to the garage issue. That claim, which consumed the bulk of the time and expense of the proceedings, was unsuccessful. That there is no discernible basis for the order by the Disputes Tribunal to award costs in favour of the owner.
The respondent submits that it was appropriate for the Disputes Tribunal, not a reviewing body, to exercise the discretion to award costs, relying on Palm Bridge Pty Ltd v Miles [2001] WASCA 334.

Considerations

Section 38(4) (BR Act) expressly provides:
"(4)In any proceedings costs are not to be awarded to any party to the proceedings for the services of any legal practitioner or other person representing or assisting in the representation of that party, unless, in the opinion of the Disputes Tribunal, it is fair to do so, having regard to‑
(a)…
(b)…
(c)…
(d)the nature and complexity of the proceedings; or
(e)any other matter the Disputes Tribunal considers relevant."
Only sub‑paragraphs (d) and (e) are set out above, because they are the grounds considered by the Disputes Tribunal to be relevant.
There is considerable force in the applicant's submissions to the effect that the Disputes Tribunal has wrongly approached the question of costs from the outset, on the assumption, that once the successful party's legal representation is permitted, it should recover costs, unless there are other reasons suggesting otherwise. That is entirely consistent with the Disputes Tribunal's original reasons for decision at par 4.4 referred to above.
Having had the opportunity to reconsider its award in relation to costs, the Disputes Tribunal has set out a basis upon which it would be proper to conclude that costs should be awarded to the owner relevant to para (d) and (e) of s 38(4) of the BR Act. However, having identified those circumstances, the Disputes Tribunal has not gone further to motivate why it is fair to award costs, and that is the very conclusion, which is required of it by s 38(4) having had regard to the various criteria or factors set out in the sub section.
In the applicant's written submissions to the Disputes Tribunal dated 19 July 2005, the applicant proceeded at some length to emphasise the need for the Disputes Tribunal to consider whether it would be fair to award costs having regard to the specified paragraphs of s 38(4) of the BR Act. The submissions covered some 17 paragraphs, some of which had several sub‑paragraphs.
The Disputes Tribunal, was expressly directed to the need to make a finding that an award of costs was fair, having regard to the submissions made. While the Tribunal does not necessarily endorse the position of the applicant in relation to any of the submissions made, it was certainly necessary to consider the submission made about the amount of time taken up on the garage/carport issue and to motivate why, notwithstanding that submission, it was fair to award costs to the owner.
By failing to make a finding on the criterion prescribed by s 38(4) the discretion exercised by the Disputes Tribunal has miscarried. As the amount of costs awarded to the respondent is potentially equal to the amount of compensation ordered to be paid to her, if not in excess of that amount, a substantial injustice would result if the opportunity to review the decision was not granted. In accordance with the principles for leave expressed in Tangent Nominees Pty Ltd and Edwards [2005] WASAT 119, leave to review the decision should be granted.

Orders

Ordinarily, it would be appropriate to refer the matter back to the Disputes Tribunal under s 31 of the SAT Act, rather than for this Tribunal to entertain submissions on costs during a substantive review of the decision. The Disputes Tribunal is obviously better placed, given its knowledge of the proceedings, to deal with costs. However, in view of the conclusions to which the Tribunal has come, in relation to a related application in VR 207 of 2005, which is in the nature of a cross‑appeal in respect of the same matter, there will need to be a substantive hearing on the claim relating to the garage/carport. The outcome of that review may affect the question of costs. Accordingly, in all the circumstances, it is determined that the question of costs should be reviewed by this Tribunal.
The Tribunal will take steps to ensure that this matter and the related matter (VR/207/2005) are set down for directions, so that they may be programmed to hearing of the review in an appropriate manner.

Orders

The Tribunal accordingly orders as follows:
1.The applicant is granted leave to review the decision of the Building Disputes Tribunal reflected in Order to Pay no 114/2004-05 insofar as it relates to the payment of legal costs by the applicant to the respondent.
I certify that this and the preceding [31] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
MR C RAYMOND, SENIOR MEMBER